Market/Volume Profile Part 2
Getting Smarter in 2022
Hey Traders,
Last year, I learned a lot from FinTwit , not so much in technicals but mainly in psychology and timing. One of my 2022 goals is to share more of what I know (time permitting).
To that end this is the Part 2 of my Order Flow educational series.
Reading Part 1 of this is a pre-requisite to be able to grasp some of the concepts in this post. Here is the link to Part 1: Profile 101
Additionally, I recommend you read these posts before you proceed:
Last but not the least, here is an example of putting this all together and where we want to be at end of mastering the tape:
Main purpose of this post is to describe common Opening scenarios and how I view/trade those that can potentially save me from making costly errors and may even provide some opportunities to get into low risk trades.
What this post is not:
This post is not a signal or alert service. There are no guarantees these set up will continue to work in future. There are no promises you will make any profit whatsoever. I am sharing this simply as documenting my thought process and how I view various market opening scenarios. This does not include all of the opening scenarios which will be shared as and when they occur, time permitting. If you are expecting trade signals and get rich quick scheme, this is NOT for you. This post is for those who dare to think. I use these concepts every day in my own trading.
Background and Why this Works:
When we say Price of something, that price could be many things. Often times when we think Price we just assume the last traded price, however, throughout the session, there are several different prices, and they all tell a different story: OPEN, CLOSE, LOW, HIGH
Price is always telling a story, given the current context. Experienced practitioners of Price Action can glean several important clues from the Day’s price points.
While High and Lows of the session are important markers, I pay much more attention to the Close and Open prints.
If I could prioritize the Open, Close, High and Low prints, I will say the OPEN is the most important price for me, followed by the session close. In this post therefore, let us focus on the OPENING Price of the asset and try to visualize few things that may be informing us the market intent.
In my opinion, there are 2 MAIN type of openings. It is much easier to think of the OPEN price as:
Is it within yesterday’s Value Area (or Range)
Is it outside (above or below) Yesterday’s Value Area
In general, but NOT always, the initial assumption when the market opens within the prior Value Area is that the market is in a homeostasis. Things are stable. In this case , naturally I am leaning against some pre-defined or pre-planned reference points, like Prior Highs and Prior Lows.