Market Profile the technique for successful trading

A market profile is an indicator that shows the number of traded contracts at each price level of a trading instrument. If you want to earn money by trading then you must follow few essential steps they are Observations, studies, and analysis. Stock market speculation has nothing to do with luck but is based on observing trends and developing strategy.

When did the market profile concept start?

The first market profile was shown to the world in 1984. The market profile was developed by Chicago Mercantile Exchange trader Peter Steidlmeier, who also proposed the concept of a market auction. It was believed that the market develops from balance to trend, and then again to balance, and this cycle is constantly repeated. On the chart, the balance can be recognized by a balanced distribution or a bell-shaped curve.

The basic idea:

Every day the market develops a certain range and within it, the value area (area of value), which represents a zone of some equilibrium, where there is an equal number of buyers and sellers.

If prices go beyond the value area, but volumes begin to decline, then there is a possibility that the price will return back to the balance zone. Price movements outside the balance sheet area without significant volumes indicate that the main buyers and sellers are outside the market. The deviation of the price from the balance zone, accompanied by an increase in trading activity, indicates to us that market participants overestimate the existing value.

Popular tool for professionals

Market Profile is an analysis chart, which represents price movements in the market. It was designed by J. Peter Steidlmayer in the 80s and popularized in the 90s by J. Dalton. This financial chart represents the evolution of price volumes and prices, thus allowing us to see the trend and better anticipate their future direction. The Market Profile is used by many industry players, including investors and analysts. Whether the trend is bearish, bullish, or in the range, it can provide essential information for decision-makers. The very purpose of this tool is to contribute to the definition of strategies and decision-making. Due to its efficiency, the Market Profile is constantly used by professionals. And, today, more and more individuals are carrying out their analyzes using this tool, which is just as easy to use.

How does that work?

The market profile is presented as a histogram, in which volume areas and price levels are displayed. The VA or Value Area is specifically the area where 70% of trades were recorded during the session. Val (Value Area Low) represents the lowest level, while VAH (Value Area High) represents the highest level. The POC (Point of control) is the price level most frequently used by the course during the session. The IB (Initial Balance) is the characteristic of the price range during the first 60 minutes of quotation and, finally, the FB (Final Balance) represents the price range during the last hour of quotation. The use of the Market Profile is based on these key elements and above all allows you to anticipate the evolution of the price of an asset.

Market profile indicator and Market profile arithmetic

According to the original theory, in order to work on the market profile, you need to analyze the chart at a 30-minute time interval. The concept of a market profile assumes that there will be some logical form in the market, which consists of price, time, and volume. Typically, the profile corresponds to the mathematical line of the normal distribution.

Every day the market finds a certain zone, which is called the value zone or value area – you can say, the equilibrium zone, where the number of sellers is equal to the number of buyers. Where the current price of an asset is located relative to the equilibrium zone can give you knowledge of what price level you may consider fair to discard speculative prices.

A basic understanding of what a market profile is, how it works, and how to apply it will come in handy for any market participant, with any level of experience and with any trading style. This indicator is developed by us futures market traders and it provides the trader with incredible information about the current state of market affairs. Previously, such data was not available to a simple trader. In the old days, it was known only to traders with "pits" - exchange halls for live trading. The market profile will give a visual representation of the logic of the market and its structure, which is tied to time, trading volume, and price.

The market profile indicator is not an ordinary indicator of technical analysis. It does not give classic signals to enter and exit the market, the trader will have to analyze the incoming data on his own, and make a decision on the entry and exit point himself. The indicator is practically devoid of disadvantages, it will be useful as an independent CU or an addition to any existing trading system because it gives the trader knowledge about where the equilibrium price level is, and who is now gaining a large position to buy or sell.

Strategies for Nifty future trading, that you should know!

Nifty future is a very popular term in the trading market. Nifty genuinely represents the market specifically and the economy overall. If you want to know the future contracts on Nifty and Nifty future gives you the best solution. The base lot size of the Nifty is 75 units which make the parcel esteem at a little over Rs.7.50 lakhs. What are the ways to exchange Nifty prospects and what are the Nifty future strategies? Allow us to find some of the most important tips that will help us on the most proficient method to exchange Nifty prospects intraday and for the more extended term.

Strategy 1: Check out the Future spread over spot

In Future trading, the future typically exchanges at a spread over spot cost. Under ordinary circumstances, the prevailing cost of funds decides monthly spread over the spot. It is likewise called the expense of conveying and prospects typically statement along with some built-in costs. Two things you want to recall here. Try not to purchase Nifty prospects when it is at a precarious premium to the spot list as it very well may be an instance of overpricing and an excessive amount of hopefulness. Likewise don't bounce in to purchase when the Nifty fates at a rebate as it very well may be an indication of forceful fates selling. Get the rationale of the spread before exchanging Nifty prospects.

Strategy 2: Utilized this position and treat it appropriately

Like all other future positions nifty future is also leveraged. Whenever you get one parcel of Nifty in close to a month, your edge is around 10% for typical exchanges and 5% for MIS (intraday) exchanges. That implies you get multiple times utilized in an ordinary exchange and multiple times influence in intraday exchanges. This works the two different ways. Influence implies that your benefits can get duplicated however misfortunes can likewise get increased. Consequently, any exchanging Nifty fates must be finished with severe stop misfortunes and benefit targets.

Strategy 3: Before taking a position remember to check open interest data

It generally pays to do a few logical information examinations prior to taking a Nifty futures position. A brief glance at the open interest of the Nifty futures and their aggregation patterns will provide you with a thought of whether the open interest is expanding on the long side or the short side. You can take a more educated view of the Nifty course.

Strategy 4: Try not to get in a liquidity trap

Liquidity is never quite difficult for the Nifty futures as it is perhaps the most fluid agreement however there are events when the Nifty futures can get into your liquidity trap. Initially, on the expiry day, you will ordinarily observe the volumes on the Nifty futures evaporating once the rollovers are significantly finished. Likewise, in a market that is falling forcefully, the spreads can augment considerably expanding your gamble in exchanging Nifty prospects.

Strategy 5: There are various Margin suggestions

Whether you purchase Nifty prospects or you sell Nifty futures, it is a direct situation as it can prompt limitless benefits and losses for the two sides. While stop losses are an absolute necessity while exchanging the Nifty, one likewise needs to get the edges. First and foremost, there is an underlying edge you pay at the hour of taking the position which incorporates the VAR edge and the ELM edges. Presently it is required for agents to gather both these edges and ELM is at this point not discretionary. Also, consistently you really want to pay MTM (imprint to advertise) edges in view of the cost of development. These have capital designation suggestions for you.

Strategy 6: Be careful the short-term risk in Nifty prospects

Regardless of whether you put stop losses during the day, these orders won't cover your short-term risk. For instance, assuming you are long on the Nifty Futures and because of an accident in the Dow on the off chance that the Nifty accidents by 200 on opening, what do you do? Stop misfortunes don't work and you are presented with short-term risk in Nifty futures.

Strategy 7: Look from a counterparty point of view

This is a fascinating part of Nifty futures exchanging. Whenever you are purchasing bank Nifty futures then there is another party that is selling and a similar rationale applies when you are selling Nifty prospects. The other party could be a merchant or a hedger and the open interest information will give you fundamental bits of knowledge. While you are regularly determined by your view on the Nifty, it generally pays to comprehend the counter view as it can give you more noteworthy lucidity in your Nifty view. Here, one should know 8 things to recall while exchanging Nifty Futures

Strategy 8: Keep a tab on the profits, exchanges expenses, and assessment suggestions

Whenever you exchange on Nifty prospects, recall that you are submitting genuine cash and consequently three angles are significant. Finally, Nifty futures are treated as protections for charge purposes so any benefit or misfortune will be treated as a capital increase or a capital misfortune and the duty suggestions will apply in like manner.