Market Profile Charts
Market Profile Charts were developed in the 1980s by the Chicago Board Of Trade Director and trader J. Peter Stiedlmayer. Stiedlmayer’s concepts of Market Profile charting and the Liquidity Databank were huge steps forward in using charting for trading and the provision of liquidity.
What is a Market Profile Chart?
The Market Profile charts use price and time to provide a unique way to visualize market action and the most important prices of a day’s trading. The three core concepts are the point of control (POC), the time price opportunity (TPO), and 30-minute time blocks.
How to Read a Market Profile Chart
To be able to interpret a Market Profile Chart, you need to understand the key terminology.
1. Point of Control (POC)
The Point of Control is considered the fair price of the stock for the day. This is when the stock is traded the most during the day, week, or month. This is also referred to as value pricing, essentially where most traders see the value of the equity being fair.
The value area is the price range at which 70% of the action happens.
2. Time Price Opportunity (TPO)
Above the point of control suggests the stock is overpriced, therefore a possible confirmation for a short-term short. Below the point of control would mean a possibly undervalued equity, thus a possible long trade. Each time block letter represents a TPO.
When the price is above and below the value areas, this represents a possible ideal buying or selling point.
3. Time Blocks
“A” represents the first 30 minutes of trading, “B” represents the second 30 minutes of trading. The point of control is the area (price range) at which most trades occur during the day. Lower case lettered time blocks represent out-of-market hours trading.
|Market Profile Time Block||Start Time||End Time|
|A – Market Open||08:00||08:29|
|O – Market Close||15:00||15:29|
Video: Learn About Market Profile Charts
Best Software for Market Profile
Out of our Top 10 Stock Market Analysis Software Review winners, there are only two companies offering market profile charts as standard.
MetaStock is a clear winner in stock charting, covering all the core chart types and includes Point & Figure, Equivolume, and Market Profile charts.
When it comes to indicators, MetaStock has 300+ different types, including Darvas Box and Ichimoku Cloud. MetaStock will also help you develop your own indicators based on their coding system.
|Visit MetaStock||Read the MetaStock Review|
Optuma offers institutional-grade charting with an array of 400+ technical indicators and drawing tools, specializing in Market Profile Charts & Gann tools such as Gann Grid Lines, Gann Fans, and Gann Swing.
|Visit Optuma||Read the Optuma Review|
Pros & Cons of Market Profile Charts
People who use market profile charts become evangelists to the cause. They believe it offers unique insights into buy and sell opportunities. It can be a good option if you are a quick-fire day trader. On the downside, it can require serious effort to learn how to use them, and very few stock chart services offer this type of charting.