Another look at using the market profile as a powerful tool. This is at the core of my daily planning and identifying levels - in this lesson we will look at profiles in the context of the week.
Image 1. Poor highs and lows from a profile perspective. Looney Tunes.
The Market Profile
Recall the study guide from CBOT. Yep, you can find it for free at that link, no sign-up necessary.
Since you’ve all grown familiar with using my favorite tool - the profile - I thought we could put the week in context. Especially since we had poor structure every single day this week.
First of all, I’d like to remark that this is the trademark of a very mechanical market. There is no real conviction from market participants in either direction, rather it is business as usual and repetitive trading against very obvious references. This often happens at tops and lows. That doesn’t mean we won’t go higher here.
Poor structure in the form of gaps and single prints is indicative of price discovery, with prices moving rapidly and players caught out of position.
Poor structure in the form of poor highs and lows is often the result of grinding action in one direction or other. Think of it like inertia from a car that has lost engine power. Objects in motion remain in motion until acted upon by another force.
Image 2. Either way, it hurts
And with Europe capitulating to Trump 2.0, that other force will likely not take the form of tariffs. It’s actually breathtaking how that side cannot put up a unified force against the US - a supposed ally at that (Nordstream 2, anyone?).
But mechanical markets are where the profile shines. So let’s take a look at the mess that was made of the bears last week!
I use Sierra Chart below. This is my default trading platform. However many other services and software have volume profile and time price opportunity studies. If you have any questions or even tips for other followers, leave them in the comments below.
Rinse Repeat
Poor highs and lows are more than often revisited - a break and rejection often sees momentum build in the opposite direction, or a clean break and acceptance can see momentum accelerate in the same direction.
In general, poor highs and lows interested me for the subsequent ten trading days. In backtesting I find them less useful after too much time has passed.
Finally, an untested poor high or low may also suggest trapped traders, providing fuel for the opposite direction of the structural reference.
Image 3. ES market daily profiles, July 21-25
OK, I hope those rules are clear. Let’s see them play out day by day.