These below are MY Trading Rules/Methods for Market Profile
Only trade in the direction of the trend (trend is determined by a rising or falling Point Of Control/POC)
Term used:
VAL = Value Area Low
VAH = Value Area High
LOD = Low of Day
HOD = High of Day
CSH = Close Swing High
CSL = Close Swing Low
POC = Point of Control
IB = Initial Balance
DBY = Day Before Yesterday (2 days ago)
Category 1
Trade setup #1a: In a down trending market, when the current session opens below the previous day’s VAL enter a short trade at the prev VAL and again at the previous day’s POC.
Place a protective stop for both trades 7-10 ticks above the previous day’s VAH or above the previous CSL.
Trade setup #1b: In an up trending market, when the current session opens above the previous day’s VAH enter a long trade at the prev VAH and again at the previous day’s POC.
Place a protective stop for both trades 10-15 ticks below the previous day’s lower VAL or below the previous CSH.
Trade setup #2a: In a down trending market, when the current session opens within the previous day VA and at least 20-25 ticks below the VAH enter a short trade at the VAH.
Place a stop 10-15 ticks above the DBY POC (Day Before Yesterday’s POC or HVN)
Trade setup #2b: In an up trending market, when the current session opens within the previous days VA and at least 20-25 ticks above the VAL enter a long trade at the VAL.
Place a stop at 10-15 ticks below the DBY’s POC/HVN
Trade setup #3a: In a down trending market, when the current session opens above the previous days upper VA (VAH) and below the DBY’s lower VA (VAL) enter a short trade at the DBY’s lower VA (VAL) (SELL on STOP on exit from the value area) and again at the DBY’s VA (VAL) (LIMIT order).
Place a stop for both trades 5-7 ticks above the DBY’s upper VA (VAH).
If stopped out on this setup and price remains above the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Place a stop for both trades 5-7 ticks below the DBY’s lower VA (VAL).
If stopped out on this setup and price remains below the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Trade setup #4a: In a down trending market, when the current session opens above the DBY’s lower VA (VAL) and below the DBY’s POC enter a short trade at the DBY’s POC and again at the DBY’s upper VA (VAH) placing a stop 10-15 ticks above the DBY’s High Of the Day/HOD.
If stopped out on this setup and price remains above the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Trade setup #4b: In an up trending market, when the current session opens below the DBY’s upper VA (VAH) and above the DBY’s POC enter a long trade at the DBY’s POC and again at the DBY’s lower VA (VAL) placing a stop 10-15 ticks below the DBY’s Low Of the Day/LOD.
If stopped out on this setup and price remains below the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Profit targets for all trades should be in consideration of the risk of each respective trade and should be placed in consideration of the previous days POC, VA or HVL
Category 2
Category 2 trades are based off the current sessions VAH, VAL, HVN, LVN and POC with profit targets of approximately 23 / 30 ticks (they will generally setup after steps 1 and 2 have occurred in the market profile’s development)
• Step 1: being vertical movement of price and step 2 being the capping of step 1
• Step 2 will generally takes place during the Initial Balance/IB period of the day (the Opening Range, first 45 minutes)
• Step 3 is when the market begins to move more in a horizontal direction than vertical direction and the bell curve begins to take shape
• Step 4 is when the bell curve is becoming fully developed and its POC tries to drift towards the center of the IB, if it is not already in the center (occasionally steps 3 or 4 do not fully develop and the market enters step 1 again, this is known as minus development)
Minus development is very helpful in showing the direction of the market.
Only trade in the direction of the trend (trend is determined by a rising or falling Point Of Control/POC)
Term used:
VAL = Value Area Low
VAH = Value Area High
LOD = Low of Day
HOD = High of Day
CSH = Close Swing High
CSL = Close Swing Low
POC = Point of Control
IB = Initial Balance
DBY = Day Before Yesterday (2 days ago)
Category 1
Trade setup #1a: In a down trending market, when the current session opens below the previous day’s VAL enter a short trade at the prev VAL and again at the previous day’s POC.
Place a protective stop for both trades 7-10 ticks above the previous day’s VAH or above the previous CSL.
Trade setup #1b: In an up trending market, when the current session opens above the previous day’s VAH enter a long trade at the prev VAH and again at the previous day’s POC.
Place a protective stop for both trades 10-15 ticks below the previous day’s lower VAL or below the previous CSH.
Trade setup #2a: In a down trending market, when the current session opens within the previous day VA and at least 20-25 ticks below the VAH enter a short trade at the VAH.
Place a stop 10-15 ticks above the DBY POC (Day Before Yesterday’s POC or HVN)
Trade setup #2b: In an up trending market, when the current session opens within the previous days VA and at least 20-25 ticks above the VAL enter a long trade at the VAL.
Place a stop at 10-15 ticks below the DBY’s POC/HVN
Trade setup #3a: In a down trending market, when the current session opens above the previous days upper VA (VAH) and below the DBY’s lower VA (VAL) enter a short trade at the DBY’s lower VA (VAL) (SELL on STOP on exit from the value area) and again at the DBY’s VA (VAL) (LIMIT order).
Place a stop for both trades 5-7 ticks above the DBY’s upper VA (VAH).
If stopped out on this setup and price remains above the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Place a stop for both trades 5-7 ticks below the DBY’s lower VA (VAL).
If stopped out on this setup and price remains below the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Trade setup #4a: In a down trending market, when the current session opens above the DBY’s lower VA (VAL) and below the DBY’s POC enter a short trade at the DBY’s POC and again at the DBY’s upper VA (VAH) placing a stop 10-15 ticks above the DBY’s High Of the Day/HOD.
If stopped out on this setup and price remains above the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Trade setup #4b: In an up trending market, when the current session opens below the DBY’s upper VA (VAH) and above the DBY’s POC enter a long trade at the DBY’s POC and again at the DBY’s lower VA (VAL) placing a stop 10-15 ticks below the DBY’s Low Of the Day/LOD.
If stopped out on this setup and price remains below the stop level, change directional bias for all “Category 2” trade setups for the remainder of the day.
Profit targets for all trades should be in consideration of the risk of each respective trade and should be placed in consideration of the previous days POC, VA or HVL
Category 2
Category 2 trades are based off the current sessions VAH, VAL, HVN, LVN and POC with profit targets of approximately 23 / 30 ticks (they will generally setup after steps 1 and 2 have occurred in the market profile’s development)
• Step 1: being vertical movement of price and step 2 being the capping of step 1
• Step 2 will generally takes place during the Initial Balance/IB period of the day (the Opening Range, first 45 minutes)
• Step 3 is when the market begins to move more in a horizontal direction than vertical direction and the bell curve begins to take shape
• Step 4 is when the bell curve is becoming fully developed and its POC tries to drift towards the center of the IB, if it is not already in the center (occasionally steps 3 or 4 do not fully develop and the market enters step 1 again, this is known as minus development)
Minus development is very helpful in showing the direction of the market.
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