Educating traders on Market Profile™ methodology

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Mission statement – to introduce and further educate traders on the Market Profile™ methodology and provide a foundation from which to develop your trading platform.

  •  Market Profile™, a hybrid of the statistical bell curve, is a form of technical analysis that was jointly developed by renowned trader, software developer and author J. Peter Steidlmayer and the Chicago Board of Trade. Over the years this unique tool has helped traders gain unparalleled understanding of markets, as well as find profitable trading opportunities. Simple in concept yet complex in detail, Market Profile™ organizes a number of elements into a rapidly understood graphic form – revealing trading opportunities other methodologies miss.
  • How does the Market Profile™ develop? The industry standard 30-minute display takes half-hour ranges and assigns consecutive letters of the alphabet to the ranges.  The first half-hour range of the profile is assigned a chronological letter and the array of prices encompassed within that half hour range are displayed along the y-axis.  As consecutive half hour arrays are added to the display with their corresponding range of prices and assigned letters; repeated prices move one column to the right and price probes expanding to new highs or new lows continue to occupy the left most column of the display.  What is uncovered over time is a Market Profile™ display with the belly representing the frequently traded prices and the thinner part(s) of the profile representing areas of decreased frequency of trade.
  • What does a Market Profile™ look like? A Market Profile™ can take on many appearances.  The standard display takes on the look of a normalized bell curve with the preponderance of letters near the middle of the displayed range and less letters or TPOs as you move towards the extremes (see figure 1 below). 


    Figure 1 (Normal bell curve).

  • Over time as markets have evolved to become more efficient with locals and specialists impacting the market less and less, a hybrid Market Profile™ has evolved.  The characteristics of this hybrid are a preponderance of letter’s or TPOs near one of the vertical extremes, and price rejection at the other extreme (see figures 2 and 3 below). 

Figure 2 (3:2:1 up)

Figure 3 (3:2:1 down)

STEVEN B. HAWKINS has been involved in the markets throughout his professional career. He has acted as an institutional broker and analyst to some of the largest investment banks and trading houses in the world. His trading experience entails proprietary trading in stocks and commodities. Over the past ten years, Mr. Hawkins has instructed traders in the United States, Europe, Australia, Canada, Singapore, and Hong Kong. He has also collaborated on the writing of trading books and has written articles for industry trade publications. Hawkins graduated from the University of Illinois with a degree in economics.

Comments about the recently released book, 
Steidlmayer on Markets: Trading with Market Profile , 2nd Edition
J. Peter Steidlmayer, Steven B. Hawkins

"Anyone serious about market profile should read Steidlmayer on Markets, Second Edition. Pete and Steve have done their most advanced work yet to create an objective perspective from which to manage risk."

–John Helmers
Senior Portfolio Manager, Tudor Investment Corp.

"I recall Pete Steidlmayer’s pioneering work with the futures markets in the 1980s, in particular his discovery of ‘the natural organization of the market’ in accordance with the price/time relationship: Price + Time = Value. In this important new work, Pete takes us on a journey from his childhood discovery of the key concepts of order and personal control, to his early days developing Market Profile™ at the CBOT, to his up-to-the-minute ideas on trading, technology, and the future. And as a stock trader I found the concrete examples of Market Profile™ applications to individual stocks to be particularly gratifying."

–Bernie Schaeffer
Chairman and Chief Executive Officer, Schaeffer’s Investment Research, Inc.

 

Copyright Steven B. Hawkins 2003
Contact Information: email info@profiletrading.com
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