If you’ve been following my journey into day trading, you know my screen usually looks like a kaleidoscope of moving averages and trendlines that I think mean something, until the market violently disagrees with me.
This week, I decided to try something different. I went down the rabbit hole of Order Flow and stumbled upon two tools that look less like a geometry test and more like a bell curve from statistics class: Market Profile (TPO) and Volume Profile.
I found a really cool indicator over at mzpack that combines both, and it completely changed how I look at price. Instead of just asking “What is the price?”, these tools ask “Where is everyone hanging out?”
Here is what I learned after staring at these colorful histograms for a week.
The Two Profiles: Time vs. Heft
At first glance, these two look almost identical—blobs of histograms sticking out from the side of the chart. But they tell two very different stories.
1. Market Profile (The “Time” Factor)
Market Profile, often called TPO (Time Price Opportunity), is the OG. It was developed in the 80s by J. Peter Steidlmayer at the Chicago Board of Trade.
Instead of standard bars, it uses letters (A, B, C, etc.) to represent 30-minute chunks of time.
- A-Period: The first 30 minutes of the day.
- B-Period: The next 30 minutes.
- And so on.
As the day goes on, these letters stack up. If the market sits at $100 for three hours, you get a huge stack of letters at $100. It visually shows you Time Acceptance. It tells you, “Hey, the market was really comfortable chilling at this price.”
2. Volume Profile (The “Heft” Factor)
While Market Profile tracks how long the price stayed somewhere, Volume Profile tracks how much money changed hands there.
This distinction is huge.
- Market Profile: “We spent 2 hours at $50.”
- Volume Profile: “Yeah, but only 10 shares traded there. It was a ghost town.”
Sometimes price flashes to a level and rejects immediately (a wick on a candle). Market Profile might ignore it because it didn’t spend time there. Volume Profile might show a massive spike if thousands of contracts are traded in that split second.
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Key Concepts I’m Trying to Master
The indicator I was testing highlights a few critical zones that apply to both profiles.
The Point of Control (POC)
This is the price level with the fattest stack of letters (or volume). It’s the “fair price” for the day where the most business happened.
- My experience: Price treats the POC like a magnet. It loves to return there. I tried fading moves away from the POC, and it worked… until the trend day ran me over (more on that later).
The Value Area (VA)
This represents the range where 70% of the day’s action happened.
- Value Area High (VAH) and Value Area Low (VAL) act like support and resistance.
- The 80% Rule: This was a fascinating nugget I found in the documentation. If the market opens outside the Value Area, but then moves back inside and stays there for two 30-minute periods, there is apparently an 80% chance it will travel all the way to the other side of the Value Area. I tried this once. I got nervous and closed early, but it actually worked!
Split vs. Unsplit
One feature that saved my brain was the ability to “Split” the profiles.
- Unsplit: Looks like a bell curve. Great for seeing the big picture balance.
- Split: Shows the letters chronologically (like a weird blocky candle chart). This helped me see trends that were hidden inside the blob.
The Verdict?
So, did “David Tries Market Profile” turn me into a profitable trader overnight? No.
However, it stopped me from buying breakouts right into a “High Volume Node” (resistance) and helped me see when the market was “balanced” (choppy) vs. “imbalanced” (trending).
If you are tired of standard candlesticks and want to see the why behind the moves, give these profiles a look. Just be prepared to dream in alphabet letters for a few days.
Disclaimer: I am just a guy trying things on the internet. This is not financial advice. I usually lose money. Don’t be like David.
