Market Profile - How to Earn More?Johannes Röll 06 / April / 20 Visitors: 11
I think every trader sooner or later starts to notice that candles sometimes show not quite a whole picture of what is happening on the market. Secondary price changes often confuse us and distract us from really important indicators.
In this article, we will look at a way that was invented a long time ago on the Chicago stock exchange in order for a trader to distinguish speculative moments from realistically important ones. Today we will talk about Forex Market Profile.
Let's begin with basics:
Before you begin to understand what a market profile is, you should know what the term "Gauss distribution" means or what it is called "normal distribution." After all, this concept is the basis of the idea of Market Profile.
So. A Gauss distribution or normal distribution is the probability distribution of a given event/value. It is very widely used in all fields of science. Normal distribution is also very important in the Forex market.
For example, measuring any magnitude, error during shooting, human growth is all a Gauss distribution.
Characteristic of the Gauss distribution is that sixty-eight percent of all its traces are in the range of about one standard deviation from the average reference value. The graph above shows this distance.
This is the indicators that really have value during trade, as the chart shows the places at which the price was most often traded inside the day.
In the range of -2 deviations there are about ninety-five percent of the indicators of normal distribution, other data for us are no longer so important.
To learn how to use the Gauss distribution on Forex, one must be focused on the plus minus one standard deviation of any price value of the day, without paying attention to other prices.
In addition, only the most important check price of the trading day should be taken into account (on the chart it is located in the middle, but you should know that its location may be different).
We call the market profile a method that helps determine where the price was most of the time during the day.
This way to analyze the market may be suitable for short-term trade. At the same time trade can go not only inside the day itself, but also two or three days in a row. If you need signals longer-term, you will have to rely on other factors.
With the help of the market profile we can find two points of price, the distance between which can be called a zone of value. Then it will be much easier to see the main thing and not to be distracted by useless market noise.
A value zone is a zone of real value on a chart. It is possible to determine it and purely on the eye, but, using the indicator, it will be much easier to do it.
The market profile is quite a complicated thing, but very convenient and, most importantly, payback if it is properly understood and able to apply correctly during trading in the Forex market.
Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer