Community Forex Questions
How to read a market profile chart?
Market profile charts (y-axis) display price as a vertical line. There is a combination of characters and colors in the timeline, and the volume is shown on the horizontal scale (x-axis). While the pricing segment is quite obvious, the volume and period segments may be more difficult to grasp. The price is displayed on the right side of the chart, just like any other day trading chart, while the price scale is displayed on the left. On a market profile chart, the amount of trading volume appears as a horizontal histogram, with the longest horizontal lines indicating the most trading activity. It is also recognized as the point of control because it was the price that had the most market control. When it comes to representing the period, letters and colors are used on the market profile chart. Each letter represents a unit of time, which could be minutes or longer periods. Therefore, the colored squares, each indicating 15 minutes of trading, could be used in a 15-minute chart. If a trader knows what color is being used, they can easily discover which prices have recently been traded. There are various indications and areas to pay attention to when using market profile charts. Therefore, the lowest buying and selling TPOs for the trading session are in the selling and buying tails, whereas the value area accounts for about 70% of the TPOs.
A market profile chart is a graphical representation of price action over time, organizing data to show market activity and value areas. To read it, focus on the TPOs (Time Price Opportunities), which represent price levels traded during specific time intervals. The chart is divided into vertical columns, each representing a trading session. The widest part of the profile indicates the Point of Control (POC), the price level with the most trading activity, signalling fair value. Areas with fewer TPOs show low activity, indicating potential support or resistance. Analyze the shape: a balanced profile suggests consolidation, while an elongated one indicates trends. Use it to identify key levels, gauge market sentiment, and make informed trading decisions.

Add Comment

Add your comment