Market Profile: Intro to Key Contextual Levels

All right, so let's talk about the different types of, as I've referred to, key contextual levels or inflection points. So these are levels within market structure, within our market profiles, where if we've either lost them or gained them, represent that significant change has occurred or is occurring. So this is also. These are also rather areas where we see a substantial increase in trading activity. And this is going to be indicated by likely a substantial increase in participation and presence. So there are a few that we're going to go over. The most common way of defining contextual levels or inflection points or areas of significance, the most common one is market structure. We're all familiar with market structure. We're looking at horizontal support and resistance zones, swing points within structure. So if we're looking at daily structure, if we're looking at any type of structure, the areas where the market has interacted with heavily, the areas where the market has abruptly turned, the areas where the market has said, you shall not pass, whether that's to the upside or to the downside. So we say that this is a key contextual level because this is a level where we can reasonably define risk in a very close fashion. Because if we lose this level, if we gain this high, it means that if in the case of fading this level, assuming that it's going to hold as support, if we lose this level within market structure, it signifies that this range has changed. And at that point, we definitely don't want to be behind the thesis that this is going to be moving upward because likely we'll be moving downward if we lose the underside of the structure. So key areas within market structure. Now we say that these are areas where we see a substantial increase in activity. And that's because if we're looking at market structure, this is a good buying opportunity at support. This is, more often than not, if tested again, a good selling opportunity. So when price approaches these levels, we see a substantial increase in activity. And it also happens to be that on the higher time frames, these levels, major swing points within market structure are where we see all types of participants get into the mix. So whereas within structure, when you're more within the extremes, you're. You'll likely see this is dominated by your smaller traders, your more intraday traders. When you get towards the extremes of market structure, that's when you'll see a substantial increase in participation by swing traders, by position traders, who are not maybe as interested in what goes on within the range, but are looking to find their risk around the range. The first Most common one is market structure. That is, if we're just looking at this area right here, we see that what preceded it was a multi week high that was respected. Going back to the left, we broke out of that significant. It signified that there was significant change underway. Right. This was an area of massive resistance. We finally broke through. The market responds, expands upward. And again we form this higher time frame consolidation where we have a very clear area of resistance, a multi week support. And we know that if we gain this or if we lose this, it represents again that significant change is underway. Areas within this. There are clearly areas within higher time frame structure that represent sort of the smaller versions of again these key contextual levels and inflection points as well. You know, midpoint of a range, your microstructure, how you define the shape of this, okay, where the market has turned multiple times. Where we see as sometimes referred to as price interacting with areas where price has previously interacted with. So in the future, where it has interacted with in the past. So that's the most common type, that is market structure. And if we're just zooming out to give you a more clear idea, you can see how this has extended multiple times in the past. See support and resistance flips all the way up. Okay. There are areas that were significant turning points and then once, once we've gained or lost them, have represented in follow through or rather have resulted in follow through and continued movement in that direction. So that's just horizontal support and resistance. You know, some traders might use diagonals, okay, to represent that price has more or less respected a level over time that has changed. Okay, this is more of a dynamic significant level, a dynamic contextual level. The most common one, the most, the one that holds the most weight is in that case, I would say the horizontal levels. Because over time horizontal levels are not going to change. So for example, an 8,600 horizontal support, that's not going to change until it breaks. Whereas if we look at something like, let's say we're just drawing a diagonal trendline support, all price has to do to break this is essentially move sideways through time. So that's the most common type. Just using basics of market structure. Now when we get into market profile, we talk about the concepts of high volume nodes, low volume nodes, high volume nodes are essentially these large structures within our profiles. So large structure right here, large structure right here, very prominent structure, a little bit less. But still the idea is we spent a lot of time in this level, so a lot of time in this Level. Now again, we're just looking at the tpo, but we could see underneath the structure there was a great deal of volume that was transacted that confirmed that level. But these are the fat points within market structure. So looking at a TPO chart, the thick areas within the chart, these are the high volume nodes where we spent a great deal of time. Now, more often than not you're going to see that the high volume node and the value area share the same general area. So we'll typically see that the high volume node is somewhere at least within the value area where most of the volume and most of the participation occurred. Remember, that is where 70% of that occurred. So high volume nodes are key levels. What they represent is sort of the same thing that we were just talking about. They represent underlying market structure that is confined to a general area. So if we look at this high volume node right here, if we were to expand this, we'd see that this was pretty much coinciding with the high of this range. So if we're looking at from 514 to 520 and we go onto our chart over here, so we'll go to 514 to 521. Looking at the top side of this structure, that high volume node is right here, which actually represents the final turning point that price was dealing with as resistance before ultimately breaking down. And this single high volume node within this structure. So if we go back to the tpo, so we'll go to that TPO again, hopefully it'll work. There we go. So this single high volume node right here that we could see occurred between 9720 and around 9840. If we look back at the price chart, we see that that extreme, again, tracing that back was coinciding with a significant swing point within market structure. Looking at the daily chart, rather the four hour chart. So it's not arbitrary that something like this fat portion within the structure is constructed. What we see is that there's a great deal of confluence between this and previous levels within actual just candlestick structure. And if we're looking back at the levels of thickness within this entire range, so high volume node is that it's the large perturbations or large structures that are on these TPOs. And it represents that we spent a good amount of time there. And what that means is that there was definitely a good amount of structure that was established in that area. So high volume nodes, these are areas where we can expect the market to slow down as it passes through or as it approaches to act as a support or resistance. So low volume node is the opposite. So low volume node is this depression, right? Is the depression. It's not this area that's a lower volume node next to a high volume node. It's the depression within this volume structure. So within this TPO chart and within the underlying volume structure, so we see multiple low volume nodes. We see low volume node right here. We see low volume node right here, right here towards the end of the tails. Okay. That's where volume completely drops off. But we're looking at the ones that are focused rather within structure. So right here, right here, right here. And these are areas where there was not much two way trade at all. These represent imbalances. There was not much activity at all. There was no trade facilitation. It was very one sided. These low volume nodes are areas where the market passed through very quickly. So typically you'll see that they are formed during trends. So this is a trending structure right here in between the consolidations, the moves, the expansions between consolidation to new consolidation, those expansions result in a low volume structure. So a trend is an imbalanced structure by its own nature. It is moving from a constantly redetermined value area or it is rather constantly redetermining the value area. And what we would say is this low volume node, since there was no trade facilitation in there previously, we would look for these levels also to act as potential support or resistance. So if we are in this case, if we are within a high volume node. So for example, let's say that we have currently closed out within this structure over here and we're using this as an example. So this is our example right here. We are currently within the structure before it breaking down. What we would look for is for this low volume node to in this case act as a resistance if we approached it again. So we have a low volume node within the structure, we're currently under it. We're looking for this area to act as resistance. This represents a very imbalanced area. It's likely that as the market moved down, we saw a ton of aggressive selling in this area. And we'll see that when we start getting into the footprint and order flow and we're going to look for this area to be defended. On the same note, a low volume node, if it's not acting as support or resistance, if we gain acceptance through this level, will likely pass through it very quickly. So that might sound confusing because we just said, you know, we're looking for this to act as support, we're looking for it to act as resistance depending on what level we're approaching it from or what direction we're approaching it from. But if we gain acceptance within it, we'll more than likely cover it. So if you see and we'll find a better example because these are kind of tight over here. If we go back to a low volume node like this, if you see that we're trading into this, we should see that initially it's going to act as support. So here's your low volume drop off right there. You see the single prints within the structure. And then as we look at how we have rotated towards that structure, we see that multiple times. The area that did not facilitate trade prior, the area where there is a great deal of imbalance within the structure acted as support. And moving forward, if we continue to press this level, we'll likely fill it out. So we test it once, we test it twice, we come back down to the support again for the third time. And then what we ultimately do is, is in the future fill this structure out. So you have to keep an open mind, right. When we're looking at these levels and not only keep an open mind, but rather know how to use these. Right. If we're seeing the first time that we're returning to this level, we would expect to act as support. If we're texting this level multiple times, if we're constantly grinding against this level, it does represent an imbalance and the market might essentially clean that up, might fill that out. But for the first time before interacting with the level, we can expect these low volume levels to act as. Since they were levels where there was not much two way trade facilitated to begin with, we can expect them to act as support and resistance. Until we start pressing into them, until we start showing signs of, as we talked about previously in the video on being accepted versus being rejected, until we start to see signs that we're being accepted in this level through volume and participation or presence also. So those are low volume nodes. They are where there's not much going on within this TPO whatsoever. It represents an imbalance, it represents a lack of two way trade. It's very one sided. The next thing we're going to talk about is the point of control, key contextual level. Because this is the fattest area, this is the thickest high volume node. So when we talked about high volume nodes, we're talking about these mountains along this structure. If they were flipped, these would look like beautiful horizons of mountains, right but the point of control is actually the largest one within that structure. So point of control within this structure, point of control within the single tpo. If we're combining and making composite, the point of control represents the most fair value area within this structure because it represents where we spent the most amount of time. Now remember, this is the point of control for a TPO chart. We're not talking about the point of control for a volume chart yet. Ideally we want to see these confirm each other. But the point of control is technically fair value within the structure according to market profile basics. Right. The original tenants of market profile, point of control is fair value. That's where the buyers and sellers were in most agreement. That's where we spent the most amount of time. So technically that's where we establish the greatest degree of structure. So over the course of these individual rotations, that is where we spent the most amount of time. Okay, so if we look at or where we interacted with the most. So if we look at this structure moving forward, this should be an area where we can expect a good amount of friction. So as we're approaching a point of control, as we are approaching it from the underside or from the top side, this could be an important area of support or resistance. If we are approaching it and we're currently in a trade, we could expect that this will likely again cause a good degree of friction in the opposite direction, or sometimes referred to as stickiness. So for this reason, this kind of contextual level does represent a good area to take profit or at least consider managing the trade. So point of control is the highest volume node within this structure. And for that reason, a lot of the times it can act as one of the more important barriers within structure. So if we're just looking at, for example, we're going to combine this profile, which is relatively a range. If we're looking at this structure from where we currently sit right here, we would say that above us a key contextual level where most of the volume was transacted and the structure above us that we would need to deal with moving forward is this point of control right around 91, 9180. Okay, so this has been volume shifting down over time. This was the last point of control within the structure above us. So a change, something that would be significant would be regaining this structure. So flipping this structure. What that would mean was that we pass through the most, you know, the high density point within the structure above us. Right? The area with the greatest degree of structure, the greatest degree of presence and in this case, actual volume as well. So the next thing we're going to talk about is the naked point of control. So this is a concept that we'll refer to quite frequently. A naked point of control is just a point of control from a previous structure that has yet to be interacted with. So a point of control, remember this is an area where there's a great degree of volume that's transacted. There's a great degree of trade. As we can imagine, when you have a great degree of trade facilitated in one area, you likely have a lot of people that got in at that area. So people that are going to be defending their positions, people that potentially be covering. And then again, if we start passing through that level, an area that will likely be retested and serve as either support or resistance, depending on what level we're coming from. So a naked point of control is a point of control that has yet to be interacted with, with a future profile. So we can see that on this chart right here, we actually have two naked points of control that are currently untested. Now, these serve as inflection points moving forward, but they're not as strong as obviously greater time frame market structure, something like daily and weekly. But we would expect, again, a certain level of resistance, in this case moving up to 92, 20 or 92.10. And then this one even further up around 97, we'll say that's 97.40. These are untested. These are areas of previous structure that were significant. We could expect a good amount of resistance in this case, if we're going to be moving up towards them, and we could expect that if we move down towards them, that there would be a significant amount of support. So a good example of that is looking back this naked point of control right here, when the trend moved up, gapped up within this entire imbalance within the single print, and essentially started settling back around this fair value, back around this point of control. If we open this structure, we see that as the market came up, this is right around where the market established a new point of control, and right around where fair value established as well. This case is not the most clean example. We have a lot of examples within structure where point of control actually just serves as the final bounce. So, for example, this is your point of control from a previous trending day, the high volume node. Within the day of the 13th, the market, after breaking down and recovering this inefficiency, ends up settling back right above the point of control. So this is your naked point of control. We have another naked point of control again, moving forward. So what you would do in the future is if you had two points of control like this that were yet to be interacted with, you'd be extending this line out moving forward as an area of significance to pay attention to, to look for potential support if price traded down through. So what you can do is, actually what we will do is we're going to go ahead and combine these structures to see what we would have actually had. And in that case you could see that the point of control of that composite where, where all the points of control line up, where the most volume is transacted over these three days, extending that forward gives us a support again right here, that when price came forward in the future, interacted with this more than once and you'll see a significant level of interaction. Obviously the more time you test something, the more time the more likely it is to give away. Right? So if we're constantly testing support, constantly testing resistance, becomes more likely that eventually that folds. So naked point of control is a point of control that has yet to be established, or rather, excuse me, has yet to be interacted with, that has been established in a previous session. Now we can establish one from a single day or what we can do if we have a higher time frame range, again higher time frame range like this at the low. So what we can do is move these together, begin to form this composite and then you get a more extreme idea of where the point of control will be after this trending day. So again, the best idea is to always consider zones, so you have an idea of where you could potentially find support. Generally remember, point of control is where the market was most accepted. So when trade comes back into this level, we can expect at first a bounce, but we might just see trade facilitated in a two way fashion. Again, where the market comes back into balance, where it starts establishing fair value in a value area again. So naked point of control, whether it's from a composite or where it's from a single day, it's extended and it has not yet been interacted with in the future by a new session. Meaning, you know, right now we have two of them and until we move into one of these, we are yet to, you know, they will continuously be naked points of control. Naked, meaning they're not touched or not covered. Meaning I guess it would mean not covered. I don't know why they came up with the term naked, but I'm not going to try to figure it out right now, but right now you have 9,200 again right around 97. And we would expect that when the market moves up that there'll be a good degree of kickback from both of these levels, or we should expect that the price probably will consolidate around these levels briefly. So again, just representing potential area, if you're looking to get long over here to take profit or begin manager trade, the last thing we're going to talk about is single prints. So single prints are areas within TPOs where we have a single line of prints. Okay, you're going to hear this spoken about within structure. So within volume nodes, more commonly it is referred to within structure. So this is a single print right here. You'll more often than not hear that this is an extension, even though this entire structure was established in the matter in the course of the first half hour.

So this entire structure right here, this initial balance occurred throughout this first candle. But single prints are an area where we have only one column of TPOs, and single prints need to be more than two if we're going to consider it a tail at the extreme. So to not have a poor high or poor low, we need more than two TPOs. So we cannot have something like this where you have actually rather that's not a single, that is a decent high and a decent low. But single prints are the areas where we had only one rotation through, so a tail. Here. This originally began as single prints before we probed it again. And single prints, just if you think about them very simply, are areas where there was really no trade facilitation. They were gaps. Okay? So when you think about a gap, a gap is an area that will probably pass through very quickly in the future. But these border of single prints, so remember, single prints are also portions of low volume nodes. So the areas where single prints begin, until we start gaining acceptance into the single print, we could expect that that area will act as some type of resistance or support. So again, here's a single print at the low. We would expect that if we're revisiting this single print. So for the first time, remember, so if we're revisiting this level where the single print left off, so right here within the structure, we would expect that if we're revisiting it from below, it should act as resistance. The same concept would be, if we were revisiting the single print at the low right here, that it should act as support. And we're going to look for this kind of behavior at these levels if we gain acceptance Into a single print zone, it is essentially a gap, right? So it's an imbalance, it's very one sided. And more often than not with imbalances, with anomalies, we're going to be looking for them to be filled in the future. So that might not be the next 24 hours, it might not be the next week. But if we start gaining acceptance within it, we're more than likely going to fill it. So the first time we come interact with it, it should act as support or resistance because it is an imbalanced area. It is an area where we should see a good interaction, a good degree of interaction as we approach that level, that extreme. But if we start gaining acceptance within this level, then we're likely going to be covering it the same concept as any kind of gap. So key contextual levels and inflection points, these are areas where they should be serving as support or resistance. They are areas where significant change occurs if they're lost or gained, right? So in the case of single prints, if we gain the single print area, again, significant change occurs because this was a significant move down, we're ranging. If we start gaining that level again, we're likely going to cover it. The same concept occurs within ranges, right? So if we're creating a range and we see that we have a value area that's established for a range. So just to cover this concept, because if we consider a range or composite or even a single day, the value area of that day is established as the significant area within the structure, right? Where 70% of this trade was facilitated. If we start to gain outside the value area low or the value area high, this goes into one of the things we're going to talk about with regards to breaking out of value. This represents that significant changes underway. So if we see that 70% of the volume was transacted here, that there was not much volume transacted below it, in this case, we have a structure that's pretty evenly distributed. But if we had a more imbalanced structure, it'd make a lot more sense. If we gain acceptance through the value area low or the value area high, that's key contextual level because that's a previous level that was not again accepting much trading behavior. Rather, as we approach the high, sellers took control. As we approach a low, buyers constantly took control and we were mean reverting. So if we start gaining acceptance through this level, what that means is we're potentially going from a mean reverting environment to a trending environment. So, so these are some of the more key contextual levels and inflection points, rather some of the key contextual levels and inflection points that we're going to be constantly referring to. So it's really important that you understand how to expect what to expect from the interaction that we have with these levels, how we could look at them moving forward, where we sit in relation to them, and how it will dictate our behavior as well.