Market Profile: Intro to Key Contextual Levels (Point of Control, POC)

Alright guys, what's going on? This is Ryan, AKA Kenner and Clark, and in this video we're going to be talking about trading naked points of control. So we're talking about volume, points of control and the TPO chart point of control as well. And a lot of times these two are going to be right on top of each other. All right. We definitely want volume to be confirming price. So when we're looking at a TPO chart, we also want to see that the volume distribution is confirming it as well. But the profiles might not be identical in terms of how volume was distributed throughout the day compared to where we spent our time throughout the day. But you'll more often than not see that the point of control on a volume based profile and a TPO chart are going to be almost identical. And there is a problem if they aren't. So they actually used to calculate where we spend volume or considered where we spend volume before they were able to calculate it during the day and before they, you know, in the beginning what they were doing was just adding up end of day volume and you'd get the volume from that. But. But they were calculating volume based on where we spent the most amount of time. So the area where we spent the most amount of time, if you're looking at a TPO chart, that was how they calculated volume just about over 20 years ago. This is actually over 40 years ago now, now that I think about it. So we're talking about trading naked points of control and I think it's important that again we talk about points of control real quick. All right. And down here we have a volume profile, again, a very balanced volume profile and a TPO chart with the volume profile within it. And the value area is where we spent 70% of the time and where 70% of the volume occurred. So this is fair value. When you're talking about the point of control. This is essentially the most agreed upon price within the value area. So normally the way we'll trade a value area will be when prices are falling below value, it's often a good time to buy because this represents a trade that will probably revert back to the mean, which in this case is the point of control. And when price is above value, this represents often a good time to sell because this is more often than not an extension from the point of control that eventually does return back to the point of control. So this is why, because it is the most agreed upon area. This is why taking trades from the center of a range is not necessarily the best idea. Because there's really not a high probability of it going either upward or downward. The same way that when we're extending away from the point of control, we're at the exterior of a range, you could say with a little bit more conviction that we're likely going to return back to the fair value price. You can have a little bit more conviction in selling something when it is above value and buying something when it is below value than selling it when it is at the most agreed upon price. So the point of control is often a place that we return to. And this is why that it's a good, you know, it is a potential good support and resistance from a distance when we're approaching it. It does represent a good area to take profits into. And that's one of the reasons why this trade tends to manifest itself the way it does. And that's why also it tends to be more useful on the shorter time frames on an intraday basis. And again for, for some type of scalper, some type of more in and out trader. Okay, so this is an area that we have a high probability in returning to. But there's many times when this area is left naked. Okay, So a naked point of control is when we have, if we're looking at a daily session or a weekly profile, this is a point of control from that profile that has yet to be interacted with. Okay? So it is completely uninterrupted. So if we're talking about a daily profile and we're talking about the daily point of control, maybe we've gone three, four, you know, more than that days without coming back to this area. So it's considered naked. It's never been interacted with whatsoever. Okay, it has not been. And you'll see when I talk, when I, when I show you a chart, what I mean by that. So often again, the volume profile point of control is going to be in the same exact place as the TPO chart point of control. So if you don't have a TPO chart, using a volume session will be just fine. And we're going to be using, in this example, we're going to be using the daily sessions. So if you go onto TradingView and you do session profile, it immediately pull it up and it will extend the points of control and show you which ones are naked and which ones aren't. Okay? So which ones have been interacted with and which ones have not. So these are areas that are likely to have resting bids and offers and it's not necessarily because these represent prime areas to get back into. But it's likely because these represent areas to take profit into.

When we are talking about moving upwards towards a naked point of control, this is likely going to be coinciding with the most dense area of a previous cluster that we formed. And this is for that reason likely going to be an area where traders are going to be taking profit. This represents a good area that is sometimes unmarked because it does sometimes form in that it forms in a way that it's not a clear candle close or wick or confluence of those two that really defines a line. It's where most of the volume or time was spent. So it can be in a pretty ambiguous area within a cluster. So putting on the point of control and having a naked point of control extended makes it way more discernible in this manner. So this is great for short term scalps because we likely see at least a decent percentage interaction off these and if we don't, we want to be out of them immediately. All right, so what we're looking for, all right, is something that has not been interrupted on the daily. If we're talking about the daily for at least two sessions. All right, if we're talking about an uninterrupted weekly point of control, it could be the previous week's point of control and we would likely expect that it will, there will be some type of measurable interaction when we come back to it. Okay. And that's because it's not going to be interrupted until this week that we're currently in comes back to it because it is just the most near term weekly point of control. Right. So we form this week, the week that closed that point of control, when we come back to, we are likely to see a meaningful reaction off of it. And we talked about this in previous videos, but in this video we're going to be talking about taking intraday trades off of previous daily points of control that are naked for the most part. We're going to be isolating within those parameters. So as far as entry goes, this is a limit order entry trade. Absolutely not a market order entry. This, in my opinion, is a trade that you placed a resting limit order to enter. So if you're looking for a short and you're targeting a naked point of control that's above us. What I do is I will often front run this point of control by anywhere from half a percentage to a full percentage. So I'll often front run the point of control and then my stop will be no greater than 1% away from the point of control in the opposite direction. I absolutely don't want to be in this trade if it does not show an immediate sign of rejection. Since many times this area can be in a really freely floating middle of nothing type of zone. Sometimes like I said, these are areas where it's not necessarily discernible right away that this is going to be a support or resistance that we're going to interact with. And because of that it's. It's likely that it might not be that close to the most obvious market structure that a lot of traders might be looking towards. So if we completely start making our way through this area, I would not hold onto the trade. This is the type of thing that you need to see a meaningful reaction with. And this is the type of trade that you're not going to be in long anyway for the exit. As far as the exit goes with this trade, I'm only going to be holding it until.

The closest sticky area. And by that I mean if we came from a cluster that is only $100 away, alright, this is going to be the area that I'm going to target. Unless, okay, so if we're talking about where we're going to take profit, it's going to be the cluster that preceded the area that we left from, okay, Rather the cluster that we left from before heading into the naked point of control. The only other time that I would say not to hold it at the first sticky area or the first, or hold it to the first area where we're going to experience friction is if it is enforced or rather substantiated by major, other major factors, rather. Okay, so other things that are confluent with it being a more important support or resistance in that case that we could see a more meaningful reaction from. But in that case you're likely going to be paying attention to that detail first. This might be an opportunity to look for that area that we could front run that location. But in my opinion, if you are taking a trade and you're looking at that, you're going to see that major area first and you're going to know based on previous market structure context, whether or not this trade is going to be worth hanging onto before you even enter into it. Okay? So when you see a floating area that's a naked point of control that's floating, there's really nothing backing it up beyond it, right? If you're looking to take a bounce off of it and you're looking to take a bounce off of, if you're longing as we're approaching a point of control that's naked below us. If you don't see a meaningful reaction there, you want to probably be out of it because this might be the last level before we move rather rapidly or accelerate through that point. And you should be looking for any signs of stickiness right away. In this case, when I say stickiness, what I mean is you want to see some type of meaningful reaction to begin with. And if you don't see that stickiness and you start to see some type of acceleration through the level, this is why you really want to have a stop that immediately invalidates this. That is kind of just a fixed stop. So that's why I only use something like a 1% stop, maybe a 2% stop maximum. But in that case, if I'm using a 2% stop, this is probably going to be informed by other factors as well. So let's take a look at a chart and I'm going to show you what this looks like on the market profile chart. But then we're going to look at the trading view chart because that's where all of you can just add your session profile and you'll be able to see where all the naked points of control are right away. All right, so here's the market profile chart and we have three examples right away of naked points of control. So this is the current week right here, all right, and we have three points of control that are still naked. In this case they're still yet to be interacted with. And this makes sense, right? The most recent trend is strongly up and the first two days were one time frame days we had one side in control pretty much from open to close this leg up out of this range. You know, we have not come down here because this trend has not changed yet. So these are naked, we have not interacted with them and that's why they are extended all the way to the right. So we do have some more. As you could see when we move down, you could see that we have a naked point of control that more or less corresponds with a three day range where we have a really inside three day range. So this point of control down here might be pretty useful. And this is probably a key area within the weekly structure regardless because we have major confluence of price action ranges within this area to begin with. But just giving you an idea, naked point of control still yet to be interacted with. This was a naked point of control. Okay, so for two days this was a naked point of control until we came up and interacted with it. On January 11th. And you can see this is a perfect example of that. Okay, so this is a daily session. In this case, we came up and interacted with this point of control and immediately came back to the, in this case, area that we left from, which was this cluster. And that's why I say try to take profit into the most recent sticky area. Right, the most recent, recent area that you left from that would be sticky. And returning to. Again, just giving you some more examples before I show you the trading view chart. Another point of control over here that was naked for a long period of time. I'm not even sure if this was one that had a good interaction off of this one had maybe $100 interaction off of again. But you know what you're doing is you're taking it down to the most recent sticky area, which would take you down to this high. So, yeah, this trade would have worked in your favor. But again, that's not really the best outcome. Right. So in this case, if you held on to this longer and you didn't take profit at the last area that we left from, again, the most recent cluster, you would have probably held onto this trade. And if you didn't have a proper stop placement, market would have moved pretty heavily against you. But we have a bunch of cases where naked points of control are on this chart. So right here. Again, right up here. Again, right up here. All right, so more often than not, we'll see an immediate reaction off of these. And if you're looking to scalp, it'd be a really good trade to get in and out of. But again, here's a really good way of looking at it on the tradingview chart because some of you don't have that market profile chart and trading view actually offers this indicator, it's called session volume. And with them, what they do is they do the same thing where naked points of control are going to be left on and they will be extended all the way to the right side of the actual chart that you're looking at. So until they are interacted with, they will remain uninterrupted and it's going to be pretty obvious to see these. So I have a few examples here of areas where it might not have been as obvious that these would have been areas that we would have interacted with. But you're looking for the first touch. That's what's one of the most important details. Right. So we're looking for the first touch after spending a good amount of time away from this. So in this case, we Have a point of control that is from, I think it's November 29th. You know, we have one profile, two profile, three profile, four profiles before we actually come back to this area, before we have any interaction with this area. So in this case, I'm going to be front running this trade. I'm going to be placing a limit order at this point of control. I see that the market is moving through this range and this is going to be an area that I'm going to be paying attention to. And in the event that the market is moving up in anticipation of the market coming to this area, I'm going to be placing a stop that is just 1% away. All right, in this case we fall within. It just happens to be, in this example we are 80 basis points, right? So under a percentage it tends to work out really well for us in this case because we actually come all the way back down to the area we left from. But I would not say that, you know, this is how it's going to happen all the time. Another case where we have multiple touches, multiple areas where we could have front ran a point of control, you have this naked point of control extending all the way forward. And in this case, if you front run the point of control, you could see the right here. If you just front ran it by a third of a percentage, you would have been in this. You could have gained entry rather in this quite a few times. All right. Again, not an area that is necessarily an area that you might look to because this is kind of no man's land over here. But this is an area where we did agree on and have not interacted with since. But because of that, it's likely an area where we'll have some resting bids and offers. Right, in this case, resting bids. And again, I would not be holding onto this trade because it is extremely dangerous to be holding onto a trade in a low volume area. So we have our 1% stop distance as a margin for error. In this case, if we're front running these, we're gaining entry into any long that we would have initially taken here. Now I have to say that the first long is probably going to be the only long that you should take because if you are seeing that this area is interacted with, you take your entry and you take your exit at the area that we left from, you're likely not going to want to get into this trade. If we revisit this area given the fact that it's kind of in no man's land. So you get your first trade you're looking for in and out. All right? You're not looking to abuse these areas. So again, naked point of control. We have one, two, three days that we don't interact with it. And we have our first interaction down here. And you actually can't see with this green box, but we come right into this area, come right into the point of control and where do we return to? Alright, again, probably should have my drawing tool out here. The area that we return to is the area where we had a previous cluster. So you're looking at the previous lows, in this case the previous cluster. We come down from this point of control and in this case actually that's not the point of control. Excuse me, I drew on the wrong part of the chart. Here is the point of control. We come to the previous closing cluster. All right, so previous cluster is going to be your first sticky area. So you're looking at very small trades. Right. You're looking at small scalps. Again, this trade is only right. We're looking at a percentage trade. It's a very even trade. So this is why you need to have extremely quick invalidation. Right. More often than not you're going to look at this rather and you're going to say if in this case I'm looking for this point of control to interact, is this trade even worth taking? Right. There's many trades that are not even going to be worth taking because in this case our market structure is really not attractive. Right. From a risk to return standpoint. Right. We're looking at a stop distance that is maximum 1% away. You could put a tighter stop on this, but you'd be taking a little bit more risk of being stopped out early. This is a one to one, maybe not an attractive trade to take to begin with. Here we have again that point of control revisited. In this case, maybe you re enter on this trade because this has yet to be interrupted and we've painted this entire market structure above it. You might be looking for other confluence in this area that might be even a swing failure pattern. Right. We're coming through a major swing area within market structure. This might be a good opportunity at this point to get back into the trade. Right. Again, we're still uninterrupted. We spent a good amount of time above this structure. We have this major swing into this structure. What do we do? We break the low. This is a swing failure and a touch of this naked point of control. So again, this represents an area that might be an attractive area to place a Limit order into. All right, because we have this area that's being approached that represents a potential swing failure pattern. And you're looking at this and you see that we have a session point of control that is yet to be interrupted. Now this trade is probably the creme de la creme in terms of points of control. We have an uninterrupted point of control from this cluster over here, major cluster. The last day of this cluster before the breakdown. You have this point of control extending all the way from 1, 2, 3, 4, 5, 6, 7, 8, 9 days in the future. Now in this case we're looking for an area that's uninterrupted and we're not taking the last two days or anything before the last two days. So you could see that you have your point of control right here. The merit or rather the reasoning for taking a trade into this area, if you're looking to short this area, is just purely based on structure. But I'm looking up at this point of control that has been extended for over five days now. All right? And in this case this represents an area that is maybe not as easy to spot with the naked eye because we're looking at, if we're looking at a daily chart or a weekly chart or a four hour chart, we might have an open or in this case we might have a closed cluster that doesn't really look to be confluent with that point of control. So you're looking up here, okay, in this case that's the point of control again extended. But again we're looking at a four hour chart. If we're looking at a daily chart. See again we don't really have anything that shows us that this is the obvious area that we want to get involved in the trade. Again, these are not lining up whatsoever. You know, maybe you want to go on the last day, maybe you want to go on the wicks. You're really not certain you're going off of the daily profile. If you go onto the hourly chart now, it becomes a bit more obvious, a bit more specific where majority of that trading took place within that structure. Now you have a key area where you could be placing limit orders to enter into. If you're looking to enter into a rejection of this area. So we're looking to enter into a short. We're really not sure when we're looking at a naked point of control. Now we have a bit more clear of an idea as to where to get involved. And again, stop 1% away. In this case you're taking this trade back to the most sticky area, which is great for this case because we have nothing that occurred down here until at least here. So if you're looking at this trade, you're at least looking. First place to take profit would be right here. Some people might consider taking it down to this cluster here that we broke out from. But at least in this trade, you're looking to take it down to this structure which sets you up with a really reasonable trade. You're looking at a three to one in this case. So again, you get the idea. Extending these moving forward, you can see all of the uninterrupted points of control. And the point is that you're taking intraday trades based off of this. These, okay. You're taking lower time frame trades. You're looking for quick ins and outs. All right? If the trade does not go in your favor immediately, you can likely cut the trade with confidence that you're not going to be stopping yourself out prematurely. All right. Even if you're front running these positions a little bit early. And by early I mean maybe a third of a percentage. So moving this forward, all right. Into the most recent history, you see, again, we have these points of control that are still yet to be interrupted. So we're looking at 9020 area. Okay. 8626. 8575. And remember I said there are times when you might consider that these point of controls are sub or rather these naked points of control are substantiated by other factors. So again, what might be a good area that that might occur probably down here. Right, because we mentioned that 8750 would be an optimal area that's right above this area. And it's 8,750 to me or 8,650. Right. So I mentioned those two areas. And again, these naked points of control in this case, if we did come down into this area, why not stagger some orders in this area or rather look at it this way. If you're looking at placing a stop for this structure, this might be a good area to place your stop outside of. Because at this point we have major confluence between market structure, between volume profile points of control and the value areas for previous weeks. All right, guys, hopefully this has been effective. Again, remember, naked points of control are areas that we have not interacted with. These are fair value areas previously. These are likely going to be areas where we will see a meaningful initial reaction. You're going to want to see an immediate reaction. If anything, this was an area where buyers and sellers really agreed on previously. We'll likely see that there'll be dormant orders to take profit here. And what we want to do is at least front run that slightly so that we could get in with that group taking profit prematurely and be able to capture a little bit of action. So this is primarily Intraday trademark, shorter time frame, scalper type move. And again, you're going to be putting a very tight stop on this because if it moves against you, you do not want to be stuck in the trade. More often than not, these can be in no man's land, Right? So pretty much no man's land. All right, so that's that, guys. Hopefully this has been informative. You have any questions, as always, feel free to reach out. It's been a pleasure. This is Ryan with block roots. Exercise, proper risk management and trade effectively.