Market Profile: Mapping Environments Base Part 1

Alright guys, so now we've pretty much covered all of the basics. So we've gone over all the core concepts within market profile. We've gone over, you know, trends versus balance, day types, key contextual levels, how we create composites, all the stuff that ultimately is foundational. So things that we're going to be iterating on, moving forward, pretty much just definitions, right? What we're doing is trying to familiarize you with all the things that we're going to be constantly referring to a lot of this stuff that we frequently talk about on block routes in general. But it's really important to understand what the whole purpose of all this is. The purpose of market profile is really just to get a more contextualized map of the environment. So we're mapping the environment, that's all we're doing. We're creating context and we're identifying significant levels within structure. So the obvious, most popular way of mapping out the environment in trading is through the use of market structure. And this is by itself limited. All we're looking at essentially is where there is a confluence of price action, a confluence of either daily closes, weekly closes, whatever time period you're looking at, swing highs, swing lows of market structure. We are getting an idea of where the market reacted, where the market came into and turned from, but it doesn't give us a detailed idea of what takes place throughout the day, where price is responding throughout the week. These significant levels that might not pop up if you are not looking at something like a TPO chart or, or a volume profile even. So identifying significant levels is one of the most important things that we're going to be doing when we're using a TPO chart. And this is not just market structure. So we're going to start on the high time frame. So ideally we're going to work from the high time frame down, but we're going to be extending the concept of significant levels to things like high volume nodes, low, low volume nodes, anomalies, odd distributions, inefficiencies within structure, previous areas where the market has come into and had a significant response from. So when we look at something like a buying tail, in the case of this is where the market opened up, rather this is essentially a buying tail. But when we look at excess areas where price was tremendously rejected, and I mean that it is like it came in contact with an immovable force and rejected very quickly. So we see something like single prints, right? So the idea of a significant level is not just areas within market structure. When we look At a candlestick chart, we get a good idea of this, but, you know, leaves out a lot to be desired when we're ranging. For example, you know, it's really useful to understand the area that price has been spending most of its time within, where fair value has been established. So when we're using a TPO chart, there's always again, three questions that we're going to be asking. There's a handful of questions, but first and foremost, where is value developing? Where is price being rejected and accepted? Are we in balance or imbalanced? This list extends further, even for things that we actually have not written down in the notes. Who is in control? Where is the market trying to go and is it doing a good job of getting there? The those things come in more, they come in more light into rather more into the light as we get further into order flow. Because when we're looking at a TPO chart, while we can use the things that we discussed, such as rotation factor, how we've been distributing through time, whether value has been migrating, value has been moving upward or downward, the point of control moving upward or downward, this gives us an indication of where the market is trying to go. But when we're using order flow, it actually gives us a more deep detailed, rather gives us more detailed insight to that. So from all of this, from the levels that we're establishing, we are identifying where the available trades are. Okay. Most importantly, it's not just that we say, okay, you know, here's a high volume node. This is an available trade. You know, there is a structural inefficiency that's an available trade. You know, at any time there might be multiple available trades.

Within earshot. So at any time we might be considerably close to multiple trades, but it doesn't mean that all of them are going to set up equally. It doesn't mean that all of them have the same probability of success. Ideally, what we want is a good amount of confluence between factors that we identify or between different environment types that we see setting up or rather what type of environment we're in setting up relative to current, again, significant levels. And then from there we're able to weigh, you know, what opportunities we're looking to take advantage of. But most of market profile is focused on the intraday. So it is focused on the daily time frame and not necessarily, you know, what has taken place over a bunch of days. But we're looking at, for the most part, for example, today's structure compared to yesterday's and just a few days prior. So a Lot of the time you're going to be seeing a day that begins to open up and for the most part you're going to be really focused on what occurred yesterday, what we're coming from, what current environment we're in, what composite we might be in, that we've established if we're moving within a range. But this does start from a top down approach. So we do start from the weekly. But from there what you'll see is a lot of traders who are using market profile. They'll have very detailed charts where they will have their levels mapped out, they'll have their levels labeled and they'll know what they're looking for. So that's what our focus is going to be on. So now that we have an understanding of again all these factors and details that we should have an understanding of, we're going to pay attention now how we would go about looking at the market from a top down approach. So let's use this example of structure right here. If we zoom out, we've seen that this has been a trending period. So this was a trending period from the low. Down here we have value migration upward. We have the point of control rising. We see the beginning of a trend. This actually to the left before this is loaded. This is a period which we're ranging for quite a long period of time. This was the end of December up into the beginning of January. I'm sure everyone remembers that. So we had this trending period through that level. Finally have a little bit of consolidation and we see that that forms after the value area is lost. So one indication of the end of a trend is when we have not only value migration, but we begin to have barely any overlap whatsoever. And you have a candle like this where you have essentially this P profile and there's a ton of volume at the high, we ultimately close below this. So most of the volume at the high, we open at the midpoint of this structure. Capture most of this volume up here and we say capture it, might as well say trap it. And then we end up closing at the low, the low volume area, it's a high volume node, but the low volume area of this entire structure. If we're going to say two high volume nodes and we're back essentially at the previous day's value area. So we don't have value overlap, but we're closing back within the value area of volume. So you can actually see if we roll back this close right here is within the volume value area, not within the TPO value area. So as we get into order flow, we're going to go more into the volume value area and the volume profile, which again is just very identical to the tpo, with exception that it's where a specific volume came in. It is important to use both of these charts, but we can see that price has kicked back. And one of the first examples, or one of the first things we talked about, one of the things that we're looking for is an example right here is when we have value overlap and that is when we begin to trend. Rather that is when the trend shifts to more of a consolidation and a ranging period. We have back to back days of inside value. All we're doing is telling a story up until the point we're going to get at back to back days of inside value. Consolidation leads to continuation in this case. And why would we assume that consolidation would lead to continuation in this case? Well, we just came from a very long range, so now we could actually we could see even further back. I thought this wasn't loaded completely. We came from what was a two and a half month range, finally broke out of that range. And one of the first indications of acceptance is all the volume that we had through here. It's not like we were very swiftly rejected whatsoever. So consolidation leads to, in this case, continuation. And now we're going to focus on this period right here. Okay, so we're going to focus on the first time that we have a major long liquidation candle. And if you remember what a double distribution is, this is what we're looking at right here. It is a structure that begins as a low conviction, somewhat balanced structure rolls over. Either the market adapts to new information very quickly, responds to new information, or the market has liquidated what is at this point a very long market. So the market in this case we see that attempts to move upward. We have rotation factors in this case that are 17 initially, 12, 17 the following day, within value. So you're not really seeing much in terms of continued upside action. So where you have a large day to the upside, the market spends a lot of time consolidating. And this next move that follows leaves us with this long liquidation structure. We say long liquidation structure because of this single print. And we're going to be talking about this location right here. So the first thing that we're going to do to map out our levels is go to the weekly. So higher time frame approach means that we're looking on the weekly chart. So we could see where up until this point, up until the 20th where most of our value has been established. So we know that this has been a trending structure. We could see that these profiles are not exactly balanced whatsoever. And we can see that towards this high we did have over these weekly structures essentially in the beginning, a one time framing market. So market opened at the low and spent most of its time moving upward. And in this case we see that value.

Is relatively balanced, but that we close at the low end of value. So rather than continuously closing towards the upside, the trend that came out of this range, you see that we close at the high over here, we closed at the high value over here. You, you can start to see that this is beginning to shift. So in this case we have a point of control that comes out of this range leading up towards the high of value, close at the high. Continuous rising of the point of control within these structures within this week. And then we see that within this weekly structure that we close out that we have the point of control at the low and we close at the low. So it's not like we close at the high and we have the point of control at the low, which would be a good potential sign of a base building. Okay, in this case we're closing towards the low end of value, not necessarily a good sign. So we're looking for what is a consolidation or range to form. So from the higher time frame down, the first thing we do is we're going to map out where we currently sit within value. So we're going to identify our value area, extend this forward. So now we have an understanding of where the value area is for that week. So we're going to make this a little bit more transparent. So we could still c. Okay, so now we see our value area and another important level always, even though we are trading based on market profile, always weekly closes, weekly opens and these swing points. So this was our close for that week right here, right around 8,700. So now when we have our weekly levels marked out, so we should take into consideration where the point of control is for this week. So the point of control being right here, we could go ahead and label these. So chart drawing properties. If we are using something like Sierra, it doesn't really matter if you're using Sierra or Exocharts or any of the other tools, it's going to show you you're still going to be able to see or be able to rather create text on many of these platforms. So we have the weekly point of control. So weak pack, we know that this is the weekly value area. So we're going to make sure that we have these prices indicated. So labels on the right show price levels. Go ahead and select that. Just running through how we would go about looking at the market. So now we have after a trending move the first time that a weekly level has closed at the low. So we're going to be looking for a consolidation of form. All right. At least within this value area. So now we're going to go down to the daily, going to go all the way back to that structure. So we should be able to take myself back to it by. There we go. So we're going to look at how this week starts off. So ultimately this is the point we're leading up to. Okay. So this is the close of that week. This red line right here. So we have an understanding of where that weekly close was. We know that for the first time we are closing at the low end of value. Mind you that this structure right here. So this structure, this white box, this is the value area for that week that we just closed out. So for the first time within the structure that gives you a little bit more context. You see that we had a little bit of back and forth between value. It wasn't the case that we had value continuously moving up. This consolidation formed and essentially the final day of this week we closed below back within a value area that we established within the middle of the week. So we could see that we lost the last two days that were in balance. We completely took out this level. Had this long liquidation structure in these single prints. So we have an idea of where some of these important levels are right now. So we have an idea of where single prints are. So we're going to go ahead and mark this off because what we said was single prints should ultimately act as an area of resistance or support if we are returning to that level. So this is an area where imbalance structure ended up. You're looking at this. What this is is essentially it's an inefficiency. The market moved right through this level and there was no two way trade. And this is where the market came back into balance. You can see that there is a ledge right here before these single prints. So you don't have a smooth distribution. You definitely don't have a balanced structure. And you have a single print level that begins right there. So we know that we're at the low end of a weekly value area. Now we know where our single print level begins. So we have what are the beginnings of a level that has a good amount of Confluence that in this case if the trend is changing would act as resistance. Okay, so if we're looking at this structure, keep in mind what we're looking at as I'm narrating this, what we're seeing is that right here. So I'll make sure I have my other drawing tools on. We're seeing that right here. There is the single print level.

The weekly close as well. So I'll just go ahead and highlight this with a different color. So I'll make sure that I have my drawing tools set up so they are red and maybe slightly larger. So we have the single print level and the weekly close of the week prior. Okay. So we know where the higher time frame level is now. So always have an understanding of where higher time frame structure is. Higher time frame structure is going to be where larger participants get involved. We're at this point going to be playing with a lot more participants. We're not just trading with intraday traders. This is an extreme in market structure. After we just came out of a multi month range, we have an idea of where a major significant level is. So if you're looking at and I'm just going to make this drawing to a little bit smaller now, maybe I'll make it pink so that it stands out even more because we do have red on the chart. If we're looking at this zone as an area of confluence between a weekly close after this level was lost and the beginnings of an imbalanced structure. So we're looking at a double distribution. What we would do is want to see the extreme in this case be invalidated. So if we were going to say that price was going to continue to move up, it wouldn't only be that we'd be paying attention to the weekly structure at this point. And this is the case for paying attention to lower time frame context or lower time frame distributions rather to get some context. Is that not at this point. We just want to pay attention to the weekly level if we're going to be trading intraday. If we're going to be trading as a scalper or as a swing trader even, we're going to want to also pay attention to this single print zone where there is a ton of imbalance. So this is a low volume zone. There's really nothing that took place here. It's a structural anomaly. This represents a very imbalanced structure. Okay. This is the beginning of single prints and a ledge. Right. We've gone over all of these concepts. So if there is any area that is to invalidate this move up, continuing down, it would be the high of this confluent level. So we're looking at again, right around 87, 68,770. So we're going to anticipate that after a large move like this that the market is going to find some level of balance initially. So after a big structure like this, after a double distribution like this, you're more often than not going to see that the market is going to remain imbalanced initially right after this structure ends, closes out. So you're going to see that this is a double distribution right here and that more often than not, at least the first day that follows is probably going to be pretty balanced. So we have an idea of where our key levels are within just this structure alone. Okay, so what we want to see is that this level above the single print area serves to reject any kind of advance. Okay, so where is value developing? Well, we could see that value shifted over time. We have the loss of that weekly level, okay, on the weekly time frame. Now we're closing at the low end of value. And on an intraday basis, we are starting to create what is likely a value area or within this structure. So you have a weekly value area composite right here. And we're going to be forming, rather this is a weekly value area on the weekly candle, but we're more than likely going to be forming a weekly composite on the low end, excuse me, a lower time frame daily composite on the low end of this weekly structure. So at the low end of weekly value, we're in balance. So this is where value is going to be developing, but it is within a previous weekly value area. So, so it's really important to understand that the trend did change in the short term. The trend changed in the short term from a structural standpoint, from a value migration standpoint. And now we're at the low end of where that change occurred. So the low end of that value area of that higher time frame structure. So value is developing here. The area that we would anticipate that would serve to reject price is the extreme of any one of these confluent levels. So in this case, the extreme, the highest value would be the single print level. And if we're looking for a rejection, what we don't want to see is the obvious sign of acceptance.

The first time that we come in contact with the single print level, we don't even come close to it. We don't even interact through it. Price turns from this level. And this is, mind you, if we combine these days, we get a more complete idea. So the market ends up on the second day closing more towards the midpoint. And again, as I said, after a double distribution stays in relative back balance for that first day, the next two days are a little bit more telling. So where is value? Developing our significant levels. Again, single print, the point of control for that weekly point of control is still being respected even on this intraday composite level where we spent the most amount of time and transacted the most amount of volume on that weekly structure. So again, if we go back to the weekly structure, we're looking at the point of control that is right. Excuse me, we are looking at the point of control right here. Okay, so this is that week. That's why I was confused for a second. This is the week that we're currently analyzing. But this is the weekly point of control that we have an extended line from. So going back to the daily. So going over here again, the drawing tools are not falling. There we go. They stuck together. So we know that above this level is an area that we should expect that price should be rejected. So we're going to draw that again. So now that we understand what level we're looking at, we're looking at into this single print zone. So this is where we're going to look for signs of rejection. Now a sign of acceptance would be the market coming to this level and not being rejected. Instead, you could see that so far, the second day in, we have a good high. So we have the market that closes towards this level at the high of value, but again below the key level that we have identified within this structure. So within this context, remember the order of operations, we're looking at weekly structure, but we are giving it the extreme, which is in this case the single print within this structure to look for acceptance through. If we're going to say this might continue, but instead into this single print zone, into this structural anomaly, we have one of the first signs that the market is not being accepted, which is that the market in this case comes in.

And is quickly rejected outside of and falls back within this balance level. So single prints comes into that level, we have a clean high that's established and the market falls back within the next day. You can see that the market comes into this level again and is rejected twice. So a sign of acceptance would be holding two TPOs. So we're looking at two TPOs within here, but we do not hold this level. The market moves into this level and then very quickly moves out. We do not get any kind of acceptance into this zone. Right. So when we're mapping our environment, what we've done is we've established our weekly levels. We've taken from what we know in terms of what was setting up. So in this case we have. What we're setting up is we had a single print level on a double distribution. So the area we're looking for rejection is within the single print level. Okay, so so far, two back to back days, and at this point what we've done is we've actually formed a composite. So important to remember when we're within value, we're asking where is value? Developing value has maintained this level. So the market moves into a level where we're looking for it to either be accepted and move upward or see a clear sign of rejection. Now, from what we know, the value area, when we move outside of the value area and gain acceptance back into the value area, we're more than likely going to at least return to the point of control, but more than likely going to cover value. So in this case, what do we have? Price moves into this single print zone. There's no sign of acceptance whatsoever. It's a little bit more clear now when you look at the volume profile, no volume transacted really whatsoever over there. There's a little bit of excess in terms of volume. And what do we do? We fall back within what was our developing value level and we cover from the high to the low. So this is a case of one of those opportunities setting up where when you gain acceptance outside of value and return to a previous balance level, you move from one extreme to the other. Okay, so shortly after the market actually breaks down from this level. So the market breaks down from this level. We know that this was our last balance area. So this brings us, this opens up the potential for new contextual levels to set up. So let's do one more example of mapping out an environment to point out some of the more significant levels, how we would go about mapping out the environment, period. So this is a structure they're going to treat as if we are just like the last one, starting off right here. So how are we going to be looking at our current structure? Well, we're looking at this one and it appears to be that we came from a very strong trend to value overlap. Which one of the first signs that we might potentially be forming a range this week makes it very clear. We have an inside week from high to low standpoint and inside value. So one of the first signs that the market is beginning to fall into an area of balance or a consolidation or a bracketed market. And what we have are three back to back weeks where we are in relative balance within value. So we're going to take a look at this the way that we normally would. We're going to form a composite and identify our key contextual levels from this composite first. So we have our value area high and our value area low. So the value area high coincides with a high volume node, the value area low. That is where we begin to shelf off or where there is a considerable ledge. So if we're looking at this distribution, it's semi balanced. If you're looking at it loosely, we could see that we are spending most of our time within the center of this structure, but is not very evenly distributed. So you could see that there is a shelf here and a pretty steep drop off here. So we have our value area high, value area low. And what we're going to do is also mark the point of control within this structure. So that's our point of control right there. And our point of control within value is right here. So we're going to say that this general area is likely going to be where a good amount of reaction will occur. This is more or less fair value within the center of the structure. So again, point of control right here is volume. Point of control right here is the TPO point of control. Between these levels. We could see that there's a high volume node right here, a high volume node right here. This will likely be the meat of this structure moving forward if we're going to continue to range. But what we've seen with this structure is that there wasn't that much of a reaction off of the lows. So what we're going to do is unravel these into this low. We had a good reaction, but down here we had a little bit more acceptance. So the one thing that we're going to be paying attention to is how we respond if we fall outside of value. And for the first time within this structure right here, you could see that we've actually entered in below value and have shown some sign of acceptance. So if we unravel these completely, so we're going to merge these and show you the kind of response we had throughout this week. Take this drawing tool off.

You could see that as we came below value multiple times, we responded by leaving very quickly.

So now this is the third time or the fourth time that we've moved down to the low. And this is the first time that We've gained acceptance into this level where there is actually single prints. If you're looking at this on the daily profile. So this is important. We have shown a sign that we have gained acceptance through what is the most important contextual level within the last few weeks. And that's the value area. We've gained acceptance down here. And the area where we have not shown much of a buying tail is at this low. So we see that this is probably a target for some type of cleanup. Now we're looking at the weekly structure. If we're looking at the daily structure, it would look more like a poor low on individual days. So if we go down here to the daily, you can see that we have a poor low down here. At our low, there's not much of a buying tail down there. So when we open this up, we get a bit more context. So not a sign of rather no sign of excess down there, no sign of a buying response, no sign of a tail. And now we've gained acceptance below the value area. So it's more than likely that we're going to clean up this tail. So this would be an area that we would mark off.

And look to either see a stop run take place or for a breakdown. So ultimately we know a level that we want to be paying attention to something like this occurring. So breaking below it and then reclaiming it, which sets up for a return to the value area low or breaking below and failing to reclaim it, which likely leads to a further breakdown. So we have one of three significant levels right now that we're paying most attention to. And that's because we've gained acceptance through the underside of where we have been auctioning within for the last three weeks. So again, the first time that we've really gained significant acceptance into this low. So rather into this structure, we spent most of our time, 70% of our time auctioning within this. Within this location. And this is the first time that we've gained acceptance to the downside. So in this situation, I would anticipate that we're going to come down to this low. And the kind of response we get down here would dictate our response moving forward. So we'll just go ahead and add some more days to this chart. So we have just on this daily alone, we know that what we have within this structure is a double distribution setup. So we have an area where the market was actually balanced over three days or two days rather at this low, did not do much to leave the low. And rather instead of moving to the upside, we had an impulsive move to the downside for stalling there before closing that day out. So this might be the kind of structure where you would look to initially find resistance at this single print before potentially continuing down to this low. So we'll monitor for that. So we're going to go ahead and mark off the beginning of the imbalance compared to where we currently are. So the beginning of the imbalance, meaning that it's the beginning of the single print for this day that we're currently looking at to reflect upon as we see how we move forward. So let's open up some more days, go ahead and change the chart settings.

Take it two days forward, rather, let's take it one day forward.

Okay, so as we can see, the level that acted as resistance, one of the first levels that we would look to is the beginning of the single print level. So the area where this imbalance occurred, where we would expect if we're revisiting from the underside, after gaining acceptance into this structure, gaining acceptance outside of rather this range that we were stuck within, we'd be looking for this to act as resistance. And surely enough, Price came into this level before moving down to the low. So we were sideways for the last three weeks. Price was stuck within a range. This was the first time we gained acceptance to the downside outside of this range. And, and the first area that we would expect to act as resistance and also the first area that we would look to to be regained has acted as resistance. And what we end up doing is visiting the low. And in this case, we actually don't come all the way down to the low. And if we remember this correctly, this was on November 17th. We go ahead and open up another day, we'll see that in this case we actually do revisit that low. We'll open up two days because we blast all the way back up. So we'll go ahead and do that. We see that we actually took out that low. So what that brings us to is back to this prior range. Okay, so it brings us right back to the last area that was most agreed upon, which is this range that we were stuck within for three weeks. So this is going to be now dictating our approach moving forward, because what we did is we're in a range, we formed a low, we formed a high, moving sideways most of the time within this structure. But now we took out this low and we've gained acceptance back within the range. So what our bias should be in this case is that we're going to auction within this range the same way we did prior. Now, mind you, these are not the setup videos. This is just a video that I want to put out to help you understand what it means to map the environment. So just, just paying attention to what's going on on the weekly. First, keeping in mind where we sit within weekly structure, are we ranging, are we in a trending market? Mapping out the weekly contextual levels. So where are our high volume levels? Where are our low volume nodes? Where has the market shown signs of rejection? Where has the market not shown signs of rejection? And then getting down onto the daily profile and getting a more broken down view of this on the daily sessions. So seeing where we have signs of imbalance, where we have signs of balance, where we have structural anomalies, whether we're looking at, in this case, this single print zone over here to identify the market probably would find resistance off of this level, which it did. And this is just a way that you need to be looking at the market, you need to be looking at it from the higher time frame down to the lower time frame and mapping all of these considerations out, all of these important levels out, to have an idea of where we might visit, what we need to hold, what we cannot lose, and so forth.