Market Profile: Trading Environment Intro

So let's talk about environment type. And this is separate from our individual day types. We have a separate video on the different day types that there are. There are about five to six day types, and each one of those day types will influence whatever approach we have to follow. So whether or not the market is trending, whether it's balanced, whether we have a double distribution, and we're setting up for potentially a double distribution reversal, those are individual day types. Okay, what we're talking about, when we're talking about the environment, is how we are moving through time. What is the behavior over time? What is the trading environment like right now? Is it balanced? Are we, for example, beginning to form a bracketed range respecting the high and the low of the range? Are we setting up for that? Are we currently in a trending environment where we have essentially value that began within a range but now is leading to value being determined at new levels? Okay, so when we're describing the environment, the things that we want to be able to answer are, is the market balanced? So do we have, for example, just off an individual day, potentially a balanced range beginning to form? So we see a structure like this, which ultimately resulted in a break from balance. But we see a structure like this. And what this looks like is a balanced profile. It is symmetrical. It is pretty much showing a level of evenness between both sides of the market. Okay, so this is a single daily session. And for the most part, this daily session was a range. There is not much strength on part of buyers or sellers over the other. There's a whole lot of agreement right here. Okay? The point of control, the volume in the center. This is your normal balance, sort of Gaussian distribution. Market like this is imbalanced, right? There is a whole level of inefficiency between not much was transacted. The market started off temporarily looking like it was imbalanced and then quickly moved to the upside. This is a double distribution structure and in this case takes on the form of a short liquidation. Okay? So the market is imbalanced and then very quickly moves to the upside. And ultimately it is likely that the aggressor to the downside help this move to the upside. Okay, so what we're looking to do is sort of describe the environment that we're in so that we could best situate ourselves moving forward. If we see that over the course of few days we have something like value overlap. So, for example, we have two days, we're essentially within the structures. Okay, we have an inside day to follow, and we begin to have this overlap in value. So what we're looking at is essentially if we look at the high of this, we combine with the first low. What we're seeing is that there is a ton of overlap within value of the rotations to follow. So the market might not be balanced on an individual level. So from a single daily session, but over time it is balanced over time it is in relative agreement between these levels between around 9800, 9900 and, and to the lows around 9250 9200. So remember that a single profile while that day is important, while that day's close is important, okay? If that close occurs through a important level, that close occurs through a major contextual level that might be important as far as follow through. But other than that, this is all just really one long day. This is essentially we're looking at a market that is a 24 hour market and we're going to pick up right off from where we left, right. So essentially this is just one continuous structure that is forming a larger, higher time frame balance range. And now if we open this. Okay, well that didn't work. If we open this after compressing this, we'll see that over time, even though we had these deviations to the high, each deviation to the high was ultimately met with a level of rejection that had us returning back to the other side of the range. So this is essentially what we're doing. We're looking to describe the environment that we're in. Are we balanced? Are we imbalanced? Are we in a symmetrical structure that's forming? Okay, Are we in a trending environment? Is it one sided? And by one sided you'll sometimes hear the term one time framing. Now what that means is essentially from the open, so from, let's say for example, the initial balance right here, which is the first hour of the day, from that period on, there's been one side that has been in control. Okay? So from the open to the close, we're almost at both extremes where you could see that we have a very high rotation factor to the upside, a very positive value. In this case, buyers are clearly very in control. So that's another thing we're looking for. We're looking to decide not only is the market shaping up to be balanced or imbalanced, but is there one side that is beginning to show more control than the other? Okay, so in a trend we want to see that control is maintained. Right? If we have a trend upward, you would want to see that constantly you are Creating new highs. Constantly you are creating higher value areas and constantly that volume is shifting up as well. So we're going to get all into this on the videos to follow, but this is what we mean when we're talking about describing the environment. So on the high time frame you might have one environment. On the lower time frames you might have a trending structure. And you have to keep this in context always. Or rather keep your current positioning in context to greater context. Rather keep it in mind, keep it, keep it in perspective. Because a lot of the time our approach is going to be dictated by what type of environment we're coming off of. You could also see things such as whether or not the market is compressing over time. How is the ranges, or rather how are the ranges changing over time? So is something like our volume value area, our, our TPO value area, is that beginning to drop? Because we know that that is essentially the high to low of these ranges for the value areas. Is that compressing over time? Is the average sub period rotation size, is that increasing or decreasing? You would ideally want to see that that is increasing. If a trend is increasing, okay. And potentially towards the end of a ranging environment, you might see a ton of compression in those values. So this is what we mean when we say identifying what type of environment we're in. Make sure that you watch the specific day types videos and after this we're going to be getting into trading a range, trading a trending environment, and more of the specifics.