Market Profile Terms
Auction Markets
A market in which buyers place bids and sellers enter offers at the same time. A transaction only takes place in the auction market when there is an agreement on price between the buyer and the seller. The transaction typically takes place at the highest price that a buyer is willing to pay and the lowest price that a seller is willing to sell at.
Auction Point
The auction point is located at the first price that is traded above or below the Initial Balance for the day.
Ask
The ask is the price at which sellers are willing to sell in an auction. The forces of supply and demand in the market will influence the ask price at any given point in time based on market conditions. Aggressive demand in the market will usually push the seller’s asking prices higher.
Average Volume at Price (AVAP)
The average volume at price is the average traded volume at a specific price for a given session or period of time.
B Letter Shaped Profiles
There are two letter B profile shapes; one shape is that of the capital letter B. This capital letter shaped profile is also described as a double distribution. The other B letter shape is that of a small letter “b”, the profile is long and narrow at the top and wide at the bottom. This structure is usually the result of heavy selling at the top of the profile.
Balanced Market
A balanced market is a rotational market where prices trade around a fair price.
Balanced Profile
A profile that has an approximately equal number of TPOs above and below the point of control is considered to be a balanced profile. A balanced profile indicates acceptance of current value in the marketplace. Most of the trading activity is balanced around a fair price which is identified by the point of control.
Bid
The bid is the price at which buyers are willing to buy in an auction. The forces of supply and demand in the market will influence the bid price at any given point in time based on market conditions. Aggressive and abundant supply in the market will usually cause the buyers bid prices to drop.
Buying Tail
A Buying Tail is a single print column that appears on the lower portion of a profile structure. The buying tail is usually made up of three or more TPOs. It is formed as a result of aggressive buying activity that takes place once prices drop to a price level that the market participants perceive it as an unfair low for the session. As aggressive buyers jump at these lows, their aggressive buying causes prices to quickly move higher towards value.
Column
A column is term that is sometimes used to describe a series of consecutive vertical TPO prints on a profile chart. A split profile is typically made up of a number of different columns. Each TPO column on the profile chart will be for a specific time period, it will have a price high, a price low, an open price and a closing price.
Composite Profile
A composite profile is a profile that consists of two or more profiles.
Delta
The delta is a term that is often used to describe the difference between the level of selling and the level of buying for a given trading session. The delta is calculated by subtracting the total selling volume from the total buying volume for the session. A positive delta is indicative of a bullish sentiment for the session or period, while a negative delta reflects a bearish sentiment.
Developing Range
As the market activity moves up and down within a specific range of prices during the auction market process, this activity results in a developing range of prices for the session. The range continues to develop until the market finds a fair price and begins to distribute and create a value area around that fair price.
Distribution
A distribution is the process of trading activity that takes place during an auction market. Sometimes, the term distribution is also used to describe selling activity in the market.
Double Distribution
During some trading sessions, the market starts to distribute around a certain fair price. As the session develops, the perceived fair price suddenly changes due to news, events or changes in the market. This sudden change causes the market to locate and distribute around another new fair price. This new fair price may be above or below the previous fair price on the profile chart. In either case the market will create a new distribution around the new fair price, thus creating a double distribution for the session. If this event occurs during a trading day, the profile structure is described as a double distribution day or a “B” shaped profile.
Dynamic Day
A dynamic day describes a trading day during which the high or the low of the day’s range are both revisited by market activity during the day.
Ease of Movement
The ease of movement describes the ease by which price goes up or down during a directional move in the market.
Failed Range Extension
A failed range extension results when prices fail to break the range created during the initial balance.
Footprint Chart
The Footprint® chart is a proprietary type of chart that is only found in the Market Delta charting platform. The Footprint chart makes it possible to keep track and display the net difference between buyer initiated volume and seller initiated volume at each price. It does this by monitoring the volume traded at the bid and ask.
Imbalanced Market
An imbalanced market is a market where prices are moving directionally seeking a fair price for a balanced market.
Initial Balance
The initial balance is typically defined as the first two periods (letters) on the profile chart for a trading day. Typically, these two periods account for the first hour of trading activity.
Initial Range
The initial range is the price movement from price low to price high that takes place during the first hour of trading for the day session. Frequently, the day’s high or low for the session is put in place after completion of the initial range.
Initiative Buying
Initiative buying takes place in the market when market participants feel confident that market prices are undervalued and destined to move higher. Initiative buying is aggressive bullish buying activity that moves market prices higher.
Initiative Selling
Initiative selling takes place in the market when market participants feel confident that market prices are overvalued and destined to move lower. Initiative selling is aggressive bearish activity that drives market prices lower.
Inside Day
An inside day is a trading day where all of the trading activity for the entire day takes place inside the price range of the prior trading day. It is a day of uncertainty in the market.
Ledge
A ledge is formed on a profile chart when two or more consecutive letter columns end their range of price activity at the same price level forming a flat ledge. If the ranges terminate at an equal high the ledge on the profile is formed at the top of the columns. However, if the columns end at an equal low level the ledge is formed at the bottom of the columns.
Liquidity Data Bank (LDP)
The Liquidity Data Bank is a powerful tool for analyzing volume that is offered by the CME Group for traders. This in-depth data source reveals a detailed image of market activity. LDB is an application that summarizes and reports trade data by the Customer Trade Indicator (CTI) code and it is used by trading companies for analyze trading patterns. The CTI specifies whether a trade has been executed by a Member trading for their own account, a Clearing Firm trading for its proprietary account, a Member trading for another member, or all others. This data, is currently only available for CBOT products, it is produced every 30 minutes during regular trading hours and every 15 minutes during Electronic Trading Hours
Minus Development
A minus development is an area on the profile structure where there has been little trading activity; it appears as an area that is underdeveloped on the chart. The most extreme type of minus development is the single print on the profile structure.
Multi-Day Profiles
A multi day profile is a profile chart that consists of a specific number of days/sessions that are combined into a single profile.
Naked POC
A naked POC is a point of control from a previous session's profile that has not yet traded in subsequent profiles. The naked POC can be used as a useful reference point "support/resistance".
Neutral Day
A Neutral Day describes a profile structure for a trading day with limited range extensions on both sides of the initial balance. Neutral days are formed as a result of market uncertainty and lack of directional conviction.
Normal Day
A Normal Day is a term used to describe a profile structure that is characterized by a wide ranging initial balance, the first two time periods of the day create a wide range. As activity develops for the day, the distribution will generally develop within the range of the initial balance. As long as there is no long term aggressive market participation, range extensions will be limited. That is to say that the market may extend beyond the initial balance by only a small amount to the top or bottom of value, and then return back into the value area. Some normal day structures will not have any range extensions at all.
Normal Variation Day
A Normal Variation Day is a profile structure that is characterized by a wide, but somewhat limited initial balance. The initial balance usually represents about half of the finished profile structure, with a range extension early in the day to create a fairly normal bell curve.
Offer
An offer is the price at which sellers are willing to sell in an auction market. It is the price that a seller offers to the buyer. It is also often described as the “ask” price. The forces of supply and demand in the market will influence the seller’s offer price at any given point in time based on prevailing market conditions. Aggressive demand in the market will usually mean that sellers can offer or ask for higher prices in the marketplace.
Open Drive
An open drive describes an event that takes place when the market opens the trading day with a strong directional drive. Prices will open and continue to move in one direction without ever breaking the open price. This usually occurs when there are aggressive and determined buyers or sellers in the marketplace.
Opening Range (OR)
The opening range is the immediate range that is created during the first 5 or 10 minutes of activity for the day. It is always contained within the range of the day’s initial balance.
Open Test Drive
An open test drive occurs at the open for the day when prices move towards a direction to test a key support or resistance level.
Overnight Session
Once a trading session close for the day in the U.S. markets, the activity that takes place in overseas markets is described as an overnight session.
P Letter Shaped profile
A profile structure that is shaped like the letter (P) is narrow at the lower portion and developed or wide at the top. This type of profile structure is usually the result of short covering rallies.
Period
A specified or set increment of time or trading activity.
Pioneer Range
When prices move for the first time into a new price area where it had not previously traded during the current trading session, this initial activity is described as the pioneer range.
Point of Control (POC)
The point of control on a profile chart occurs at the price where the most TPO activity has occurred during the session. Visually it appears as the longest horizontal line on the profile chart.
Price Ladder
A price ladder is a stacked display of market prices on a profile chart; the ladder can also be used to show a variety of different market information. It is also sometimes used to place and track orders.
Range
A range is the distance that a price travels from (low to high) or (high to low) during a specific period or session. A range is the entire extent of price movement from a price high or low during a specific trading session or period. The range of prices for a session is calculated by subtracting the price low from the price high for the session.
Range Extension
A range extension occurs when price activity expands and extends beyond a previously defined range.
Range Low
The lowest price point on a specific range of price activity.
Range High
The highest price level reached during a specific range of price activity.
Responsive Buying
Responsive buying occurs when prices drop to an unfair low and buyers promptly respond to it with aggressive buying activity.
Responsive Selling
Responsive selling occurs when prices rise to an unfair high and sellers promptly respond to it with aggressive selling activity.
Rotational Market
A rotational market is a market where price activity is bounded by an upper price limit and a lower price limit. Prices rotate back and forth from one side to the other. This type of price activity is also described as a balanced market.
Short Covering
After an extended price move to the down side, traders who were short during the move will decide to close their positions and capture their profits. This action creates what is known as a short covering rally. A short covering rally may provide fuel for a reversal to the upside; however, sometimes when there is a strong trend to the downside, markets tend to continue to move lower after the short covering rally ends.
Single Print
A single print is a series of TPO prints that appear on a profile chart without any activity preceding or following it. Single prints may appear on the top or low end of a profile chart as well as in the middle of a profile structure. A single print is a portion on a profile chart that usually represents an area of fast market activity. Price is not in balance in these areas and they are often referenced as points to look at for potential support or resistance.
Selling Tail
A Selling Tail is a single print column that appears at the top of a profile structure. The selling tail is usually made up of three or more TPOs. It is formed as a result of aggressive selling activity that takes place once prices rise to a price level that the market participants perceive as an unfair high for the session. As aggressive sellers react to these high price levels, their aggressive selling cause’s prices to quickly drop lower.
Settlement Period
Prior to the conclusion of a trading session there is always a flurry of last minute activity when long term traders and day traders are conducting their final transactions for the session. In other words, they are settling any open positions that they may have. Those who are holding long positions may choose to settle and sell to close their open positions, while those who are holding short positions may choose to buy to cover their shorts prior to the session close. This last segment or period of the day's session is often described as the settlement period. The activity during this period can often provide some insights about the final trader sentiments at the conclusion of the session.
Split Profile
A split profile is a profile chart that is split into separate columns or periods. This makes it possible to clearly see the range of prices traded for each letter column.
Spread
The difference between a bid price (what the buyer is willing to pay for an instrument , i.e. the buyer's bid) and the ask price (what the seller is asking, or what the seller is willing to accept for an instrument) is called "the spread" or "the bid-ask spread".
Time Price Opportunity (TPO)
A time price opportunity occurs every time the market trades at a new price point within a given period, each price point of activity is assigned a single TPO on the profile chart regardless of the size or frequency of activity at the price opportunity. Each letter on a profile chart typically represents all activity that occurred at the price opportunity during a 30 minute period. The TPOs are the building blocks for the Market Profile Charts.
TPO Count
The TPO count is the total number of TPO prints or letters that are printed on a profile chart for a given period or session. The larger the TPO count on the profile chart, the greater the activity for the session.
Trade Facilitation
Trade facilitation describes the degree of ease for prices to move in a particular direction in the market. When trading activity increases as prices move in a particular direction it indicates that the market is facilitating trade in that direction.
Trend Day
The term trend day is used to describe a profile chart with a strong directional movement. Typically a directional day is characterized by a narrow profile structure that continues to extend the price range in the direction of the trend for the day.
Unfair High Price
An unfair high price is a price level that is above current value for a session and is recognized by the long term market participants as an attractive selling point. Unfair high market prices attract responsive sellers.
Unfair Low Price
An unfair low price is a price that is below current value for a session and is recognized by the long term market participants as an attractive buying point. Unfair low market prices attract responsive buyers.
Value Area
The value area on a profile chart is typically calculated by tracking the number of TPOs on the Profile for a given session, and then identifying or highlighting the range of prices that included approx 70% of the trading activity or TPOs on the chart. This identified price range represents the value area for the session’s profile chart. The upper price of this Value Area is considered the Value Area High (VAH). The lower price of the VA is considered the Value Area Low (VAL).
Virgin POC
A virgin or naked POC is a point of control from a previous session's profile that has not yet traded in subsequent profiles. The virgin POC can be used as a useful reference point to trade around or look for support/resistance.
Volume Bars
A bar or candlestick on a technical chart that is formed on the basis of a set level of traded volume.
Volume at Price
The total volume that is traded at a specific price level during a set period or session.
Volume Distribution
A volume distribution shows the various levels of traded volume at each price within the price range for the session. It is often displayed as a histogram on the side of a profile chart.
Volume Histogram
A histogram display indicating the total traded volume for a specific period.
Volume Point of Control (VPOC)
The volume point of control on a profile chart is the price level that had the greatest level of trading activity during a session. The price level that has the largest volume traded during a specified period or session. Note: The volume point of control is not always at the same price level as the POC for the session.
Value Area High
Once a value area is calculated and identified on a profile chart, the upper price of this Value Area is considered the Value Area High (VAH).
Value Area Low
Once a value area is calculated and identified on a profile chart, the lowest price level of this Value Area is considered the Value Area Low (VAL).
Volume Value Area
The volume value area is the price range for a session that includes 70 % of the traded volume for that session.
Volume Value Area High
The volume value area high is the upper limit of the volume value area for a specific session.
Volume Value Area Low
The volume value area low is the lower limit of the volume value area for a specific session.
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