The TradingEdge

[jxyzobrien]

market profile
part 2
value area and structure

Value area
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Is where 70% of the previous days volume occurred.
VPOC is in the value area typically in the middle and contains
the point where the most volume occurred.

When the value area is entered from below the market attempts
to rally to the top of value area high.
Market magnets are va high and low, vpoc and thick/thin areas
of volume.

When the value area high fails an attempt to go to value area
low is attempted.

When the market enters an area of congestion (lots of trades
there) the market slows down like an expressway traffic jam.

Market structure
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Most of the time the market is in balance- market goes sideways building energy to create excess and finish the auction
(up or down).

Excess end is created by an exhaustion gap or creating a new high
during RTH with thin profile (often looks like candle with a tail or wick). Single lettered.

In an up market the balance is used to repair weak highs and lows
to resume the rally.

In a down market rest and sell further.

When the market leaves the value area after balance its then ready
to become energetic and rally or sell.

Unless breadth and volume are strong pullbacks overlap each
other not going straight down as most expect.

Profile often protects the trader from getting too short too early
and relying solely on price which is often different from real value.

In tight markets the value area is extremely reliable
and often trades on it.

In general in an up market if the market goes up and down in
the value area it is building energy to break out of it.

Up markets kind of chop up and rally and down markets tend to fall much faster.

still look at spy volume and candle analysis to confirm.