Study Book Recommendation
Markets in Profile: Profiting from the Auction Process
Following on from Mind over Markets, this book delves deeper into the auction process and its graphical representation in the form of market profile. This representation is a technical analysis tool used by many market participants across all time frames which organises and structures the market using three key parameters; time, volume and price.
One of the main concepts highlighted by the author is the variability of market behaviour. Following a behavioural change, many market participants from all time frames find it difficult to move away from an approach which previously made them money, and continue to stay attached to their ideas and methods. Every market participant strives towards consistent performance; but how can this be done if the market itself behaves inconsistently? The answer is that we as traders need to determine these changes and adapt to them.
Trending and ranging are the two fundamental phases all markets shift between, and identifying when one changes into the other is a difficult skill. In a ranging condition, the market essentially finds an area of fair value and auctions between two extremes where market participants respond to the divergence from value by buying or selling. A trending condition occurs when there is a shift in perception and market participants across all time frames begin buying or selling at prices which were originally deemed expensive or cheap. The author emphasises that this shift in perception can be determined from analysing the volume involved when the market moves away from value. A relatively high volume move can indicate that participants from many time frames are moving in the same direction. However, a low volume move indicates a false move with less conviction.
Alongside these main concepts, throughout the book, the author uses examples to describe market profile patterns and how to interpret them. This is the main factor separating this book from other market profile texts including Mind over Markets. Based on this, in our opinion, Markets in Profile is a must read for any aspiring Market Profile trader.