Market profile and understanding of the language


The organization and presentation of the data does not give any useful as long as we do not try to identify a phenomenon that lies at the basis of this presentation. In fact, there is an underlying pulse of the market, or a fundamental pattern, which is called the cycle of equilibrium and disequilibrium (cycle of equilibrium and disequilibrium). Cycle of equilibrium and disequilibrium Market Profile measure horizontal movement of the market in terms of its vertical movement. Call this the "balance" through the "imbalance". This ratio is a fundamental organizing principle of the market. Depending on which part of the cycle of equilibrium / disequilibrium is the market can vary trader trading style in general. Market profile can define, and when the market is going to move from equilibrium to disequilibrium and how big this movement can be. But first, let's define some basic concepts. Thus, the two basic concepts of market profile:

1. Market - is an auction, and it moves in the direction of the price range at which supply and demand are more or less equal.

2. The market has two phases: horizontal activity and horizontal activity. The market moves vertically, when supply and demand are not equal or non-equilibrium, and the horizontal - when they are in equilibrium or balanced.

The main objective of the market - to promote the flow of orders, that he exercises through auction. This auction is constantly fluctuates around the point of efficiency. Prices are rising so long until they reach the point where they are so high that it can no longer attract new customers. Then they begin to fall until they are too low to attract more sellers.

Once established range, the market will move vzadvpered around the level, recognized by all as fair value. This market can only do three things: to move up, down or sideways. If it goes up or down (ie vertically), it is in a state of disequilibrium. This occurs when supply and demand are not balanced, and either buyers or sellers control the market. When the market moves horizontally, it is in equilibrium: supply and demand are roughly equal. In this condition, the price is controlled by the market, not buyers or sellers.

Vertical motion has a simple structure, in contrast to the horizontal. Behavior of buyers and sellers in the market equilibrium, to some extent consistent with the basic statistical principles.

The most basic principle of the statistics may be a bell curve, which often appears in studies of different characteristics. For example, if you measure the growth of women and set aside the results of the chart, you will get a bell curve with the apex at the most common growth. This peak is called "fashion".

Middle Section 1 under the curve shown in the figure, which contains 67% of the data, is called "the first standard deviation." Sections 1 and 2 together contain 95% of the data. Third standard deviation (Section 3) will probably characterize the women with 6ft 2 inches and 4 feet 11 inches. In terms of the market is the price where the asset is recognized in the least time in the trading process.