Market Profile
Overview
Market Profile organises price data into 30-minute periods called TPOs (Time Price Opportunities), creating a bell-curve distribution that reveals market behaviour patterns. Developed by J. Peter Steidlmayer at the CBOT, Market Profile identifies day types (Normal, Trend, Double Distribution, etc.) and provides a statistical framework for understanding auction market theory.
Key Concepts
TPO (Time Price Opportunity): each 30-minute letter block, Initial Balance (IB): first hour of trading range, Day types: Normal, Normal Variation, Trend, Double Distribution, Neutral, p-shape profile: rally with buying tail (potential short), b-shape: decline with selling tail (potential long), D-shape: balanced/rotational, Single prints: fast moves through price levels (future support/resistance)
Entry Signals
Normal day: trade within the value area. Trend day: trade in trend direction only. Double distribution: trade breakout of initial range. Opening outside the previous value area on a gap: trend day likely. IB extension trades in the direction of the break.
Exit Signals
Rotation day exit: opposing value area boundary. Trend day exit: trail using 30-minute TPO structures. IB extension target: 1×, 1.5×, or 2× the IB range projected in the extension direction.
Best Timeframes
30M TPO periods are the standard unit. Session analysis on daily. Weekly composite for context.
Pro Tips
Market Profile is most useful for understanding the type of day you're in. A trend day requires different behaviour than a rotation day. Identifying the day type early (by the third or fourth TPO period) gives you an edge for the rest of the session.
More Topics in This Category
Footprint Charts
Footprint charts display the actual volume traded at each price level within a candle, broken down by aggressive buyers (market orders hitting the ask) and aggressive sellers (market orders hitting the bid). This granular view reveals exactly where buying and selling pressure occurs, exposing absorption, exhaustion, and imbalance patterns invisible on standard charts.
Absorption & Exhaustion
Absorption occurs when large limit orders absorb aggressive market orders without allowing price to move. For example, price hits a level where heavy sell market orders are absorbed by even larger buy limit orders — the aggression is neutralised. Exhaustion is when aggressive buying/selling loses momentum, visible through declining delta and volume at price extremes.
Point of Control (POC)
The Point of Control is the single price level at which the most volume was traded during a specified period. It represents the 'fair value' according to market participants and acts as a magnet — price tends to gravitate toward the POC. The naked POC (from a prior session that was never revisited) is one of the most reliable support/resistance levels in order flow trading.
Delta & Cumulative Delta
Delta is the difference between aggressive buying volume (market orders hitting the ask) and aggressive selling volume (market orders hitting the bid) within a candle or time period. Cumulative delta tracks the running total over time. Divergence between price and cumulative delta reveals whether rallies/selloffs have genuine buyer/seller conviction.