Have you seen a chart like this before? (click to enlarge)
This style of chart is known my a number of different terms. Market Profile is one. TPO charting is another. Volume at price is a third. Although they are becoming more prevalent, I’d venture to say that most traders haven’t looked at charts like these before.
The idea of these charts is to identify where the market is spending the most (and least) amount of time. Think of it like taking a bar chart and squeezing all the bars together. That gives you a distribution of prices over the course of a day or week or whatever. (The chart above shows two seperate days).
Two very good books on the subject of what I often refer to as “price distribution charting” are Mind Over Markets and Markets in Profile, both by Jim Dalton.
This charting methodology is the basis for a great deal of what I do in my work as a market analyst, and I went over the methology in the Following the Quest for Value course I developed earlier this year. I definitely encourage you to give a look. It could very well change the whole way you think about the markets and the way prices move.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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