Reader Questions Answered

How do I see Market Profile charts on Tradestation?

Trader Barabara sent me the following question the other day.

I think it might work, too. I will probably take your course, but I do have a few questions. First, I recently started with Tradestation and am working my way around it. So, my first question is, where is this info? Is it what appears with the Matrix? Is it the Market Depth (which I can’t seem to fathom at all)? I can’t find anything that shows prior days’ info – is this available somewhere, or do you have to print off each day’s data? If so, then how long back is the data good for? I assume one needs this info for some period of time, but at some point it may become irrelevant to the current trading (stale data). Thanks for your help.

I’m not a Tradestation user, so my ability to answer specific questions is going to be limited here.

As I understand it, the Market Profile charting (or the equivalent) isn’t a part of the base charting package. It doesn’t seem to be the Matrix or Market Depth things – as I understand, anyway. I could be totally wrong. A quick search on the discussion forum comes up with a couple of related entries, though. One of them looks to have code for programming a custom indicator. There also may be an already developed third party add-on which provides the correct functionality.

Any Tradestation users out there are encouraged to add their input.

The point I would make, though, is that Market Profile charting (or any variation thereof) is not a requirement for using the price distribution methodology of market analysis. It’s about looking for the dense trading areas and the thin ones. Those can be quite readily seen by looking at a normal bar or candlestick chart by just examining how many bars/candles can be seen passing through a given price point. That really is all MP charting does.

Reader Questions Answered

What does The Essentials of Trading entail?

A gentleman by the name of Jeff asked “What does The Essentials of Trading entail?” in a comment on a post about gold I wrote the other day on my Rhody Trader blog. Since this is the trading education blog and that one just my thoughts on the markets, my trading, and other stuff, it made sense that I should answer the question here rather than there. So here goes.

The History of The Essentials of Trading
The Essentials of Trading book by John FormanI wrote The Essentials of Trading a few years ago when I was partnering with a professor friend of mine on a university summer trading course. We were going into our second year teaching it and I was looking around to see if there was a good general introductory trading book. Try as I might, I couldn’t find one. All the basic books were either market or style specific (swing trading stocks, day trading, forex, etc.), or assumed a familiarity with trading that not everyone has.

I was working with college students who had a basic understanding of what the markets were about, but had pretty much zero exposure to actual trading. Believe it or not, college finance programs don’t really provide students with much that is useful for individual trading. I know. Shocker!

Since I couldn’t find the introductory book I was after, I decided to write one (The Essentials of Trading wasn’t the original title – but I can’t remember anymore what it was). It became a book about trading that didn’t focus on any one market, but rather discussed them all along the way. That’s what I needed for the college students since I couldn’t say ahead of time whether they were going to be stock traders or forex traders or futures traders, or anything else.

I thought things out in terms of a semester long type of structure and included a lot of exercises and practical application elements along the way. Some of it could even be turned into homework and/or exam type things for classroom application. It was really helpful being able to apply the stuff in the classroom as I was developing it. In particular, I found that I should rearrange the way I presented a couple of key things, causing me to shuffle them around in the book.

Taking the New Trader from Nothing to Something
The intention of the book was to take the reader from ground zero – little to no knowledge of the markets and trading – up to the point where they had a sufficient foundation to be able to take on the markets in a reasonable fashion. That meant starting with the very basics of prices and transactions and position monitoring and all the stuff that anyone in the market for a few years takes for granted. Then it was on to explaining how and why prices move and the types of market analysis employed. In the middle third it really gets seriously into trading plan development, with the rest of the book essentially going into the various specific elements of one’s plan – risk management, trading system, etc.

I never intended The Essentials of Trading as a “this is how to make money in the markets” type of book, because any given book of that sort is completely useless for most of its readers. I don’t say that to imply poor book quality. What I’m saying is that those types of books attract people looking for answers to questions they aren’t even able to ask yet.

Instead I focused on helping people understand how they individually should approach trading. Once someone has that kind of foundation they are much better positioned to take the step of reading the book on swing trading stocks or day trading forex or whatever best suits them – rather than running around willy-nilly as most new traders do.

I kind of think of it like a PhD program. In order to get a doctorate the candidate must demonstrate a foundational competency in the subject matter. Then they have to do their doctoral thesis. The Essentials of Trading was meant to be that foundational competency which then allowed the reader to pursue her or his trading thesis.

From Trading Course to Trading Book to Trading Course
The Essentials of Trading basic introductory courseThe book was published in April of 2006 by Wiley. Later in that year I actually kind of turned the process around. I took the book material and taught it in course format again, though online rather than in the classroom. Doing that allowed me to see what it was like in application once more. Along the way I added some supporting materials and some audio discussions with other traders to support a general desktop video presentation.

That collection of materials became The Essentials of Trading Home Study Course. It’s about 9 hours of video lecture material covering everything the book does (and more) and 4 hours of seperate audio discussion with other traders, plus some additional video and e-book materials.

I hope that answers the question.