Constructing session market profiles from half-hour auctions

How a market profile is constructed

A market profile is constructed from time/price opportunities that participants accept or reject. The premise is that a market exists to facilitate trade. Each time/price opportunity is a chance to trade a specific price during a specific clock interval, and those opportunities are the building blocks of the profile.

The finished graphic is a session map. It stacks time/price opportunities so auction acceptance and rejection can be read as they form, rather than only after the day is complete.

Dual auction and the two participant groups

The underlying auction is dual. Successive price probes move alternately too high and too low, and the resulting time/price opportunities are accepted or rejected according to participant needs. That practice of probing both sides is how the market attracts opposing participants.

Day-time-frame participants intend to finish business inside a single session. They seek a fair price by trading the bid or the offer to keep trade flowing. Other-time-frame participants may enter because a time/price opportunity looks advantageous, typically at the high or low of the range.

Stacking half-hour letters

The profile is built as a real-time time-and-sales map. Successive letters mark half-hour intervals. As the letters accumulate at each price, they show which prices are being accepted or rejected.

The first column of the profile is the pioneer range, formed by the opening period or the first two periods. The value area is the price zone where participants repeatedly trade during the session. A later move that carries price beyond the initial value area is a range extension.

Six session constructions

A day's trade can resolve into six general profile constructions: normal, normal-variation, trend, non-trend, neutral, and running.

A normal-day profile is constructed when the pioneer range covers the first period or the first two periods, extremes show few time/price opportunities, and most activity concentrates in a value area.

A normal-variation profile is constructed when about 50% to 60% of the pioneer range forms in the first one or two periods and participants later extend price beyond that initial value area.

Trend-day construction takes two forms. One is an elongated one-direction profile that never builds a consolidating value area. The other is a double-distribution profile that leaves a weak first value area and later builds a second one.

A non-trend day is a narrow range with little reaction to higher or lower prices. A neutral day extends range both up and down with little follow-through.

Restacking a running profile

A running profile is constructed by shifting later letters into a second graphic so a mid-session change in condition, such as from a normal shape to a trend, can be read. That restack shows that market condition changed after the initial shape formed.