Top 5 Ways to Utilize Market Profile for Day Trading
10. Nov, 2011 
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Are you involved in day trading? Do you use market profile? If not, then you are missing out on a lot of potential earnings. Developed around three decades ago, market profile charts can prove to be an indispensable tool when it comes to day trading. However, there’s a lot of confusion surrounding market profile charts which unfortunately prevents day traders from harnessing their true power. Here we will take a look at why you should consider using market profiles for futures trading within the same day.
Why Use Market Profile for Day Trading
Here is why you should consider using market profile charts for day trading -
1. Real Time Market Activity View – Market profile charts when used along with footprint charts can offer valuable insight to day traders. The market profile graphic is basically a vertical price scale, which offers a range of prices over a specific trading period. They can view market activity as and when it happens in real time. This helps traders understand present market activity better which further allows them to make more informed decisions regarding futures trading.
2. Identify Support/Resistance Levels – Market profile charts offer a three dimensional view of the happenings in the market which isn’t possible with traditional charting methods. Support as well as resistance levels on a market profile chart are calculated based on value parameters and actual real time market activity. This allows futures traders to determine the support and resistance levels reliably and easily.
3. Applicable for all Market Conditions – While most indicators work only for particular market conditions, market profile charts offer an accurate depiction of market activity in all market conditions, whether it’s a sideways, trending, bracketed or consolidated market. In fact, it actually helps traders identify the existing market condition which leads to better futures trading.
4. Identifying Value in a Market – Traders make trading decisions based on the value in that market. Market profile charts offer the best way to determine the value in a particular market. Traders can identify the true value in a market at any time in a day, thus helping them make better trading decisions.
5. Works for Both Day and Swing Trading – Besides helping day traders, market profile charts are also effective for swing trading. It can help identify whether the market is in a balanced or unbalanced state, which helps them detect potential directional movements. Besides that, creating a composite profile for a particular number of days or analyzing day profiles can provide both day and swing traders with valuable insight.
Finally, using market profile charts can help day traders gain a better understanding of the market and what forces are moving it.
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