Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

How to Set Optimal TPO Size to Read Market Profile Charts?

2 min read

How to set the TPO size? The most asked question among the market profile beginners. TPO (Time Price Oppourtunity) is the basic building block of market profile. Multiple TPO blocks jointly form profile structure (profile distribution).

The main purpose of reading profile structure is to visualize and understand what kind of participation we dealt or dealing for the current day. Profile structures reveal whether day timeframe traders or short term traders or any long term behavior is going on.

Price distribution is completely independent of timeframe. Every day one gets a composite profile distribution. Regardless of what TPO size is used price distribution remains the same. However lower the TPO size one can get finer details about the market participants behavior. Higher the TPO size lower the amount of data one could get about the participants behavior.

It is always recommended to go with optimal TPO size settings because an ultra-low TPO size brings more data points (more letters) and tough to read/process by compressing the charts and expanding every time. It is time-consuming but reveals a lot of finer details about market behvaior.

Too bigger TPO size gives fewer details as it some times miss pieces of information like anomalies, single prints which is crucial information from an intraday traders/positional trader perspective.

Following are the set of guidelines to set optimal TPO size,

How TPO Size is calculated in Market Profile Tool?

TPO size and Tick size are inter related in most of the trading analysis tools like Ninjatrader 7, Ninjatrader 8, Multi charts, Market Delta.

Usually if the Tick size == 0.05 (minimal possible price moment specified by the exchange) then actual TPO size has to be divided with actual Tick values to get the TPO value keyed into the trading software.

For a Instrument like Nifty futures where tick size = 0.05 and if one have to set the TPO size of 1 point then 1.00/0.05 = 20 is the TPO Size one have to key in the market profile indicator settings.

TPO Size settings in Ninjatrader 8

Choosing the optimal TPO size depends on three factors Tick Size, Volatility, Traded Price. 

For a 0.05 Tick size instrument Here is the Optimal TPO Size which I prefer to read market generated information.

If you are a BellTPO Market Profile Ultimate user then the following method is recommended to get the automated reference line properly.

Price RangeTPO sizeTick SizeNT8 TPO Value
Less than 1005 paise0.051
> 100 and < 25010 paise0.052
>250 and < 100025 paise0.055
>1000 and < 500050 paise0.0510
>5000 and < 300001 rupee0.0520
Greater than 300005 rupee0.05100

Instruments TPO size based on Volatility

Trading InstrumentTick sizeLow volatility High volatility
Nifty0.05TPO = 1 rupee
NT8 Value =20
TPO = 2 rupee
NT8 Value = 40
Bank Nifty0.05 TPO = 1 rupee
NT8 Value =20
TPO = 2 rupee
NT8 Value = 40
MCX Crude Oil1 TPO = 1 rupee
NT8 Value =1
TPO = 2 rupee
NT8 Value = 2
Es-Mini Futures0.25TPO = 0.25 cents
NT8 Value = 1
TPO = 0.50
NT8 Value = 2

Higher the volatility in the market one can also prefer higher TPO size as the trading range increases during the high volatile markets it is always preferred higher TPO size to read optimal profile information.

One can also prefer ATR based TPO size for adapting to different market conditions.

Daily ATR RangeTPO SizeTick Size
Less than 5TPO = 0.05 paise
NT8 Value = 1
0.05
5 – 25 TPO = 0.10 paise
NT8 Value = 2
0.05
25-50 TPO = 0.25 paise
NT8 Value = 5
0.05
50-100 TPO = 0.50 paise
NT8 Value = 10
0.05
100 – 150 TPO = 1.00 rupee
NT8 Value = 20
0.05
150 – 250 TPO = 2.00 rupee
NT8 Value = 40
0.05
250 – 500TPO = 5.00 rupee
NT8 Value = 100
0.05
500 – 1000TPO = 10
NT8 Value = 200
0.05

TPO size can be fixed based on India VIX (Volatility Index). For example TPO size = 1 point in Nifty Futures if India VIX remains below 18 and TPO size = 2 or 3 if India VIX shoots above 18 levels.

Conclusion

I prefer to use Optimal TPO information for capturing max details about the market generated information. There is no thumb rule to set the TPO size for various instruments, if you find too much of information then one have to increase the TPO size or if you find too less of information from the profile distribution then one should reduce the TPO size. However the above mentioned pratice helps one to read the most of the market generated information.

I hope this tutorial helps you to identify the optimal TPO size settings required to read maximum amount of market generated which a trader cannot afford to miss.

Let me know in comments if you face any issues with TPO settings.

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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4 Replies to “How to Set Optimal TPO Size to Read Market…”

  1. In the above detailed explanation is nicely provided,

    My observation
    a better nomenclature for field on bell tpo should be read as “TPO Interval” instead of tpo size

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