Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

Market Profile Tutorial – Introduction to Market Confidence – Part 1

2 min read

Introduction to Market Confidence

How the market as a crowd it is doing. Are the buyers are doing a good job or sellers are doing a good job? How do we come to that conclusion? Is there any objective way of looking into the market confidence rather than getting into subjective ideas? How I can understand the street sentiment better.

TradEdge 4.0 – June 2024 Edition
80+ hours of Live Online Mentorship Program on Market Profile, Orderflow Analytics, VSA

Live Classes Starting from 1st June 2024 onwards

If you are asking such questions then welcome to the world of Market Profile. Using market profile one can build a basic framework on the current market sentiment objectively and can be used as a routine day-to-day trading practice that helps traders to control their emotions, and expectations and learn to live with the dynamic and forever changing trading landscape.

Market Confidence Framework

Here is my open framework to Market Confidence using Market Profile Structures based on my screentime experience with Market Profile.

Classification of Market Confidence

1)High Buyer Confidence (Serious Buyers in Control)
2)High Seller Confidence (Serious Sellers in Control
3)Low Buyer Confidence (Buyers showed up but not serious traders)
4)Low Seller Confidence (Sellers showed up but not serious traders)
5)No Confidence (neither Buyers nor sellers are in control

Understanding Market Confidence revolves around 4 major parameters

1)Initial Auction Direction
2)POC Acceptance at Key reference level
3)Price Rejection around key reference level
4)Reference Level to Monitor Confidence (Short Term or Intraday reference levels)

Initial Auction Direction

Initial Auction talks about which direction the market moved during the start of the trading day and helps traders to estimate the developing POC zones for the day with a greater probability and which in turn helps solve the market confidence indirectly.

Initial Auction Types

1)Initial Auction Up – Early Morning High i.e A period High is Broken at B or C period
2)Initial Auction Down – Early Morning Low i.e A period Low is Broken at B or C period
3)Initial Auction Center – Neither the Early Morning High nor the Early Morning low is broken at the B or C Period

Why to predict the Developing Point of Control Direction?

It helps traders to understand where the two-way price auction can happen and provides more subtle information on where most of the trading business is likely to happen and the likelihood estimation of where the developing POC is likely to get build which is critical information for both short term and intraday traders.

Immediate Balancing Odds

If the price breaks the one timeframe early it brings the odds of balancing markets with more rotational odds.

If the price forms the Initial Auction center where the early morning established high and low i.e A period high or low neither got broken at B period or C Period which brings a possible immediate balancing odds. And high possibilities of such zones becoming a possible rotational day

Trending Odds and Non-Confirmity of POC

If the one-timeframing continues in the direction of the Initial Auction that increases the chances of elongated structures and non-conformity of Developing POC levels.

Hope this tutorial clarifies about the importance of market confidence and it types and how to monitor Initial Auction in the next part of the tutorial series we will be learning how to understand POC acceptance and Price rejection around key reference levels and how monitoring such auction information could efficiently improve the trading decision.

Stay tuned!

Rajandran R Creator of OpenAlgo - OpenSource Algo Trading framework for Indian Traders. Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Building Algo Platforms, Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in

Analyzing Bank Nifty: Dual Momentum Top and Market Profile…

The Bank Nifty chart showcases a fascinating pattern known as the “Dual Momentum Top,” indicating potential short-term bearishness. Let’s dive into the details of...
Rajandran R
1 min read

Increasing Risk of Short-Term Trading Inventory – Nifty Futures…

Since Election Day on 4th June 2024, the market has experienced a significant one-sided movement. The Nifty Futures have shown a pattern where every...
Rajandran R
1 min read

Understanding Gap Events – Market Profile Tutorial

A known event that causes a significant gap up or gap down in the market is typically referred to as a "Gap Event". These gaps...
Rajandran R
2 min read

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More