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.

Market Profile : Understanding Price Vs Value

1 min read

For many people price by itself not a key factor while making a purchase decision. No one will be buy a house or mobile phone just because of the price tag. Most of us understand the value (i.e offerings, features, benefits) before making any purchase decision and not solely based on product price. While making a purchase decision price is one of several variables which attracts buyers to evaluate when they mentally assess a product’s overall value.

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Price is simply a advertising mechanism. If the advertising is successful it attracts buyers. There are times a price tag failed to attract buyers if the price is not worth the value and shuts down buying activity. Many traders does not make this distinction between price and value and often they are price based traders. If you simply trade the price without looking into the value you often get emotional and often ends up entering at the unfair price points .

Start here if you are new to market profile charts

Let take the example from Nifty September Futures profile charts. You can see that friday’s value was lower than the thursday’s value. It was clear that as the auction unfolded that we would have lower value on friday. This observation would have helped you to maintain your trading decision on not to carry forward your longs to monday morning.

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The relationship between price and value differs in a trending environment and sideways market. In a trending environment or breakout mode value catches the price and the price lead the value. It is a price discovery mechanism where price is searching for a new equilibrium where buyers and sellers finds a fair value and the two way auction process happens. In a sideways markets price catches the value whenever the price moves away from the value.

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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