V.6:2 (59-61): Market Profile and trends Part 3 by Thomas Drinka, Ph.D. and Robert L. McNutt
Product Description
Market Profile and trends
Part 3
by Thomas Drinka, Ph.D. and Robert L. McNutt
The key to market opportunity is knowing when current market price diverges from value and being able to judge whether price will move to value or value to price. A divergence of price and value can occur during the trading session-as well as over many days-and may generate a trend.
Trends can be used to evaluate the speed at which the market is moving through time and, knowing the market's speed, even a trader far from the pits can judge the amount of response time for trading.
There are three types of trends, each defined by their timespan. As the market-in attempting to facilitate trade-seeks the activity of market participants through the use of price probes, the current price may diverge from value. Then, one of two occurrences results: Either market participants reject the divergent price and price returns to value or market participants accept the price as fair and value is generated at new price levels by attracting volume.
In the first case, the divergence results in a price trend-a price movement that occurs during only one half-hour time period. In the second case, the divergence results in a value trend-a price movement that occurs during two half-hour time periods. As price moves through time and attracts volume, the price movement slows and this suggests a continuation of the trend.
The key to market opportunity is knowing when current market price diverges from value and being able to judge whether price will move to value or value to price. A divergence of price and value can occur during the trading session-as well as over many days-and may generate a trend.
Trends can be used to evaluate the speed at which the market is moving through time and, knowing the market's speed, even a trader far from the pits can judge the amount of response time for trading.
There are three types of trends, each defined by their timespan. As the market-in attempting to facilitate trade-seeks the activity of market participants through the use of price probes, the current price may diverge from value. Then, one of two occurrences results: Either market participants reject the divergent price and price returns to value or market participants accept the price as fair and value is generated at new price levels by attracting volume.
In the first case, the divergence results in a price trend-a price movement that occurs during only one half-hour time period. In the second case, the divergence results in a value trend-a price movement that occurs during two half-hour time periods. As price moves through time and attracts volume, the price movement slows and this suggests a continuation of the trend.
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