V.7:4 (121-123): Understanding Market Profile Part 6 by Thomas P. Drinka and Stephen M. Ptasienski
Product Description
Understanding Market Profile
Part 6
by Thomas P. Drinka and Stephen M. Ptasienski
Range extensions are the intraday price moves that hold good profit potential. Many current trading systems use them although they are typically called opening range breakouts (See "Opening Range Breakout, Part 5" in this issue). Our research into the range extensions of the Chicago Board of Trade's Market Profile report suggests there are analyses that Market Profile traders may wish to conduct on a day-to-day basis. We tabulated the frequency and magnitude of range extensions of 12 markets from February 1 to July 29, 1988, using nearby contracts only.
According to J. Peter Steidlmayer, Market Profile's author, price probes attributed primarily to "day-time-frame" traders usually converge to an initial balance during the first two half-hour periods of a trading session. Once the initial balance is established, the only possible development is an imbalance, or range extension, attributed to "other-time-frame" traders.
Figure 1 is a frequency distribution of the half-hour periods during which range extension first occurs during the trading session. The initial balance of CBOT corn, for example, is assumed to be established during the D and E periods. Then, during the six-month period of analysis, the first instance of range extension occurred during the F period in 32% of the trading sessions, during G period in 19% of the trading sessions, and so on. As the table shows, the first range extension of the day occurs most often immediately following the first hour of trade.
by Thomas P. Drinka and Stephen M. Ptasienski
Range extensions are the intraday price moves that hold good profit potential. Many current trading systems use them although they are typically called opening range breakouts (See "Opening Range Breakout, Part 5" in this issue). Our research into the range extensions of the Chicago Board of Trade's Market Profile report suggests there are analyses that Market Profile traders may wish to conduct on a day-to-day basis. We tabulated the frequency and magnitude of range extensions of 12 markets from February 1 to July 29, 1988, using nearby contracts only.
According to J. Peter Steidlmayer, Market Profile's author, price probes attributed primarily to "day-time-frame" traders usually converge to an initial balance during the first two half-hour periods of a trading session. Once the initial balance is established, the only possible development is an imbalance, or range extension, attributed to "other-time-frame" traders.
Figure 1 is a frequency distribution of the half-hour periods during which range extension first occurs during the trading session. The initial balance of CBOT corn, for example, is assumed to be established during the D and E periods. Then, during the six-month period of analysis, the first instance of range extension occurred during the F period in 32% of the trading sessions, during G period in 19% of the trading sessions, and so on. As the table shows, the first range extension of the day occurs most often immediately following the first hour of trade.
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