Preface
A market is a place composed of buyers and sellers. A prosperous market is made up of active buying and selling transactions, while market contraction is often caused by indifferent transactions. We can observe this phenomenon in any commodity market. For example, when the holidays come, traffic surges, causing merchantsâ sales volume and price fluctuations to increase. When seasons change, out-of-season products are often sold at discounts, causing savvy consumers to rush to buy them. Although merchants sell goods at low prices, they generate cash flow to help with capital turnover, thus promoting a new cycle. This is one of the economic laws of the market.
When the price is different from the value that people psychologically expect, divergence will occur, which will form the basis for market changes. Peter Steidlmayer summarized 30 years of experience in the futures market and summarized price and market changes into a set of theories, namely Market Profile theory, or four-dimensional space theory, hereinafter referred to as "MP".
The core concept of this theory is that when price and value will always diverge, and only when they diverge, investors can catch when the price is lower than the value and then buy these commodities.
Market Profile: A way to organize market information
MP is a method of aggregating market information, which can include price and reasonable value, undervalued and overvalued areas, time and other information. Compared with the four tools and strategies of order flow, MP is a method of integrating market data. It is not a trading system or trading strategy, but a more integrated analysis tool.
Time Price Opportunity: Interpret the combination of price and time
Time Price Opportunity, referred to as "TPO" for short, is a statistical method for price changes at each point in time. The image above is a TPO diagram showing compression to the left.
When using TPO interpretation, time periods within a day are used. The most commonly used time frame is the 30 minute time frame. The area traveled by each 30-minute K-stick will be represented by a symbol. The little penguin here uses A to Z, and then from a to v. A total of 48 letters represent a total of 48 30 minutes in a day. The reason why we use the number 48 is because cryptocurrencies are traded 24 hours a day, and we have 48 time periods to count price positions; while U.S. stocks or other markets will have different numbers of observed time periods due to different trading times. .
When we want to mark TPO, we can think of each K bar as a whole symbol, distributed on the chart according to different times. Then, we compress it to the left side, forming the common TPO chart as shown above.
On the right side of the picture above, we can see that the price reached a high level and fell back. According to the time calculation, it occurred in the e time period, so there will be records in the e time period, and after compression, it will appear on the left side.
Here we also remind you that the difference between each e and e represents a difference of 100 points (such as 100 USDT). This part can be set according to your preference. The difference lies in the intensity. Sometimes the software does not support more intensive settings, so this part needs to be tested by yourself.
TPO value range
According to the auction market theory, we regard 68% of the distribution as the Value Area (hereinafter referred to as "VA").
In the middle 68% area of ââTPO, we will mark it as a VA using an interval. Among them, VA High and VA Low represent the high point and low point of this interval respectively, such as the blue interval in the middle of the picture above. Price behavior in this range can be judged with the help of auction theory (middle) and auction theory (below).
Conclusion
Because TPO has a lot of space, we will mention the most basic concepts here first, and we will break down the details of TPO in detail next time. As for the indicators used by TPO, Little Penguin has mentioned some useful TradingView indicators in past posts for your reference https://www.instagram.com/p/ClBAQBqpElT/.
