Market Profile Guidelines and Trading Balance

Market Profile

To successfully participate in the market, I have devised a set of guidelines that are not absolute, but are absolutely necessary for me to be consistent. As a discretionary trader, I have an advantage over an algorithm because I can better analyse Realtime data and disseminate new information more quickly. The disadvantages are mainly to do with consistency and having these loose rules helps to close that gap.

It will be impossible to benchmark, monitor, refine, and tweak my behaviour without these guidelines. This is a common mistake among new traders, but it is also one of the most important steps they can take to become consistently profitable.

In this article, I’ll go over the fundamental principles that guide my day-to-day trading. They are not overly complicated, but this is also significant. The simpler the process the faster decision-making in real-time and without hesitation. Hesitation is a major cause of FOMO so let’s dive into my rules.

Just a reminder I am a market profile trader first so most of these rules revolve around concepts like balance, hence the name thebalanacedtrader.

General Trading Rules

  • The general rule is to go with the breakout of balance.
    • There is a failure of opposing forces to defend key markers.
  • A Break to the upside (Look above and go) – You want to be a Buyer.
    • If you miss the initial move look for a retest of the break, this is often a safer entry.
    • You want to see initiative and impulsive PA.
    • Pre-empting at the extremes is very risky and a low payout trade. Pre-empt lower TF by identifying HTF setups.
    • Volume and tape speed should be increasing.  A flush away from prior acceptance is a good sign.
    • Monitor for continuation. The auction should not return above/below the prior local value.
    • Monitor for (Acceptance) or lack of.  
      • Singles are a great visual aid in identifying balance and breakout setups. To remain in balance buyers/sellers must defend themselves.  Failure to defend would mean change.
  • A Break to the downside (Look below and go) – You want to be a Seller.
    • If you miss the initial move look for a retest of the break, this is often a safer entry.
    • You want to see initiative and impulsive PA.
    • Pre-empting at the extremes is a very risky and low payout trade. Pre-empt lower TF   by identifying HTF setups.
    • Volume and tape speed should be increasing. A flush away from prior acceptance is a good sign.
    • Monitor for continuation. The auction should not return above/below the prior local value.
    • Monitor for (Acceptance) or lack of.  
      • Singles are a great visual aid in identifying balance and breakout setups. To remain in balance buyers/sellers must defend themselves.  Failure to defend would mean change.
  • Lack of continuation (Failed breakout / Look above/below and fail)
    • You want to fade and target another side of balance.  Acceptance and retest of re-entry into balance a good location to trade.
    • Excess tails are another good visual and a tapered auction.

I hope you find this article interesting. If you would like to learn more on how to trade using market profile, and footprint please subscribe to the newsletter and visit me on YouTube where I am trading live most days. In my next article, I will be outlining some more process guidelines on spike rules. Click here to read this post.