Market Profile, Spike and Singles Guidelines

What exactly is a spike? A spike is simply an initiative price movement induced by a shortage of available liquidity to match demand from opposing buy and sell orders. As a result, the market moves away from a previously established balance. When participants are less willing to execute orders in a controlled and passive manner, they become price takers, who typically use market orders.

This activity can only be regarded as emotional trading, and it leaves significant MGI that can be used to trade against later. When we observe a spike on a given timescale we are looking for one of two things, acceptance or rejection/excess.

As a general rule, these are some good spike trading principles.

Spike Higher

Buying Tails, Spike base and multiple singles markers

A price opening below than an upward spike is considered excess and a negative rejection because the price spike higher was rejected, resulting in a selling tail. An upward spike that creates an excess can be used to sell into the market with stops at the highs of the spike or the spike base. This can be described as having an excess selling tail.

A price opening above a spike high is considered acceptance of the positive move, and long positions can be entered. The lows of the spike base serve as the stop loss.

Spike Lower

Selling tail, spike base at 4156, singles marker 4141.5

A price opening above a spike lower is considered excess and a positive because the price spike was rejected, resulting in a buying tail. A downward spike that creates an excess can be used to buy into the market with stops at the lows of the spike or spike base. This can be described as having a buying tail.

A price opening below a spike lower is considered acceptance of the negative moves, and short positions can be entered. The highs of the spike base serve as the stop loss.

Singles Markers

The logic behind single markers and single prints on our profile charts are the same in principle, but they occur within the profile. They are excellent visuals for gauging support and resistance because a breach of their integrity singles out an opposing force’s willingness to reverse previous actions.

The singles markers can be a good way of defining a distribution, as a rule on a smaller scale, I treat each mini distribution as a separate entity always looking to trade my general trading rules.

Profile Distributions help to identify distribution ranges.

Singles trading rules, fade into the singles markers where an LVN has been left. It is a clear indication of rejection and the price should move away quickly. Stops should be maintained above or below the singles marker depending on market direction.

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.

Trade Well and Prosper

BT