Trading from the 3rd dimension with NinjaTrader market profile
NinjaTrader market profile is a special charting technique
that combines
price, volume, and timeframe information to form an advanced graph that we call “the 3rd dimension of
trading”. With its provision of invaluable market information, a market profile for NinjaTrader 8
becomes a powerful weapon that helps NinjaTrader users gain deep insights into the distribution of
volumes or TPO in a given market at different price zones, leading to higher rates of executing
profitable trades.
ninZa.co’s market profile indicators for NinjaTrader 8 provide traders with
2 types of profiles to select:
- Volume profile: The profile is based on volume distribution by price. For example,
a profile row of 100 means that there have been 100 contracts traded at that price.
- TPO profile: The profile is based on TPO distribution by price, where TPO stands
for “Time Price Opportunity”. In our version, we only track the number of price hits while ignoring
the chronological order of hits for maximal simplification. For example, a profile row of 100 means
that the market has traded at that price 100 times.
When looking at our NinjaTrader market profile, you might notice that there are 4 basic levels: POC, VAH,
VAL, VWAP/TWAP.
- POC: POC stands for “Point of Control”, which is simply the profile row with the
largest volume/TPO in a given market profile.
- VAH & VAL: VAH (Value Area High) and VAL (Value Area Low) define the upper
limit and lower limit of a market profile’s value area. Value area is the profile zone around POC
where most of the volume/TPO of the profile locate (the default setting for value area is set to
70%, which is a trading standard).
- VWAP/TWAP: This level pinpoints the average price of an instrument in a given
market profile. Depending on the type of market profile that you choose, this average price may be
called VWAP (Volume-Weighted Average Price) or TWAP (TPO-Weighted Average Price).
Out of countless types of techniques that NinjaTrader users may employ to monitor market activities,
NinjaTrader market profile is definitely one of the most powerful means of technical analysis. Using
market profile indicators to their fullest will offer traders the possibility to anticipate the market
reaction at/toward critical levels like POC, VAH, VAL, VWAP… and make trading decisions smartly.
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