Market Profile Glossary Of Terms

This is a post which includes all the acronyms I use in my analysis. This can also be
considered as a glossary of sorts where different market profile concepts are explained in
brief. Just in case you have any more terms that you have doubts about let me know I will just
append the list.
Market Cycle

It is the cycle in which the markets move up and down through various stages such as
Accumulation – Mark Up – Distribution – Mark Down and sometimes the intervening stages of
Re-accumulation and Re-distribution.

Auction market Theory [AMT]

Auction Market Theory proposes that all financial markets work like an auction. That the price
will move higher in search of sellers and price will move down in search of buyers. Once the
price has move low enough to uncover buying strong enough to stop the down auction, a new
auction up will begin. Market Profile Charts can be used effectively along with AMT principles
to trade low risk opportunities in financial markets.
Market Profile [MP]

Market Profile is a way of organizing data. It organizes data in such a way that it reveals
various AMT principles in real time. In a MP chart the regular bars and candlesticks are
replaced by letters (one letter for each 30 min bar is the most common setting). These letters
are then collapsed on to the price axis to give it a distinct shape, which sometimes resembles
a bell curve.
Day Types

•Normal Day [ND]

•When price stays within the initial balance the whole day the day type is called as
a Normal Day.

•Normal Variation Day [NVD]

•When price moved outside of initial balance in subsequent periods, but does not
create a range greater than twice the initial balance the day is called a Normal
Variation Day.
•Trend Day [TD]
•When prices consistently move in one direction and create an elongated profile
then it is called a trend day.

•Double Distribution Trend Day [DDT]

•When price forms a narrow balance to begin with and then BO/BD from that
balance and then form a second balance in the same day, the day type is called a
double distribution trend day.
•Neutral Center Day [NEC]
•When price extends range beyond the IB in both directions and closes within the
value area, it is called a Neutral Center Day.

•Neutral Extreme Day [NEX]

•When price extends the range in one direction and then moves in opposite
direction and extending the range at the other end, as well as closing on the
extreme, is called a Neutral Extreme day.
Open Types

•Open Inside Range [OIR]

•When prices open inside yesterday’s range, we call it Open Inside Range.
•The range development potential is limited.
•Open Outside Range [OOR]
•When prices open outside yesterday’s range, we call it Open Outside Range.
•In this scenario the range development tends to be wide, and dynamic moves
can be expected.
Opening Types

•Open Drive [OD]

•Market opens and drives confidently in one direction.
•Price seldom returns to the opening level.
•Open Test Drive [OTD]
•Market opens and test beyond a known reference to check for any unfinished
business, if not found we resume the drive.
•Second most confident opening.
• Open Rejection Reverse [ORR]
•Market opens and moves in one direction till it loses momentum and interest.
•Spotting this opposite party enters and moves the prices confidently in the
direction opposite to open.
•But this early confidence is often short lived and range development is often not
very wide.
•Open Auction Inside Range [OAIR]
•Market opens inside previous day’s range and auctions in a narrow range.
•Weakest open.
•Open Auction Outside Range [OAOR]
•Market opens outside previous day’s range and auctions in a narrow range.
•Even though the initial range is limited there is always a chance of a dynamic
move later in the day.
Structural details

•Initial Balance [IB]

•The range of the first 2 bars or first 2, 30 min periods form the initial balance.
•Tails
•When price probes a reference and get rejected in the same time period we get a
tail.
•Tails show end of one auction and start of another.
•Sometimes tails are also classified as excess.
•Excess
•When a tail occurs outside of a recently accepted area of acceptance it is called
an excess.
•Poor High [PH] / Poor Low [PL]
•When price trades at one of the extremes in more than 1 time period it is called a
PH/PL.
•It indicates exhaustion of the current auction and may result in an adjustment of
the inventory.
•Inventory Adjustment Break / Rally
•When the market becomes too short (PL) or too long (PH) then it moves in
opposite direction to bring the inventory back in balance.
•This also happens when auction forms a ‘P’ or a ‘b’ shape.
•Spikes
•When price moves away from established value especially near the close the
development is called a spike.
•Spikes can be because of old business or new business.
•In the later case, we get the continuation and former case we get retracement.
•Old Business
•When a dynamic move up/down subsequently takes a ‘P’ or ‘b’ shape
respectively, we call if old business.
•‘P’ shape denotes short covering.
•‘b’ shape denotes long liquidation.
•New Business
•More often than not ‘P’ shape and ‘b’ shape denotes old business.
•To extend the range above ‘P’ or below ‘b’ we need new business, that is new
traders coming in and extending the range further.
•This is often seen on a trend day.
•New business is not necessarily smart money.
•Prominent Point Of Control [PPOC]
•When at a price level most of the time periods trade for the day, we get a wide
POC.
•Such wide POCs are called as Prominent POC and act as a magnet to prices.
•Volume Point Of Control [VPOC]
•The widest point of a volume profile shows the Volume POC.
•It also acts as a magnate to prices.
•Value Area [VA]
•The 70% of days trading clustered around the POC is called the value area.
•It denotes where the majority of day’s trading took place.
•VAH-POC-VAL
•VAH – Value Area High – Upper limit of the value area.
•POC – Point of Control – The price level about which Value Area is calculated.
•VAL – Value Ares Low – Lower limit of the value area.
•Anomaly
•Sometimes the profile is not smooth and has ragged edges to it.
•These ragged edges are called anomalies.
•Anomalies denote forcing action.
•Forcing Action
•It means that every time the opposing activity increases the traders with the
original trend overpower them.
•This leads to anomalies and multiple distributions in a profile.
•Forcing action is liable to retracement.
•One Time Framing [OTFing]
•When each subsequent bar makes a higher low in a trading day we say that
market is one time framing higher and vice versa.
•It is an indication of a strong presence of OTF buyers or sellers.
•Intraday Poor High [IPH] / Intraday Poor Low [IPL]
•On an intraday pullback rally if markets form matching highs, even if it is not at
the extreme of the day. It is called an IPH and suggests exhaustion on part of the
buyers.
•The situation occurs in reverse for an IPL.
•Failed Auction [FA]
•Whenever auction probes above or below an important reference like YH/YH,
PPOC, HVN, Balance High/Low, etc and does not find any new business in the
direction of a test, returns back below the important reference, it is called a failed
auction.
•A failed auction suggests lack of interest in a direction in which the test happens.
Time Frames

•Scalper
•Trades intraday. Tries to capitalize on very short-term price inefficiencies.
•The tool of choice Order Flow Charts, VSA Charts.
•Day Trader / Very Short Time Frame [VST]
•Trades intraday. Does not carry positions overnight. Tries to capitalize on the one
or two good moves that happen in a day.
•The tool of choice Market Profile Charts, Order Flow Charts, VSA Charts, Price
Action.
•Swing Trader / Short Time Frame [ST]
•Trades over a few days. Carries home her positions. Trades from swing point to
swing point.
•The tool of choice Market Profile Charts, VSA Charts, Price Action.
•Positional Trader / Intermediate-Term Trader [IT]
•Trades the FnO series and sometimes rolls over his positions into next series.
Tries to capitalize of big swings.
•The tool of choice Market Profile Charts, VSA Charts, Price Action.
•Investor / Long Term [LT]
•Buys and holds.
•Tools of choice are TTA and Fundamental Analysis.
Order Flow Glossary Of Terms
Common Terms Used while I refer to Order Flow charts are described here for your
convenience.
Best Bid – Highest Price at which buyer is willing to buy.
Best Offer – Lowest Price at which a seller is willing to sell.
Aggressive Buyers – Buyers who put in market orders. These might be aggressive buyers
or even sellers whose stop losses are getting hit.

Aggressive Sellers – Sellers who put in market orders. These might be aggressive sellers
or even buyers whose stop losses are getting hit.

Trapped Buyers – Buyers who have bought and and now find the CMP trading below their
buy price. These traders often lead to long liquidation breaks.
Trapped Sellers – Sellers who have sold and now find the CMP trading above their sell
price. These traders often lead to short covering rallies.
Delta – Delta is the difference between Buyer and Seller. Basically it is the answer for (Buyer
– Seller). Now delta can be calculated using many different techniques. Either we calculate it
on per price level or we can calculate net delta on a single bar of any time period. The later
delta calculated on a single bar is used to find delta divergence.

Delta Divergence – This occurs when we have lower lows on price but delta forms a
higher low. This is easier to spot if the delta is spotted in a candlestick format. But if this
facility is not available then we can use net delta figure per bar to spot these divergences. An
example is included below.
Stop Hunt – This occurs when a cluster of stop losses is hit. This results in a lot of stop loss
market orders being sent to the exchange. This activity can be spotted easily on an order flow
charts and has specific consequences.

Lack Of Interest – This happens when interest dries up in one direction. This also can be
spotted easily on an order flow chart.