VOLUME PROFILE

Distribution-Curve

Market Profile is based on a normal distribution curve, in which about 70% of the volume is reduced with one standard deviation from the mean. Monitoring the distribution of prices over time gives an understanding of which levels are fair and which are not. This information can help identify potentially good opportunities for deal. The

volume is the key to understanding the Market Profile. If the price is out from a zone of values and volumes begin to decline, likely that the price will return to the zone of values. Such a move suggests that sellers are not happy with the location of the price above the zone, and buyers are not happy when the price is under it. The trading activity may increase only when the price is within the values. If, on the other hand, the price moves out of values range during increasing of the price activity, this suggests that market participants have revised their views on value. Watching the market activity by using a profile of the market, it is easier to understand, who is now at the helm of the market, and to determine in which direction the market is likely to go.

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