This profile is a non directional structure, best recognised by the fact that the market makes range extensions in both directions, up and down. These day types occur about 8-10% of the time and are very balanced, non-directional. The other time frame trader is active during these sessions, but their activity is not uniform. They, the commercial players, are present as both buyers and sellers during the session.

The initial balance is within the bounds of a normal range with respect to the average daily initial balance and that often ends up being about 50% of the day’s range. The sum of the range extensions is generally about equal to the range of the initial balance. The market more often than not closes in the middle of the range for the day and therefore leaves the market balanced, while still directionless.

Fig 105

Running Profile

Fortunately these types of profiles occur rarely. They can often start off as trend days or normal days, with a range extension in one direction progressing nicely. The trouble comes when they deviate from these shapes, for example a trend day reversing or single prints being filled by a reversal.

It will often be a news event that forces a reversal in the market, thus creating this type of profile. Reversal is the key word for this profile. Other time frame traders are evident on both sides of the market, but perhaps at different times of the session. They probably change direction as the result of a news event that may have panicked the market. Obviously a reversal is more than likely the result of unexpected news or an announcement that is contrary to what was expected by the commercial players.

Day traders are advised to stay away from these profiles and other time frame traders should also warned of the potential for whipsaw price action.

Double Distribution

These types of profiles are also rare. They consist of two distinct distributions usually separated by single prints. They often occur as a result of the market moving too far too fast in one direction. Once that move is made however, instead of rejecting the directional probe the market starts to develop a new profile shape in a new location.

The initial balance is generally in the average range. The profile starts generally as a normal day, complete with a tail and a range extension, which provide direction and evidence of the activity of the other time frame trader. Depending on the background at the time, this profile signals continuation of the move, in the direction supported by the commercial traders.

It’s often difficult to go with an up market, but that’s exactly what this profile tells us to do. In the above example it demonstrates the market accepting higher prices, accepting the new value area developing higher. Price acceptance suggests continuation in the same direction.

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Craig MacLean is a Futures Adviser Licensed under the Australian Securities Commission, Corporations Law. The writer accepts no responsibility for any losses incurred from any action or inaction derived from the advice in this report.