Market Profile for the Longer Term Investor
The AMS Market Profile Tool – Its Use Expanded & Explained
By: The Mark-It Wizard
Let me start by saying thank you for permitting me back into your investment and trading lives. It’s been a busy year for us all but I am happy to be back working with Danny and Niels. Between trading advice and how better to use the AMS Trading Group platform there is much to share with you. Now that this 65+ year old has learned how better to use this editor you’re in trouble. I’ll do my best to remain on point but everyone knows I possess an innate ability to ramble.
Today I would like to illustrate a few examples of how the AMS Market Profile product works. Most of you use this tool as it relates to shorter term trading. In the following write-up I’ll show you how we use Market Profile to determine which or several futures contracts is ripe to trade. Best way to illustrate this to you is through the following charts along with a brief commentary of what they tell us.
First, for this and all of the following charts we’ve included monthly data going back to early 2012. Other than increasing the timeline the features of Market Profile are the same inherently. Remember my philosophy that water flows from higher points to lower points. In this November 2020 Soybean chart that is exactly what we see. Over the last couple years Soybeans built a base between the 800 and 1,000 levels. Due to economic, supply /demand, political and trade reasons beans were pretty much range bound. Recently with both the decline of the Dollar coupled with some negative weather events beans bounced. What was prior resistance has now become support.
This pattern is the kind we look for when deciding what to trade. It doesn’t make any difference what the underlying future is; it’s the chart stupid. Give me a trough buttressed by a couple mountains, or even plateaus and I’ll declare it ripe for trade. In this case it would be on the buy side. What makes this an even better trade is the fact that the highest node on the histogram is over 200 points higher. I’ve been a buyer of beans for quite some time and more than likely will be for the near to long term future.
Pretty much the same detail as Soybeans, the Euro chart, like the Grand Canyon, depicts a couple mountain ranges surrounding a river that flows in between. While looking for just graphical interfaces from which to trade one cannot jump into any currency trade without looking at the world surrounding it. We went long the Euro today. The Dollar’s rally, given the sheer amount of money the Fed has put into circulation, using just supply / demand suggests a higher Euro. Europe is recovering from COVID faster than the United States as well.
But the primary reason, similar to Soybeans is that the trough to be filled is still lower than the highest histogram node. I’d consider trading the Swiss Franc as well.
Copper has given us a ride lately due to economic concerns related to the COVID pandemic and the rise, fall and slight rise again of the Dollar. We’re long copper for many of the same reasons we are long the Euro. There’s lots of construction all around the world and more is undoubtedly coming as regardless of Trump or Biden winning infrastructure need be repaired.
Whereas in the prior two charts, the highest histogram node is smack dab where copper is trading. Nice trough a little higher. Seems to me that if recent ramps higher gain some strength the floor underneath will provide great support. Great opportunity today to add a few more contracts to our position and that is just what we did.
As I said before, “gee but it’s great to be back home”. Niels is my business partner and Danny is my hero. We at AMS Trading Group are in the final stages of building our own platform. Currently we rely upon NinjaTrader something we knew had to change. Incorporated into our long term strategy is a symbiotic relationship with MrTopStep. Keep watching both sites to see us in action. I am more of the long term trader with Niels being more akin to how Danny trades.
Me. known as The Mark-It Wizard, The Wizard or just David serve as your primary contact. If you have any questions send me an email at firstname.lastname@example.org or just follow us on the site. We’re happy to help you get your feet wet with the AMS Trading Group products and trust we will be a beneficial source for all of your trading needs.