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- Wiley
More About This Title Mind Over Markets, Updated Edition: Power Tradingwith Market Generated Information
English
Emerging over twenty years ago, Market Profile analysis continues to realize a strong following among active traders. The approach explains the underlying dynamics and structure of markets, identifies value areas, price rejection points, and measures the strength of buyers and sellers. Unlike more conventional forms of technical analysis, Market Profile is an all-encompassing approach, and Mind Over Markets, Updated Edition provides traders with a solid understanding of it.
Since the first edition of Mind Over Markets—considered the best book on applying Market Profile analysis to trading—was published over a decade ago, much has changed in the worlds of finance and investing. That's why James Dalton, a pioneer in the popularization of Market Profile, has returned with a new edition of this essential guide. Written to reflect today's dynamic market conditions, Mind Over Markets, Updated Edition clearly puts this unique method of interpreting market behavior and identifying trading/investment opportunities in perspective.
- Includes new chapters on Market Profile-based trading strategies, using Market Profile in connection with other market indicators, and much more
- Explains how the Market Profile approach has evolved over the past twenty-five years and how it is used by contemporary traders
- Written by a leading educator and authority on the Market Profile
One of the key elements that has long separated successful traders from the rest is their intuitive understanding that time regulates all financial opportunities. The ability to record price information according to time has unleashed huge amounts of useful market information. Mind Over Markets, Updated Edition will show you how to profitably put this information to work for you.
English
JAMES F. DALTON has been a pioneer in the popularization of the Market Profile, a unique method of identifying trading/investment opportunities. He has been involved in the stock and futures markets for more than forty years. Currently a full-time trader, Jim advises two hedge funds and several trading firms. He is a discretionary trader and longtime proponent of employing the Market Profile to facilitate trading. Jim began his career in the investment industry as a broker with Merrill Lynch and Shearson Lehman. He is the coauthor of two books, the original edition of Mind Over Markets and Markets in Profile (Wiley).
ERIC T. JONES is a Senior Managing Director and Head of Advisory Solutions and Product Development at TIAA-CREF. His past experience includes more than twenty-five years of developing new investment products and programs designed to help individual investors more successfully achieve their financial goals and dreams. Eric is the coauthor of two other books on the financial markets, investments, and trading: Hedging Foreign Exchange and Markets in Profile (both from Wiley).
ROBERT B. DALTON is a partner at Karass Creative, a Seattle agency that bonds brands to tribes by telling stories that matter. For two decades, he has woven compelling campaigns across myriad media—from Addy-winning websites to short films and poetry—for a long list of artistic, nonprofit, and corporate clients ranging from Starbucks to TEDx. He is the coauthor of Markets in Profile (Wiley).
English
Preface xiii
Acknowledgments xvii
CHAPTER 1 Introduction 1
CHAPTER 2 Novice 7
Laying the Foundation 9
The Auction 9
Organizing the Day 10
Challenging the Rules 15
The Role of the Marketplace 16
Going with the Crowd 17
Introduction to Day Timeframe Structure 19
Normal Day 19
Dynamics 19
Structural Characteristics 21
Normal Variation of a Normal Day 21
Dynamics 21
Structural Characteristics 23
Trend Day 23
Dynamics 23
Structural Characteristics 23
Double-Distribution Trend Day 25
Dynamics 25
Structural Characteristics 25
Nontrend Day 27
Dynamics 27
Structural Characteristics 27
Neutral Day 27
Dynamics 27
Structural Characteristics 28
Day Type Summary 31
CHAPTER 3 Advanced Beginner 33
Building the Framework 34
The Big Picture: Market Structure, Trading Logic, and Time 34
A Synthesis: Structure, Time, and Logic 35
Ease of Learning 36
Amount of Information 36
Recognition Speed 37
Trade Location 37
Confidence Level 37
Summary 38
Evaluating Other Timeframe Control 38
Other Timeframe Control on the Extremes 40
Tails (or Extremes) 40
Range Extension 40
Other Timeframe Control in the Body of the Profile 40
TPO 41
Initiative versus Responsive Activity 45
Trending versus Bracketed Markets 49
Key Elements—A Brief Discussion 51
Trending Markets 54
Bracketed Markets 54
The Two Big Questions 56
CHAPTER 4 Competent 59
Doing the Trade 59
Section I 60
Day Timeframe Trading 60
Day Timeframe Directional Conviction 61
Opening Call 61
The Open 62
The Open as a Gauge of Market Conviction 63
Open-Drive 63
Open-Test-Drive 65
Open-Rejection-Reverse 68
Open-Auction 69
Open-Auction in Range 70
Open-Auction out of Range 71
Summary 73
Opening’s Relationship to Previous Day—Estimating Daily Range Potential 74
Open within Value—Acceptance 75
Rejection (Breakout) 79
Open outside of Value but within Range—Acceptance 80
Rejection (Breakout) 83
Open outside of Range—Acceptance 84
Rejection 85
Summary 85
April 13,1989 86
Crude Oil 87
S&P 500 87
Gold 90
Japanese Yen 92
Soybeans 92
Treasury Bonds 92
Summary 95
Day Timeframe Auction Rotations 96
Two-Timeframe Markets 97
One-Timeframe Markets 97
Using Auction Rotations to Evaluate Other Timeframe Control 97
Structure 99
Half-Hour Auctions 100
Extremes 100
Range Extension 101
Time 101
Identifying Timeframe Transition 102
December Swiss Franc, October 12, 1987 103
Y to E: One-Timeframe Buying 104
E: Time 104
Y to F: Auction Test 104
G: Transition Confirmation 104
E to H: One-Timeframe Selling 105
H: Auction Test 105
I: Transition Confirmation 105
H-J: One-Timeframe Buying 105
Summary 105
Auction Failures 105
Excess 110
Signs of Excess 111
The Rotation Factor 112
Monitoring the POC or Fairest Price 115
9:30 a.m. Figure 4.30 116
10:00 a.m. Figure 4.31 118
10:30 a.m. Figure 4.32 119
Noon Figure 4.33 119
2:00 p.m. Figure 4.34 119
The Close 120
Day Timeframe Visualization and Pattern Recognition 122
Short-Covering Rallies 123
Long-Liquidation Breaks 127
Summary of Short Covering and Long Liquidation 128
Ledges 129
Summary 130
High- and Low-Volume Areas 131
High-Volume Areas 131
Identifying High-Volume Levels 132
High-Volume Examples 134
Low-Volume Areas 138
Low-Volume Examples 140
Summary 144
Summary—Day Timeframe Trading 145
Section II 145
Long-Term Trading 145
Long-Term Directional Conviction 146
Attempted Direction: Which Way Is the Market Trying to Go? 146
Auction Rotations 147
Range Extension 147
Long-Term Excess 150
Island Days 152
Long-Term Tails 152
Gaps 155
Summary 155
Buying/Selling Composite Days 155
Summary 157
Directional Performance: Is the Market Doing a Good Job in its Attempts to Get There? 157
Volume 158
Evaluating Changes in Volume 158
Volume as a Measure of Directional Performance 158
Value-Area Placement 159
Evaluating Directional Performance through Combined Volume and Value-Area Placement 160
Value-Area Width 169
Summary: Long-Term Activity Record 171
Long-Term Auction Rotations 183
Brackets 183
Trade Location in a Bracketed Market 188
Rule 1: Monitor Market Direction and Location within the Current Bracket 189
Rule 2: Markets Generally Test the Bracket Extreme More Than Once 190
Rule 3: Markets Fluctuate within Bracketed Regions 190
Rule 4: Monitor Activity Near the Bracket Extremes for Acceptance/Rejection 192
Transition: Bracket to Trend 192
Trends 193
Trade Location in a Trending Market 193
Monitoring Trends for Continuation 196
Transition: Trend to Bracket 197
Detailed Analysis of a Developing Market 201
Bracket Reference Points 201
Region A (Figure 4.87) 203
Region B (Figure 4.88) 205
Region C (Figure 4.89) 207
Region D (Figure 4.90) 208
Long-Term Auction Failures 210
Long-Term Short Covering and Long Liquidation 214
Applications 224
Corrective Action 225
The Function of Corrective Action 226
Summary 228
Long-Term Profiles 228
Using Long-Term Profiles 229
The Long-Term Profile in Action 229
Region A (Figures 4.98 and 4.99) 231
Region B (Figures 4.100 and 4.101) 235
Summary 238
Special Situations 238
3 to I Days 239
Neutral-Extreme Days 241
The Value-Area Rule 244
Summary 246
Spikes 247
Acceptance versus Rejection 247
Openings within the Spike 247
Openings outside the Spike 249
Bullish Openings 249
Bearish Openings 252
Spike Reference Points 252
Balance-Area Breakouts 252
Gaps 260
Day Timeframe Significance of Gaps 260
Summary 265
Markets to Stay Out Of 265
Nontrend Days 266
Nonconviction Days 266
Long-Term Nontrend Markets 267
News-Influenced Markets 269
Summary 269
News 269
Summary 274
Beyond the Competent Trader 275
CHAPTER 5 Proficient 277
Self-Understanding: Becoming a Successful Trader 279
Self-Observation 281
The Whole-Brained Trader 282
The Left Hemisphere 283
The Right Hemisphere 283
Combining the Two Hemispheres 283
Strategy 284
A Business Strategy 285
Capital 285
Location 286
Timing 286
Information 287
Know Your Competition 287
Know Yourself 288
Consistent, Daily Execution 288
Inventory 288
Risk 289
Goals 290
Record Keeping and Performance 290
Dedication 290
Applications 291
Summary 292
CHAPTER 6 The Expert Trader 295
CHAPTER 7 Experience 297
Set Aside Your Expectations 297
Mind over Markets in Profile 298
Market-Understanding and Self-Understanding 300
Perfect Practice Makes Perfect 300
Blinded by Price 300
Be Prepared 301
Perspective 302
Overnight Inventory 305
Gaps Can Be Gold 307
Gaining an Edge 308
The Fairest Price Revealed 309
Thinking Statistically 311
The Trader’s Dilemma 311
The Most Important Omission from the First Printing in 1990 312
Emotional Markets 313
A Landscape View of the Market 314
Personal Evolution 315
Hierarchy of Information 316
Timeframe Control—Who Is Dominating the Current Session? 317
Markets Are Visual 318
Destination Trades 319
The Opening 319
Trends 320
Daily Perspective 322
Cognitive Dissonance 322
Imagination 325
False Certainty 326
Anomalies 326
Market Logic 328
We Are All Day Traders 329
APPENDIX 1 Value-Area Calculation 331
Volume Value-Area Calculation 331
TPO Value-Area Calculation 332
APPENDIX II TPO versus Volume Profiles 335
Single Price Level Distortions 336
End of Day Total Volume versus Ongoing
Volume throughout the Day 337
Anomalies 337
Too Focused on Volume 339
Conclusion 339
Suggested Readings 341
About the Authors 343
Index 345
