Mind Over Markets Power Trading with Market Generated Information, Updated Edition

by Dalton, James F.; Jones, Eric T.; Dalton, Robert B.

• ISBN13: 9781118531730
• ISBN10: 1118531736
• Edition: 2nd
• Format: Hardcover
• Copyright: 2013-07-01
• Publisher: Wiley

Summary

A timely update to the book on using the Market Profile method to trade

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.

Author Biography

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).

Table of Contents

Preface

Acknowledgments

Chapter 1: Introduction

Chapter 2: Novice

Laying the Foundation

The Auction

Organizing the Day

Challenging the Rules

The Role of the Marketplace

Going with the Crowd

Introduction to Day Timeframe Structure

Normal Day

Dynamics

Structural Characteristics

Normal Variation of a Normal Day

Dynamics

Structural Characteristics

Trend Day

Dynamics

Structural Characteristics

Double-Distribution Trend Day

Dynamics

Structural Characteristics

Nontrend Day

Dynamics

Structural Characteristics

Neutral Day

Dynamics

Structural Characteristics

Day Type Summary

Chapter 3: Advanced Beginner

Building the Framework

The Big Picture: Market Structure, Trading Logic, and Time

A Synthesis: Structure, Time, and Logic

Ease of Learning

Amount of Information

Recognition Speed

Trade Location

Confidence Level

Summary

Evaluating Other Timeframe Control

Other Timeframe Control on the Extremes

Tails (or Extremes)

Range Extension

Other Timeframe Control in the Body of the Profile

TPO

Initiative versus Responsive Activity

Trending versus Bracketed Markets

Key Elements—A Brief Discussion

Trending Markets

Bracketed Markets

The Two Big Questions

Chapter 4: Competent

Doing the Trade

Section I: Day Timeframe Trading

Day Timeframe Directional Conviction

Opening Call

The Open

The Open as a Gauge of Market Conviction

Open-Drive

Open-Test-Drive

Open-Rejection-Reverse

Open-Auction

Open-Auction In Range

Open-Auction Out Of Range

Summary

Opening’s Relationship to Previous Day—Estimating Daily Range Potential

Open Within Value

Acceptance

Rejection (Break-out)

Open Outside of Value but Within Range

Acceptance

Rejection (Break-out)

Open Outside of Range

Acceptance

Rejectio

Summary

April 13,1989

Crude Oil

S&P 500

Gold

Japanese Yen

Soybeans

Treasury Bonds

Summary

Day Timeframe Auction Rotations

Two-timeframe Markets

One-Timeframe Markets

Using Auction Rotations to Evaluate Other Timeframe Control

Structure

Half-hour Auctions

Extremes

Range Extension

Time

Identifying Timeframe Transition

December Swiss Franc, October 12, 1987

Summary

Auction Failures

Excess

Signs of Excess

The Rotation Factor

Monitoring the POC or Fairest Price

9:30 AM Figure 4-30.

10:00 AM Figure 4-31.

10:30 AM Figure 4-32.

Noon Figure 4-33

2:00 PM Figure 4-34

The close

Day Timeframe Visualization and Pattern Recognition

Short Covering Rallies

Long Liquidation Breaks

Summary of Short Covering and Long Liquidation

Ledges

Summary

High- and Low-Volume Areas

High-Volume Areas

Identifying High-Volume Levels

High-Volume Examples

Low-Volume Areas

Low-Volume Examples

Summary

Summary—Day Timeframe Trading

Section II: Long-Term Trading

Long-Term Directional Conviction

Attempted Direction: Which Way Is the Market Trying to Go?

Auction Rotations

Range Extension

Long-Term Excess

Island Days

Long-Term Tails

Gaps

Summary

Buying/Selling Composite Days

Summary

Directional Performance: Is the Market Doing a Good Job in Its Attempts to Get There?

Volume

Evaluating Changes in Volume

Volume as a Measure of Directional Performance

Value-Area Placement

Evaluating Directional Performance through Combined Volume and Value-Area Placement

Value-Area Width

Summary: Long-Term Activity Record

Long-Term Auction Rotations

Brackets

Trade Location in a Bracketed Market

Rule 1: Monitor market direction and location within the current bracket

Rule 2: Markets generally test the bracket extreme more than once

Rule 3: Markets fluctuate within bracketed regions

Rule 4: Monitor activity near the bracket extremes for acceptance/rejection

Transition: Bracket to Trend

Trends

Trade Location in a Trending Market

Monitoring Trends for Continuation

Transition: Trend to Bracket

Detailed Analysis of a Developing Market

Bracket Reference Points

Region A (Figure 4–87)

Region B (Figure 4–88)

Region C (Figure 4–89)

Region D (Figure 4–90)

Long-Term Auction Failures

Long-Term Short Covering and Long Liquidation

Applications

Corrective Action

The Function of Corrective Action

Summary

Long-Term Profiles

Using Long-Term Profiles

The Long-Term Profile in Action

Region A (Figures 4–98 & 4–99)

Region B (Figures 4–100 & 4–101)

Summary

Special Situations

3–I Days

Neutral-Extreme Days

The Value-Area Rule

Summary

Spikes

Acceptance versus Rejection

Openings Within the Spike

Openings Outside the Spike

Bullish Openings

Bearish Openings

Spike Reference Points

Balance-Area Break-outs

Gaps

Day Timeframe Significance of Gaps

Summary

Markets to Stay Out Of

Nontrend Days

Nonconviction Days

Long-Term Nontrend Markets

News-Influenced. Markets

Summary

News

Summary

Beyond the Competent Trader

Chapter 5: Proficient

Self-Understanding: Becoming a Successful Trader

Self-Observation

The Whole-Brained Trader

The Left Hemisphere

The Right Hemisphere

Combining the Two Hemispheres

Strategy

A Business Strategy

Capital

LocatioTiming

Information

Know Your Competition

Know Yourself

Consistent, Daily Execution

Inventory

Risk

Goals

Record Keeping and Performance

Dedication

Applications

Summary

Chapter 6: The Expert Trader

Chapter 7: Experience

Set Aside Your Expectations

Mind over Markets in Profile

Market-Understanding & Self-Understanding

Perfect Practice Makes Perfect

Blinded by Price

Be Prepared

Perspective

Overnight Inventory

Gaps Can Be Gold

Gaining an Edge

The Fairest Price Revealed

Thinking Statistically

The Trader’s Dilemma

The Most Important Omission From the First Printing in 1990

Emotional Markets

A Landscape View of the Market

Personal Evolution

Hierarchy of Information

Timeframe Control—Who Is Dominating the Current Session?

Markets Are Visual

Destination trades

The Opening

Trends

Daily Perspective

Cognitive Dissonance

Imagination

False Certainty

Anomalies

Market Logic

We Are All Day Traders

Appendix 1: Value-Area Calculation

Volume Value-Area Calculation

TPO Value-Area Calculation

Appendix II: TPO vs. Volume Profiles

Single Price Level Distortions

End of Day Total Volume vs. Ongoing Volume Throughout The Day

Anomalies

Too Focused On Volume

Conclusion

Suggested Readings

About the Authors

Index