The market profile indicator provides an X-ray perspective of market activity and outlines the most important price levels, value ranges and control values during daily trading hours. The foreign exchange index refers to the foreign exchange quota that the foreign exchange user has the right to use uniformly arranged by the state foreign exchange management authority. In order to maintain a balance of international payments , a country’s use of foreign exchange is based on the priority of the project. The state’s foreign exchange management department uniformly arranges for a certain amount of foreign exchange to be used by the foreign exchange department or unit, and specifies the purpose and period of use (China’s foreign exchange indicators must be within the year Used and voided across the year). Departments, units, and individuals that use foreign exchange can only apply for the use of foreign exchange within the foreign exchange use index or use RMB to purchase the corresponding foreign exchange use. This is an important means for the country to live within its means in foreign exchange management and maintain the balance of foreign exchange revenue and expenditure.
The relative strength index reflects the power comparison between the long and short sides of the market. The indicator value fluctuates between 0 and 100. When it is around 20, it indicates that the short side is very strong and almost played to the extreme. There has been an oversold signal, which is less than the price. The bottom is not far away, and the time to buy is about to come; when it is around 80, it means that the power of many parties is very strong, the market has over bought, and the short-term top is about to form, and the time to sell may be coming soon.
In general, when the fast line (the line with frequent fluctuations) crosses the slow line (the line with relatively flat fluctuations) from top to bottom near 80, it is a sell signal; when the fast line crosses from bottom to top near 20 When the line is slow, it is a buy signal.
MARKET PROFILE Indicator
The MARKET PROFILE indicator reflects the trend and strength of market price fluctuations. The index value generally fluctuates between plus and minus 5. When the indicator value is positive, it means the market is long (bull market); when it is negative, it means the market is short (bear market).
When the MARKET PROFILE is hovering below 0 for a long time, the indicator gradually increases. Once it breaks through 0, it is a buy signal; when the fast line crosses the slow line from bottom to top at 0, it is also a buy signal.
When the MARKET PROFILE stays above 0 for a long time, the indicator gradually decreases. Once it breaks through 0, it is a sell signal; when the fast line crosses the slow line from top to bottom above 0, it is also a sell signal.
WHAT IS THE MARKET PROFILE INDICATOR?
In the foreign exchange market, technical analysis usually receives a large part of the attention, and the research of technical analysis can be as short as a few days or even decades as long. No matter what method a trader uses to learn technical analysis, the usual approach is to first understand the most commonly used technical indicators, and then further study price action or Elliott wave theory.
Commonly used indicators include RSI indicators , oscillating indicators, pivot points and so on. After traders learn how to use these indicators, they usually find that technical indicators are not a panacea and are often misleading. Does this mean that these technical indicators are worthless and useless at all? Of course not, technical indicators can tell us what the market is in. One thing to be clear is that the market is unpredictable, no matter how you approach him. On the contrary, trading is just a series of probabilities, and instrument indicators can help discover these probabilities. In this article, we will introduce one of the many indicators that most traders are exposed to first: MARKET PROFILE.
The full name of MARKET PROFILE is Exponential Smoothing Convergence and Divergence Average, which is developed from the double moving average. The slow moving average is subtracted from the fast moving average. The meaning of MARKET PROFILE is basically the same as that of the double moving average, but it is more convenient to read. , Because the indicator is so concise, it is one of the first indicators that traders grasp. When the MARKET PROFILE turns from a negative number to a positive number, it is a signal to buy. When the MARKET PROFILE turns from a positive number to a negative number, it is a signal to sell. When the MARKET PROFILE changes in a large angle, it means that the gap between the fast moving average and the slow moving average is opened very quickly, which represents a change in the general market trend.
HOW TO USE AND CALCULATE MARKET PROFILE
The MARKET PROFILE baseline indicates the difference between two fast and slow exponential moving averages
Baseline of MARKET PROFILE
The two moving average parameters set in the figure are 13 and 34 respectively. When the two moving averages intersect, the MARKET PROFILE will cross the 0 line accordingly. When the distance between the two moving averages increases, the MARKET PROFILE indicator will move away from the 0 line accordingly.
MARKET PROFILE signal line
The difference between positive and negative (DIF) is the core of the MARKET PROFILE indicator, but only if this is the case, there is no difference between the MARKET PROFILE and the ordinary moving average crossover. It also needs the average of similarity and difference (DEA) as the signal line. By calculating the exponential shifting average of DIF to get DEA, and finally using DIFF to subtract DEA, we get our common MARKET PROFILE.
MARKET PROFILE trading principles:
1. DIF and DEA are both positive, DIFF breaks DEA upwards, buy signal reference.
2. DIF and DEA are both negative, DIFF falls below DEA, and the sell signal is for reference.
3. The DEA line deviates from the K line, and the market may have a reversal signal.
4. The value of MARKET PROFILE changing from a positive number to a negative number, or from a negative number to a positive number is not a trading signal, because they are lagging behind the market.
MARKET PROFILE reference line and signal line cross signal encounter MA cross signal
The MARKET PROFILE cross first crosses the moving average, which allows traders to enter the market as soon as possible before the trend reverses. Of course, this indicator cannot be limited at any time, but remember that this is a transaction, and there is nothing or an indicator. It is omnipotent. Because of its characteristics, MARKET PROFILE can be integrated into many excellent trading strategies, and can well indicate market entry signals at the beginning of trend development.
MARKET PROFILE Histogram
Finally, in order to facilitate judgment, use DIF to subtract DEA to draw a histogram. When DIF and DEA cross, the bar line is 0. Below the 0 axis, the trend is downward, and above the 0 axis, the trend is upward. The longer the bar, the stronger the trend.
The length of the bar measures the distance between DIF and DEA
DISADVANTAGES OF MARKET PROFILE INDICATOR
Since MARKET PROFILE is a medium and long-term indicator, the price difference between the buying point, selling point and the lowest and highest price is relatively large. When the market fluctuates up and down and the range is too small or consolidates, you will enter the market according to the signal and then exit the market. There may be no profit between the transactions, and you may have to pay for the spread or the handling fee.
When the rise or fall is particularly large in one or two days, MARKET PROFILE has no time to react, because MARKET PROFILE moves quite slowly, and there is a certain time difference between the movement of the market. Therefore, once the market rises and falls rapidly and sharply, MARKET PROFILE will not immediately generate a signal. At this time, MARKET PROFILE cannot Take effect.
HOW TO USE THE MARKET PROFILE INDICATOR TO FIND THE TIME TO ENTER THE MARKET
Before opening a position, short-term traders should first confirm the current overall market environment. For those traders who mainly use technical analysis for trading, the best approach is to conduct a multi-period analysis: find the current major trend on a longer-term graph. Generally speaking, hourly charts and 4-hour charts can well show the market background that day traders need to observe. Regarding the analysis of trends, traders can borrow A DX indicators or moving average indicators. As shown in the figure below, on the 4-hour GBP/USD chart, we can use the 55-period moving average as a trend screening. If the price is above the moving average, then the trader will only go long when operating, and if the price is below the moving average, then only short selling is considered.
Preparatory work for using MARKET PROFILE: Use 55-period moving average to screen trends
The next step for short-term traders to solve is the timing of entry. In this regard, the MARKET PROFILE indicator can be of great help to traders. Because of the initial analysis, the trader has already determined the direction of the transaction. So all they have to do at this time is to wait for the MARKET PROFILE indicator to send a trading signal. When MARKET PROFILE crosses the signal line upwards, this is a buy signal. In the process of holding a long position, traders can also use the dead fork of the MARKET PROFILE indicator (MARKET PROFILE crosses the signal line) to close positions.
Short-term traders can combine MARKET PROFILE signals to trade with the trend
Stochastic indicators reflect the changes in market strength, similar to RSI, the indicator value also changes between 0-100. When it is close to 20, it means that the market is oversold and not far from the bottom; when it is close to 80, it means that the market is overbought and not far from the top. Investors can adopt corresponding investment strategies according to this law. When the fast line crosses the slow line from bottom to top near 20, it is a buy signal; when the fast line crosses the slow line from top to bottom near 80, it is a sell signal.
Various technical analysis indicators are forecasting methods that people use the principles of mathematical statistics to study historical data. They all have their limitations. They must not be rigidly applied . They must be based on the prevailing market atmosphere, fundamental factors, etc. Make specific analysis and judgments.
There are many indicators used for technical analysis. There is no uniform standard for which is better. Investors can choose according to their own preferences and mastery. According to the author's experience and personal hobbies, the three indicators of KDJ, RSI, and MARKET PROFILE can be used to analyze the trend of various currencies in the foreign exchange market.
In terms of the sensitivity of indicators, KDJ, RSI, and MARKET PROFILE decrease in turn. That is to say, KDJ can give clear buying and selling signals first, but at the same time this kind of signal may be advanced; MARKET PROFILE gives buying and selling signals the latest The credibility of the signal is higher, but it often misses a better buying and selling price. So, is RSI the best indicator? Not at all. RSI's buying and selling signals are not very clear, and judgments are often made based on the prevailing market atmosphere. The more scientific method is to use the three indicators simultaneously to confirm each other. In practice, three indicators will give different buying and selling signals. In this case, there are often sudden events in the market, such as the Great Japan Earthquake, the US "9.11" event, and central bank intervention.
Choice of parameters for Market Profile Indicator
Index parameters generally do not need to be modified by investors. Software developers have already given default parameters. Unless you have a better understanding and experience, you can use the system default values under normal circumstances.
However, the choice of indicator period is very necessary. The cycle of technical indicators can be selected by investors, as short as TICK, as long as daily, weekly, monthly or even annual. Different indicator cycles have different scopes of application. To determine the long-term trend of the exchange rate, you can use the monthly line; to study the mid-term trend, you can use the weekly line; for short-term investment, you can use the daily line; to determine the trading timing of the day, you can use the 60-minute line or the 30-minute line; it has been decided immediately For trading, you can use the 10-minute or 5-minute line to capture the best trading point.
Passivation of Market Profile Indicator
Because the designer of the indicator conducts research and analysis based on the large amount of historical data he has mastered, it reflects the law under general conditions, that is, the law under normal conditions. The market is ever-changing, and everything can happen. Therefore, changes in exchange rates will cause indicators that cannot be explained and predicted. This situation is called indicator passivation.
Improving personal firm foreign exchange trading transactions The key to using personal foreign exchange trading for investment and financial management is to grasp the trend of foreign exchange rates. Correctly use relevant theoretical knowledge to conduct "basic factor analysis" on various market information, and at the same time use "technical analysis" to make comprehensive judgments on exchange rate trends. We must not rely solely on feelings, let alone the psychology of "gambling".
The basic principle
The short-term trend moves in a relatively small interval, and is also easily affected by various factors and changes at any time. Therefore, it is more difficult for investors to grasp the short-term trend of the exchange rate, and it is easy to get lost in a variety of influencing factors. If you have a thorough understanding of the long-term trend before analyzing the short-term exchange rate trend, and you can be confident, then investors can overlook the short-term trend, grasp the main contradictions, and make correct analysis and judgments. If the dollar emergence of a "morning star" shape in a few days time, usually think the dollar is about to hit the bottom, likely reversal, but also many from the long analysis of the trend, the dollar is still the long-term downward spiral running, blocking There is no possibility that the line will be broken, so the "Morning Star" at this time is just a small rebound. It is a small adjustment for some investors to liquidate their positions and make a small adjustment to the market's pressure to digest, and even short-term opportunities. No. At this time, the "Morning Star" pattern has no meaning to reverse.
Location is more important
In-depth study of technical analysis will find that technical analysis has impossible rules. But if these laws are not analyzed in conjunction with the position and form, then these laws will become castles in the air and have no meaning. For example, the "head and shoulders bottom" pattern is a very classic bottom reversal pattern, which usually appears in the bottom area of the exchange rate, but if a "head and shoulders bottom" pattern appears in the high price area of the exchange rate , then mature investors would rather withdraw from the market. Wait and see, and will never believe this form. Because "the head is most likely to appear in the high position, and the bottom is the most likely to appear in the low position" is the simplest and most effective investment law.
The market is important
"The level of the exchange rate is not important, the trend of the exchange rate is the most important." Also Xu Hui price has reached a high or low area, but as long as investors can accurately determine the trend of the exchange rate, you can still buy or hold. The most important and difficult thing for investors to analyze is to analyze the direction of market trends.
Technical analysis of indicators
Spot the trend
Regarding technical analysis, the first thing you may hear is the following motto: "The trend is your friend." Finding the dominant trend will help you view the overall market orientation and give you more keen insight-especially when shorter-term market fluctuations disrupt the overall market. Weekly and monthly chart analysis is best used to identify longer-term trends. Once you find the overall trend, you can choose the trend in the time span you want to trade. In this way, you can buy or sell during the uptrend and sell during the downtrend.
Support and resistance
Support and resistance levels are the points on the chart that experience continuous upward or downward pressure. The support level is usually the lowest point in all chart modes (hourly, weekly or yearly), and the resistance level is the highest point (peak point) in the chart. When these points show a recurring trend, they are identified as support and resistance. The best time to buy/sell is near the support/resistance level that is not easily broken.
Once these levels are broken, they will tend to become reverse obstacles. Therefore, in an uptrend market, the broken resistance level may become a support for an upward trend; however, in a downtrend market, once the support level is broken, it will turn into resistance.
Lines and channels
Trend lines are simple and practical tools in identifying the direction of market trends. The upward straight line is formed by connecting at least two consecutive low points. Naturally, the second point must be higher than the first point. The extension of the straight line helps to determine the path the market will follow. Uptrend is a specific method used to identify support lines/levels. Conversely, the downward line is drawn by connecting two or more points. The variability of transaction lines is to some extent related to the number of connection points. However, it is worth mentioning that the points do not have to be too close.
A channel is defined as an upward trend line parallel to the corresponding downward trend line. Two lines can represent a corridor where prices are up, down, or horizontal. The common attribute of a channel that supports trend line connection points should be located between the two connection points of its reverse line.
Therefore, it is not necessarily a sign of changing trends. To solve this problem, the use of a short-period moving average of 5 or 10 days will reflect recent price movements better than a 40 or 200-day moving average.
Alternatively, a moving average can also be used by combining two averages with different time spans. Regardless of whether the 5- and 20-day moving averages are used, or the 40- and 200-day moving averages, a buy signal is usually detected when the shorter-term average crosses the longer-term average upward. In contrast, a sell signal will be prompted when the shorter-term average crosses the longer-period average downward. There are three mathematically different moving averages: simple arithmetic moving average ; linear weighted moving average ; and square factor weighted average. Among them, the last one is the preferred method because it gives more weight to the most recent data and considers the data throughout the cycle of financial instruments.