This post is simply to show how a proper understanding of Market Profile and OrderFlow eliminates the difficulty in making trading decisions.
For convenience we have shown a Nifty chart in the 10 minute timeframe. We however trade on a tick chart but the buy/ sell orders do not change in any time frame you see them in.
To understand orderflow one needs to have a background of the auction taking place and a trading plan in sync with it. OrderFlow is easier to read when you know who is controlling the auction in the short and the medium term. Once that is clear all we need to do is see if the change brought about by the opposing force is strong enough to mark a shift.
Our trading plan is posted every evening. We let OrderFlow lead us into the plan next. Yesterday’s post was : http://vtrender.com/levels-and-plan-for-23rd-july/#more-22220
Let’s look at the chart above :
1 & 1A ) We see an Open above value and Range. We are on the lookout for an open auction , new buyers or sellers. In the first 10 minutes we see in 1 and 1A an absence of buyers and sellers selling into the higher prices ( blue in the top pane is buyers and red is sellers)
2 & 2A ) Shows sellers getting aggressive and trying to move price down.
3 & 3 A) Shows gap closure and buyers responding to the lower prices. We know the market is in a dip buy mode and are not surprised to see the NF move back to vwap which was then at 7788
4 & 4A) Show sellers coming back from vwap and dropping the NF to previous day’s POC at 7746 .We see from the size of the bars in the top pane that the sellers are not huge ( smaller bars) and more likely a revisit will come if buyers defend the lower prices again. Our premarket plan is to see new selling below 7750 but they don’t show.
5 & 5A) Buyers respond strongly again and take the NF back to vwap where it closes for the session.
The overall auction is mostly in the range and profile of 7/7 as we pointed out earlier and has a seller at the top and buyer at the base.
We put these charts live in the trading room . For more on that visit – http://vtrender.com/trading-room/