GLOSSARY

vtrender.com /glossary/
Anomaly
An anomaly is a structural weakness represented in charts as blue horizontal lines in the middle of the
profile.Its identified as a weakness as the market does not give sufficient time to the auction mover at these
prices. Subsequently its been observed that the prices get revisited. A large number of anomalies in a chart tell
us that the move was not strong and the market would visit those points again in the coming session or the next
auction.

Auction
The bid-ask process of the market is described as an auction. The purpose of an auction is to facilitate trade.
The auction results in the formation of the value area which the buyers and the sellers agree as the fairest price
for the day. As the auction moves away from the value area, buyers and sellers change their definition of value.
If higher prices are agreed in the auction, value is supposed to move higher and consequently the market
moves up. The market will auction as high as it needs to in order to find sellers or as low as it needs to in order
to motivate buyers to see it as relatively cheap.

Balance
This refers to trading ranges, brackets, balance areas, congestion areas, and consolidation rangesall
synonymous terms. They define price ranges in the market that are containing trade.
In a balance, buyers and sellers are considered to be equal in measure as prices advertise new opportunity.
Within these containment ranges reversion to the mean trades are the favorite of short-term traders.Bigger
opportunities occur as price auctions outside of these containment ranges.

Balance Rules
Balance area rules :
1. Market may slightly extend the range in either direction, stays in balance. Patience is in order.
2. Market explores upside breakout and is met by aggressive sellers; prices fail to be accepted above the
breakout. Fade the price probe failurethe potential target is for rotation to the opposite end of balance.
3. Market explores to the upside; higher prices receive the unexpected response and attract even more
buyers. Higher prices are accepted, breakout is successful. Go with price acceptance in the direction of
breakout.
4. Market explores downside breakout and is met by aggressive buyers; prices fail to be accepted below the
breakout. Fade the price probe failurethe potential target is for rotation to the opposite end of balance.
5. Market explores to the downside; lower prices receive the unexpected response and attract even more
sellers. Lower prices are accepted, breakout is successful. Go with price acceptance in the direction of
breakout.
as price auctions outside of these containment ranges.

Buyers
Individuals of any timeframe who feel that the present market is underpriced and therefore less in value. These
individuals will move price up.

Buying Tail

The failure of the auction at lower levels to attract new sellers results in the buyers swiftly moving in forming
what is called a buying tail.

Close
The final auction of the day

D shaped Profile
A D shaped profile is a balanced distribution of the markets.
It resembles the letter D
The market is said to be in balance and both the buyers and the sellers have equal weights. The distribution
during the day is one standard deviation or 68.4 %. Thus value areas are very important for the next day and an
exit of value implies that one party is ceding control to the other .
Value areas are vitally important when you see a D shaped profile

Delta- Buyer/ seller Delta

Delta describes the quantity of contracts bought at the offer minus sold at the bid. It simply measures the
aggressiveness of buyers versus sellers. We use the term motivated or aggressive buyers or sellers who input
market orders as opposed to limit and are in a hurry to move the market their way.

Double Distribution (DD)

A DD ( double distribution) is a type of day in Market profile which has two balanced rotations separated by a
level of single prints.
On such days the market opens and begins to rotate in a balanced distribution and a bell curve starts
developing. However some additional information then enters the markets in the form of news flow or an RBI
event etc and the market jumps from the existing area and starts rotating in a new zone which is different and
removed from the earlier rotation.
The difference between the two zones is generally a single line of prints.The market then begins to balance as
the news is digested.

Excess
Excess marks the end of one auction and the beginning of a new auction. It is visible within the two-way auction
process via buying and selling tails. Excess occurs in all timeframes; it completes an auction

Failed auction ( FA)

A failed auction implies an inability of a market to auction and follow through on an exit of a known reference
area like Initial balance or even Value areas.
Thus a market will exit an Initial balance, but fail to follow through on the exit and return back to the initial
balance. There are certain rules coined by veteran profilers to define the activity. One of the things which
constitute failure is an inability to stay outside for more than 30 mins. We have discussed more on FA here

Gap
Is another form of excess. Price moves rapidly away from a prior trading level or reference; a gap signifies a
total reordering in market thinking. NOTE: In profile, we measure a gap from the previous days high or lownot
from the settlement price/ close. A gap signifies a market that is out of balance and presents a large opportunity.

HVN- High Volume Nodes

This describes a range of prices where there is a particularly high amount of volume or bulge in the profile.The
market likes to sat here and will spend considerable time. It is noted to be the best place to re-look at your
trading strategy.

Initial Activity
Control by the buyer or seller in the first few minutes of the trading day is called initiative activity.As the name
suggests, the action determines conviction on the part of the players to move the market.The strength of the
initiative activity is useful to determine which party will have a role to play in the day

Initial Balance
The first 60 Minutes of a trading day are called the initial balance. As the name suggests, the IB tries to set up
the days balance or define value for the day. The IB is important for the type of open to be monitored. See
section on Opens below.

Long Liquidation
It is a process in which old business reverses earlier positions.Long liquidation is a process that adjusts
inventory that has gotten too long. It occurs within every timeframe; day timeframe long liquidation may be over
quickly while longer timeframe long liquidation may last for much longer periods of time.

LVN Low Volume Node

This describes a range of prices where there is a particularly low amount of volume or dip in the profile.

One Time Framing

A trending situation where in value is built successively higher in an uptrend or lower in a downtrend. One
timeframing is applicable to all timeframes, from a monthly chart to the shortest timeframe Recognizing a onetimeframing mode can keep a trader from fading a market at inopportune times while also enabling a trader to
employ the most appropriate strategic and tactical plan for the current market conditions.

Open

Opening Swing High (OSH)

The Opening Swing High (OSH) is the highest point reached by the market as the session opens for trading.
This is caused by market orders rushing into the market at open prices. The prices traded on screen during the
Opening swing are all market orders. The Opening swing high is independent of time.and is the days first
auction. It is different from the Opening range which is measured in minutes.Any movement away from the OSH
represents a good buy point, particularly useful in Open drives where the OTF is strong.

Opening Swing Low (OSL)

Opening Swing Low (OSL)

The Opening Swing Low (OSL) is the lowest point reached by the market as the session opens for trading. This
is caused by market orders rushing into the market at open prices. The prices traded on screen during the
Opening swing are all market orders. The Opening swing low is independent of time.and is the days first
auction. It is different from the Opening range which is measured in minutes. Any movement away from the OSL
represents a good initiation point, particularly useful in Open drives where the OTF is strong.

OTF (Other Time Frame)

This describes all participants with a time frame that is greater than the one you are in. Major trending or vertical
moves are completed by larger participants who are using a greater time frame than the one you are looking at.
When the OTF participates, it generally takes many prices and a lot of volume transacted to complete an order.
Funds, swing investors, governments and financial institutions in general are operating at the OTF level. They
are recognized when we move from horizontal development to vertical development. They are also
recognized using the opening swing, initial balance and other indications.

P shaped profile
A profile shaped like the letter (P).
It does not have much volume or activity at the bottom and is very pronounced at the top. This formation is
typical of short covering rallies. It happens when early in the session the market moves from a certain point on
information which makes shorts cover their existing positions. The market then establishes new day value at the
top of its day range.

Point of Control Volume ( POCv)

The Point of Control in Market Profile terms stands for the most commonly traded price closest to the center of
the range. This is the price where the most activity occurred during the day ; it is therefore the price considered
to be the fairest during any trading day.The migration of the fairest price at which business is being conducted is
of great importance in monitoring longer timeframe activity (greater than day timeframe) in any single day.

Poor Highs/Lows
Auctions, within the markets natural two-way auction process, end in one of two ways: 1) Most commonly the
auction ends through a more aggressive counter auction that creates a buying or selling tail; or 2) The auction
ends through simple exhaustion.We refer to the exhaustion as poor high/ low.the poor high/ low is a temporary
halt in the ongoing auction. What is noticeable is the lack of opposite auction in such cases and hence the
original auction has a higher possibility of restarting.

Profile 3-1-3
A 3-1-3 profile has excess at 2 ends and a thick value area in the middle.
It resembles the best example of a market trying to balance or remain range bound. The excess formed at the
extremes makes it very difficult for the market to move out for a while and moves to the extremes are often sent
back to the centre and then the other extreme. However when one extreme breaks it sets up a fast and furious
move in the direction of the break.

Pullback low/Rally high

Applicable to trend days and is a late afternoon price migration against the prevailing trend. During a trend day
there is usually one afternoon inventory adjustment; the pullback high or low is the extreme of this inventory
adjustment. On the following day the pullback high or low is used to determine if there has been any meaningful
change relative to the previous day; if the pullback high or low is not violated, there has been no meaningful
change in the opposite direction of the prior days trend.

Range Extension
The movement away from the initial balance is called the range extension.Success or failure of the range
extension gives us an indication of the type of day unfolding.

Reference Levels
These are points in time which hold information.That information may simply be available for very short periods
of time or for extremely extended periods. Larger reference levels are of great importance to the long term
player.Successful trading is about managing change and taking advantage of it.

Responsive Activity
This is a response to Initiative activity, the strength of which can determine changes to the trend of the
timeframe.

Sellers
Same role as explained above for Buyers except they think that the market is overpriced and will move price
down.

Selling Tail
The failure of the auction at higher levels to attract new buyers results in the sellers swiftly moving in forming
what is called a selling tail. The selling tail is a failed upwards auction.The greater number of single TPOs that
form the selling tail the more aggressive the sellers reaction.

Short Covering
Opposite activity of the Long Liquidation. Whats important to understand here is that it is again old Business
which is covering.These become violent and misleading if you dont understand the difference between old and
new business.

Single Prints
Single prints often called buying tails or selling tails depending on where they appear on the charts are the
biggest examples of institutional activity one can track on charts live during markets.
They denote big movement in price over a small period of time backed by heavy volumes. Generally only
institutions have the ability to do that and hence single prints become active indicators of institutional bias.

Spike
A spike is a fast movement in the last 30- 45 minutes of the day where the market moves fast from known
reference points it has auctioned at during the day.Since value is not created the move cannot be accepted or
rejected, hence the next days movement can only clear if it is a fake move or a genuine one.
If the spike is lower, then if the next day a move below spike low will invite additional selling. On the other hand
a failure to take out the spike low will invite a move in the range of the entire spike.The same principle works in
the opposite direction if the spike is higher.

Structure
The structure of the market refers to the distribution of the day to see if there are clues in how volume was
transacted during the day. It can also have the same meaning on a larger context when we combine several
auctions from different days.

The idea is to look for areas and visualize the market as rotating, accepting or rejecting certain price points.A
structure gives us an idea of the quality and strength of the market and its ability to withstand
pressure.Common things to look at whilst evaluating structure are poor highs and lows, POCs, Low volume and
High volume zones etc.

Timeframes
The market profile recognizes five distinct types of individuals who operate in the markets. These are a) Scalper,
b) Day trader, c) Short term player, d) Intermediate term player, e) Long term player. Each of these individuals
have a perception which they bring to the market and this perception helps move the markets. The scalper and
the day trader are responsible for maintaining the liquidity of the markets.

TPO
The basic building blocks of the Market Profile are called Time Price Opportunities, or TPOs. Each half hour of
the trading day is designated by a letter. When a certain price is traded during a given half hour period, the
corresponding letter or TPO is recorded next to the price.

Value
The perception which all of the above mentioned players bring to the markets after the bid-ask process helps
build what we call value. Value is different for each of the mentioned players and they will move price up or
down depending on this perception. For example if the intermediate term seller thinks that the market is
overpriced he will jump in to move price down.On a daily timeframe, the period where 70 % of the volume action
takes place is defined as the value area.Similarly we have a weekly and a monthly value area.