[Download Now] Chicago Board of Trade – Market Profile

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A. There is a market profile. The technique of price vertical, time/ activity horizontal was created by J. Peter Steidlmayer, a trader at the Chicago Board of Trade. Steidlmayer wanted to evaluate market value as it developed. The bell shape on the charts was larger at the middle prices and smaller at the higher and lower prices. He recognized the normal gaussian distribution he had seen in college statistics.

The Market Profile graphic was introduced to the public in 1985 as a part of a CBOT product. The class of trader in the pits identified the end-of-day clearings, which included local, commercial, members filling for other members and members filling orders for the public. The Profile was proposed as a method for trading new data. The Profile/LDB was advertised as a way to improve performance. It’s the only variable-cost ticker service in the commodities industry.

The promotional material says the Profile is the link between the CBOT data and the market. The LDB data is used to find the market’s condition, while a Profile graphic is used to tell what the market is doing. The price of the peak cleared volume is identified as the Point of Control. The central seventy percent of trading activity is called the Value Area.

SECTION HEADINGS FOR “CBOT MARKET PROFILE, 1986” ARE:

• Using the CBOT Market Profile to Improve Performance
• The Profile: The link Between CBOT Data and the Market
• Part I What the Market is Doing: The Market Profile Graphic
• Part II The Condition of the Market: Liquidity Data Bank
• Appendix

The first Market Profile® course was launched in 1987 by Professor Thomas P. Drinka. Western is the premiere and only academic institution to offer such a course.

In 1991, a new and expanded 335 page CBOT Market Profile manual was released. The first five sections are devoted to profile analysis. LDB data is discussed in the last section. There is no emphasis on a Market Profile ticker product. In one Chicago Tribune article, Steidlmayer was identified as the man who knows where the market is going.

Market Logic School was started by Kevin Koy and Steidlmayer. CISCO futures became the vendor of the Liquidity Data Bank after CBOT gave up marketing it to the public. Public access to tick data increased so that profiles could be constructed in a single day. The days of pit trading were numbered. It was obvious by 1991 that the focus was on the profile technology and less on the database used to support the calculations. There was a change in emphasis on the Profile vs the LDB data.

It is not easy to find a definition of what a Market Profile is. There are many examples in both publications. The market’s price activity recorded in relation to time in a statistical bell curve is a working definition from Mind Over Markets. The time-price opportunity would be defined as an opportunity created by the market at a certain price at a certain time. For example:

101150 A A and B have the same time of 08:00 to 08:50101100 B C has the same time of 09:00 to 09:29101075 BC

A, B, C are TPO’s, as well as time, letters, and position.

SECTION HEADINGS FOR “CBOT MARKET PROFILE, 1991”

• Reading the Market Profile Graphic
• Profiles for Long Term Trends
• Perception of Value Fuels Market Activity
• Market Profile Data and the Distribution Process
• Market Profile Tools to Support Trading Decisions
• Liquidity Data Bank Volume Analysis

Volume is said to identify signs of continuation or change, but volume data, by itself, is meaningless. It is important to know what market participants are doing. There are many ‘profile readings’ shown in CBOtmP1 and CBOtmP2, which show who is trading what and what message they are sending. It is possible to see if volume is increasing to the upside or downside. The end of the day is when the LDB data is discussed. The CBOT began releasing clearings on the half hour. When compared to tick data, these clearings show a half hour delay. Reading trade facilitation with delayed data is not explained.

The Initial Balance is created at the beginning of the day. Certain chart formations, called day types, are recognized as additional information on the day’s trading continued. There are formations with names such as neutral day, non-trend day, trend day, etc. As the current, equilibrium, distribution moves out of equilibrium, the Steidlmayer Distribution begins.

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