This is our Trading Glossary, here you will find some of the terms that will be used on the website; it is our trading language, and actually the trading language used by all the professional traders who apply AMT, Volume Profile, and Order Flow to support their decisions.
AMT (Auction Market Theory)
It is the basic principle of market profile and volume profile, very briefly, the market can be viewed as a continuous auction where the price is like the acutioneer who gives lower prices to attract buyers and higher prices to attract sellers. It is a pillar of our trading approach and it will be widely covered in our training material.
ASK - BID
ASK (or offer) is the quantity available on the sell side, BID is the quantity available on the purchase side, all the BID/ASK levels compose the the DOM (Depth of Market) - see below
AUCTION PROCESS (2-way)
It is the "normal" 2 way auction. The purpose of an auction is to facilitate business, and to facilitate trades in our case; the auction (the market) continuously suggests prices that go from bottom to upwards and from top to bottom to efficiently distribute quantities demanded and offered by participants of various timeframes.
It is a range of prices within which the operators have converging hypotheses especially at a price, the POC (Point of Control -see below) where the biggest quantity has been traded, the price where most of the operators agee. Until this equilibrium is maintained (balance) the POC is a magnet and as the price moves away from it to the extremes we have to judge the level of acceptance, in order to decide if putting on "reversion to the mean trades" suited for balanced markets or "go with breakout trades" suited for situation where the equilibrium is broken in search of the next converging area. Balance areas are in every time frame. When identified are often called "paradise for short term traders".
It 'a way to calculate a potential target based on the basic concept of Market Volume Profile according to which the market is constantly moving from an unbalanced to a balanced situation, then the process continues by returning to an unbalanced situation and then balanced again, and so on...
It is the state of conflict and anxiety we feel when we experience simultaneously opposing/conflicting ideas and opinion. It happens when there is an indicator or any element of market evaluation, pointing in one direction and another in the opposite one. Every day we can experience these feelings, the market rarely makes things easy and clear, what we can do to better get out of this situations is being able to objectively use the most complete MGI (Market Generated Information) and trust the numbers.
The composite profile is a profile made by the volume profile of more days put together:
CHVN/CLVN - Composite HVN e Composite LVN
They are HVN and LVN of a Composite Profile (see below for HVN and LVN)
CVD - Cumulative Volume Delta
It is the cumulative value of Delta (see below for Delta definition)
DDLVN (Double Distribution Low Volume Node)
It is the LVN (see below for LVN definition) that separate a double distribution, it is an important support/resistence level. Here below an example:
It is the difference between the volume that has been traded at ask and the volume that has been traded ad bid; the volume traded at ask (offer) is the result of aggressive buyers and the volume traded at bid is the result of aggressive sellers. A strong positive delta, in a time interval, indicates more aggressive buyers than aggressive sellers and vice versa.
It is the Depht Of Market, it is possible to see (for example in the CME stock index futures) the first 10 levels of volume in buying (Buy Limit Orders) and the first 10 levels of volume in selling (Sell Limit Orders). It is the tool utilized by all all the professional traders to insert and manage orders.
DOUBLE DISTRIBUTION DAY
It is a trading day where there have been two balance areas, that create two distinct profiles separated by DDLVN (see above)
EXCESS - FAILED AUCTION (HIGH or LOW)
It can be found in any time frame. The market is moving towards a significant maximum or minimum and is unable to find acceptance over this level to continue beyond it; at this point the market turns quickly, leaving buyers or sellers trapped and wiped out in such a sudden movement in the opposite direction . It represent the end of an auction in one direction and the beginning of another in another direction. An excess or a failed auction, represents a strong high or a strong low, a relatively safe resistance or support level for trade locaiton.
It is a graphical representation now available on various charting software; it is actually the imprint of the market, volume traded at bid and at ask, total horizontal volume, horizontal delta, with the possibility of differently highlight one or more of these elements. This is the setting we use:
HVN - HIGH VOLUME NODE
It's the price within a range where there is the higher number of contracts traded; if we consider an intraday profile, obviously the VPOC is the HVN for excellence, then if the day will develop into a double or multiple distribution day it will create more balance areas and so more HVN, even if with less volume compared to the VPOC. In a composite profile instead, you will see normally more HVN and more LVN as it represents more days put together; a composite encloses more auctions and therefore more areas of convergent views that wil results in peaks of volume traded. Generally speaking an HVN, being an area of convergence of opinions, can be considered an attractor, a magnet.
IB - INITIAL BALANCE
It's the price range made during the first hour of trading. It's an important range because gives us a good indication about the type of day that might develop. Generally speaking a very narrow IB has a higher probability of experiencing a range extension to one side or another, while a very wide IB will be more stable and will have a higher probability of containing prices.
LVN - LOW VOLUME NODE
In a daily profile or in a composite profile, LVN are prices which show the lowest level of volume and in which trades are not facilitated.; so it usually represents, at least temporarily, a rejection level for the market.
MAE (Maximum Adverse Excursion)
The Maximum Adverse Excursion: it's the maximum number of ticks the market went against us from the moment we entered the trade to its closure. The study of the MAE in your methodology is crucial to define the most optimal stop loss
MFE (Maximum Favorable Excursion)
Maximum Favorable Excursion: it's the maximum number of ticks the market went in our favor from the moment we entered the trade to its closure. The study of the MFE in your methodology is critical to be able to better define an optimal exit strategy (how to take profit).
MGI (Market Generated information)
Market Generated information are the main source from which daytraders base (or, in our opinion, shoud base) their decisions. They are represented by price, volume, order flow, technical broader context, and all relationship between all of them.
MDD (Multiple Distribution Day)
They are typical trend days when the market goes all the time in one direction, forming temporary balance areas on his way (up or down) that are regularly broken to create another temporary balance in a subsequent area. This is an example of a MDD:
It 'a VPOC of previous days that has not yet been revisited
ONL - ONH (Overnight Low - Overnight High)
They are highs and the lows that the market has made from the closing of the cash market to his opening in the next day. They are important key reference levels at the opening of the trading session.
OS - Open Swing:
It is the first leg (up or down) made by the market from the exact moment of the opening. The high and the low of this swing are often relevant levels in the course of the day, however, still of some use for making hypotheses
OAIR - OAOR - OD - ORR - OPEN TEST DRIVE (opening Types)
They are classifications of opening types used by those who employ the concepts of Market Volume Profile; they are important to make assumptions about the day; they are rather complex concepts that will be covered in depth on the training courses:
OAIR: Open Auction In Range - it is an opening within the range of the previous day, can be IV (In Value) that means within the Value Area or OV (out of Value) that means outside the Value Area
OAOR: Open Auction Out of Range - it is an opening outside the range of the previous day
OD: Open Drive - it is an opening with a significant activity from the beginning all in one direction
OTD: Open Test Drive - it's an opening with the market that goes to test an important level to be sure that there are no operators interested in that direction, then definitely go on the other side
ORR: Open Rejection Reverse - it's an opening in one direction that find a strong activity on the other side that brings back at least to the the opening level.
OTF (Other Time Frame)
Other Time Frame operators - A term commonly used by profile traders to indicate operators of longer time frame, comparing to them, with a longer time horizon. OTF operators are those who are able to decisively move the market in one direction when they are in control; that's wyit's very important to identify when they are present or where they might be.
See below Weak Low or Poor Low
ROLLOVER & EXPIRATION
In the Stock Index Future market, the expiration is the day when the majority of operators switch to the next contract month, it is normally the day before the Friday on the week before the expiration (essentially the rollover is done on the second Thursday of the expiration month)
The expiration is the day on which the delivery of the underlying is due, and then the contract terminates its existence; physical delivery takes place only on commodities; in the stock index future contracts theoretically what should be delivered is the underlying that is nothing more than a basket of equities, but this actually does never happen because the traders are careful not to get to this date with an open position on the expiring contract.The Expiration takes place on the third Friday of the month to which the contract relates.Other Future contracts traded in other exchange, follow different rules so it's better to be well informed on the Rollover and Expiration rules of the contract you trade.
RTH - Regular Trading Hours
RTH in the future markets are the hours when is open the trading of f the underlying, that means the cash, for example in the US stock index ES, NQ, YM, from 9:30 to 16:30 in New York (8: 30-15: 30 Chicago) essentially the times when Wall Street is open.
It's the time horizon of a market operator, it is common to differentiate those who operate within the day or beyond the day, we can distinguish:
HFT: v / above
Market Makers: populate the DOM, they are visible and crucial especially in illiquid markets
Scalpers: time horizon ranging from a few seconds to a maximum of few minutes
Daytraders: we can define them as long term scalpers, their trades can last from a few minutes to a few hours but still closed by the end of day
BEYOND THE DAY
Swing Traders: time horizon that goes normally from 3 to 5 days and not more
Intermediate Term Traders: time horizon ranging from weeks to a few months; they operate on the basis of fundamental and macroeconomic informations as well as MGI (Market Generated Informations)
Long term investors: time horizon of months or even years, mainly based on fundamental and macroeconomic information, they use MGI as confirmations only to optimize their entry and exits.
VPOC – Volume Point Of Control
It is the price level at which, during the day, there has been the highest number of contracts traded. The POC in Market Profile originally represented the price level at which the market had spent most of the time, it was a very good approximation of the real volume, (not available at that time) because the more time is spent at a price level the greater the volume traded there; most of the time indeed the two levels match perfectly, but given the increased market transparency and the abundant availability of software and datafeed that now calculate the "volume at price" very accurately, we prefer to utilize the real volume despite using all the very robust and valuable concepts that derive from the original Market Profile.
WEAK LOW o POOR LOW
It is the opposite of a s excess Low (see / above); the market creates a new low which is not quickly rejected, buyers are not able to take control and bring price up immediately, this will create volume on the profile right at the just formed low; there is still interest at this level, this type of low is likely to be revisited and possibly broken, at least for a few ticks, on the same session or on the next one; this is an example:
WEAK HIGH o POOR HIGH
It is the same as the concept of WEAK LOW (see above) but reversed.
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