The Market Profile Graph
The Market Profile graph was developed by Peter Steidlmayer and introduced to the public in 1985. It was intended as a tool to help off-floor traders understand the auction process that took place on the floor, and the dynamics behind it.
It was initially positioned as a predictive tool and as was subsequently proven by Don Jones, the day-to-day Market Profile graph did not have predictable qualities from one day to the next. It was also Don Jones that discovered (and proved) that what he referred to as “meta profiles” could provide a valid edge.
The early promise of Market Profile created a large amount of enthusiasm among traders who wanted to believe in something that could “predict” the next day’s price action. Variations on the theme of Market Profile being a predictive vehicle persist to this day, in spite of Steidlmayer himself pointing out the flaw in this and acknowledging those following his initial concepts “would not find them helpful”.
The above history of the evolution of Market Profile is discussed in greater detail in my first book, “Practical Trading Applications of Market Profile”.
Market Profile is a tool; it is a means to an end and not an end in itself. It’s proper and best use is to help identify Market Condition, and more specifically, where a market is development-wise from an Auction Market perspective.
Without an understanding of how markets develop following the Auction Process and why they have to develop that way, no tool can be nearly as effective as it otherwise could be.
"The evolution of the fundamentals of Market Profile has been lost on the majority of users because most of the interest was in using it to make trading decisions, rather than in understanding the market."
"141 West Jackson"