Market Profile Charts reveals how the Profile Graphic is formed. It gives us a way of looking at the complete picture instead of parts of information in isolation.

How Market Profile Charts (MP) look?

Market Profile is a way of organising data. Here the traditional bars and candlesticks are replaced by letters. The most common market profile structure is to use one letter for each 30 min bar. So once you replace the bars with letters it looks like below.

What Do The Letters in a Market Profile Charts Mean?

The letters are used in Market Profile Charts serve a special purpose of making all the bars look like each other.

Because of that when we collapse the profile we get the familiar bell shape. This bell shape comes from the traditional Normal Distribution Curve. And a few of the rules of statistics applies to these Market Profile Charts.

Comparing the bell curve and profile graphic tells us that as we move away from the central value or mean or mode, whatever we call it, the readings start to reduce. The maximum readings are seen around the centre, and that is where we get the idea of Fair Price, a price where maximum time periods traded.

We call this fairest price as Point Of Control (POC).

The first standard deviation covers roughly 68-70% readings in a Normal Distribution Curve. We use it as a Value Area on a Market Profile chart. The upper limit is Value Area High (VAH) and the lower limit is Value Area Low (VAL). These 3 levels POC-VAH-VAL form important references going into next days trade.