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Frequency and volume distribution histogram

Image. 1. Bar charts of the price distribution by frequency and volume.

It can prove to be effective to use the common price charts in conjunction with the Frequency and volume distribution bar charts. Each unit of this chart corresponds to its own price range.

The unit height is proportional to the number of days, within which the trades at the prices of this range were made. The unit height on the bar chart of price distribution in accordance to the volumes is proportional to the summarized volume of the transactions concluded at prices from the given range. The Image 1 shows the combination of price and volume graphs with the bar chart of prices distribution according to frequency and volume.

Steidlmayer’s Market Profile

The P. Steidlmayer technique can be explained in the following way. Every 30-minute period corresponds to its own letter. When a certain price level, to which its own line on the graph corresponds, is reached within this 30-minute period, a letter is added to this line. The longest line depicts the price range that occurred most often within the trading day.

When a chart is being plotted, we should set the following parameters: a particular period of time such as half an hour, one hour, 15 minutes or 5 minutes; the interval between significant price levels; the opening, or the balance, level, and the duration of the analyzed period.

Image. 2. Market Profile.

When the price changes, more and more letters appear on the display, making a vivid picture in the bar chart. When prices follow the trend, the market profile becomes stretched.


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