Market Profile
within a specified duration. By representing price in this manner, we can easily
observe its activity across various price levels, identifying the areas of balance be-
tween price and value simply by the degree and shape of the resulting distribution.
See Figure 17.4. Note that the vertical axis tracks the direction of price, whereas
the horizontal axis tracks the frequency of price activity at each price level. This
cannot be easily observed on conventional bar or candlestick charting since they
do not provide a clear graphic record of price frequency distribution.
So, how can we devise a chart that will enable us to see this distribution of price
activity and hence identify areas of potential balance between price and value?
We can do this easily if we first record price activity over a specified period
and subsequently collapse each separate segment of price activity into a composite
profile of its price activity as time elapses. See Figure 17.5.
Referring to Figure 17.5, let us denote price movements within each half‐hour
period by a letter. Let us assign each successive half‐hour period the letters A, B, C,figure 17.2 Frequency Distribution of IQ Test Scores Approximating a Bell‐Shaped
Curve.figure 17.3 Frequency Distribution of IQ Test Scores Displayed Sideways.