Market Profile
James Dalton, in his book Mind over Markets, states that the initial balance is not
breached during the day’s trading activity. Nevertheless, it is still best to assume,
especially in today’s more volatile markets, a position whereby trading activity is
not generally expected to breach a relatively wider‐than‐normal initial balance,
but if it does, it will not be a significant extension, not more than a very small
percentage of the initial balance. See Figure 17.20 for a typical normal day.the normal variation Day
In a normal variation day, prices breach the initial balance with a range exten-
sion that may measure up to twice the range of the initial balance. The breach is
unidirectional, that is, only to one side of the initial balance. There is a stronger
trend component associated with the normal variation day, though not as strong
as that of a trend day. The longer‐term participants drive prices beyond the ini-
tial balance once they perceive a mismatch between price and future value. The
day’s action may end with some responsive buying or selling by the longer‐term
participants, shutting off all further trend‐related trading activity. Figure 17.21
illustrates an example of a normal variation day with a downside breakout of the
initial range.the trend Day
In a trend day, prices breach the initial balance swiftly with a significant range
extension created throughout the rest of the day. The initial balance experiences a
breakout only to one side of the initial balance, that is, a unidirectional breakout.
The initial balance is not as wide as that of the normal or normal variation day.
The closing price should be at or in proximity to the upper or lower extremes of the
day, depending on whether it is an uptrending or downtrending day, respectively.figure 17.20 A Normal Day.