Markets in Profile

JAMES F. DALTON has been a pioneer in the popularization of the Market Profile, a unique method of identifying trading/investment opportunities. Most recently, Mr. Dalton was director of research for managed accounts at UBS Financial Services. He began his career in the investment industry as a broker with Merrill Lynch and Shearson Lehman. ROBERT BEVAN DALTON is a freelance writer and creative director for a variety of agencies, organizations, and nonprofits in the great northwest.ERIC T. JONES has observed markets and investors throughout his twenty-three years of developing investment products and leading investment manager research teams.

• Preface xiAcknowledgments xixChapter 1 The Only Constant 1The Creation of ERISA 4The Rise and Fall of Relative Performance 4The Fall of the Great Bull 6The Rise of Absolute Return 7Succeeding in an Absolute Return Market Environment 8Pure, Unbaised Information 10People Change Markets, Markets Change People 13Chapter 2 Information 15Fundamental Information 16Rational or Irrational? 18Market-Generated Information 19The Auctions 20Fair Value 21Market Profile Fundamentals 22Authors’ Note 22Demystifying Market Behavior 27Chapter 3 Timeframes 29Breaking Down Market Timeframes 31Scalper 32Day Trader 32Short-Term Traders 32Intermediate Traders/Investors 33Long-Term Investors 35Your Timeframe Is your Strategy Cornerstone 39Chapter 4 Auctions and Indicators 41The Search for Value 42Concept Review 45Key Market-Generated Indicators 48Perfecting the Art of Visualization 56Chapter 5 Long-Term Auctions 59Auctions in Action 60The Compound-Auction Process 61The EBB and Flow of Balance 62Where Do Trends End and Brackets Begin? 64Clarity in the Maelstrom 66The Big Picture 68Asymmetric Opportunities and Risk 72Long-Term Strategy Development 74Assembling the Big Picture: Context within Context 75Chapter 6 Intermediate-Term Auctions 77Convergence and the Bracketing Process 77Defining the Intermediate Term 79The Transition from Bracket to Trends 80The Transition from Trend to Bracket 82The Convergence of Intellect and Emotion 85Accelerate the Learning Process 86Prelude to a Sea Change 87Hear the Bells A-Ringing 94Countertrend Auctions 94The Quest to Do Better than ‘‘Normal’’ 96Oh, the Difference a Few Points Makes 97Chapter 7 Short-Term Trading 99Analyzing Short-Term Markets 101Common Mind Traps 104When and Where to Look for Short-Term Trades 105Opportunities Around Intermediate-Term Brackets 106Technical Indicators 106Your Own Worst Enemy: Your Brain 110Seeking the ‘‘Exceptionally Tasty Patterns’’ 112All Prices and Opportunities Are Not Equal 116Ongoing Forensic Investigation 121Looking for the All-Important Reference Points 124Never Be a Laggard 129A Golden Opportunity 130Fade the Extremes, Go with Breakouts 132‘‘The Expert Reasons Contextually’’ 137Chapter 8 Day Trading Is for Everyone 141What’s a Day Trader to Do? 142What You Don’t Do May Be More Important than What You Do 145The Real World in Action 146Top Down 152Lack of Conviction 152Flight to Safety 153Inventory Imbalances 154Correction of Inventory Imbalances 155Trend Traders’ Trap 157Market Condition 158Yesterday’s Trade 162Example 1 162Example 2 165Example 3 167Trader Checklist 170The Market Is Open 171Open-Drive 171Open-Test-Drive 175Open-Rejection-Reverse 178Open-Auction 181Day Trader’s Checklist 181Example 1 183Example 2 185Example 3 188Practice, Practice, Practice 190Chapter 9 Profiting from Market-Generated Information 193Timeframe Diversification 194The New Paradigm 196Appendix A: Market Update 199About the Authors 201Index 203