The Profile Setup

Market Profile normal distribution is a balanced distribution showing a 'D' shape. When the distribution becomes skewed so the large area is toward the bottom or top; it is not normal and usually they are referred to as imbalanced distributions and their tails are considered extensions. It is the first directional piece of information we get from the profile.

As the profile develops throughout the trading session, volume will start to develop in one half of the distribution. This movement towards one side of the market be it volume or time is called Skewness.

The way to compute skewness is to draw a line half way through the distribution. More volume in the top half of the distribution yields a “p” shape, which favors higher prices. More volume in the bottom half of the distribution forms a “b” shape, which favors lower prices. This skewness is the final information to complete direction idea.

If you get the direction right, while more analysis can lead to better trade location, the majority of the profits come from getting the right direction, not from picking up few ticks from poor location. When the direction is not clear, one trick profile traders use is to combine the previous daily distribution to see if it shows a “p”, “b” or “D” shape.