Basics
Balancetrader focuses on something called Auction Market Theory. Basically, this is a fancy term that was coined to describe how all dual auction markets function. Unlike most methodologies, such as technical analysis or Fibonacci, AMT uses theories to explain why a dual auction market functions the way it does. Most other methods, however, revolve heavily around mathematical relationships, which are mostly just derivatives of price. Some of you may have never thought of the financial markets as being an auction, but if you think a bit, it should make sense. The important thing to realize is that it is not a one-way auction, meaning, price can be auctioned up or down depending on where the majority of participants are bidding or offering the underlying instrument.
Market Profile Charts
I do not want to get too in-depth on this page, as there is plenty for you to dig through, whether it be the free lessons given in the newsletter, previous webinar recordings, or my blog tutorials. The important thing to recognize is that AMT is a completely different way to view the markets, and thus, using the typical bar and candle charting methods will not work. Auction theorists use something called a Market Profile with which to chart the markets. An example of such a chart can be viewed to the right of this text (please click the photo to see the fully enlarged version). It is probably a little funny to look at, especially if you have never seen one before. I can assure you, however, that once you spend a relatively small amount of time using one, you will find that it is just another way to plot market generated data and will become second nature to you in no time.
Profiling Software Solutions
In my opinion, the most functional package as well as the most cost-effective, is NinjaTrader with the Fin-Alg addon (links for each are on the right). NT is completely free for charting and the Fin-Alg plugin requires a one-time purchase fee (Balancetrader members get a slight price reduction by using a special link in the members area). If you are planning on using profiles for longer than a few months, this solution will save you TONS of money since most charting packages require a monthly subscription and this one does not. NT also supports Kinetick & Rithmic/Zen-Fire which, in my honest opinion, is the best data & trade execution feed currently available on the market. If you use these solutions for as many years as I have, you will save THOUSANDS of dollars.
There are, however, numerous other charting solutions that provide profile charting. The following are some of the ones I am more familiar with, although I admit I am not intricately familiar with them. If you have any questions on whether or not your charting package supports profiling, you will need to inquire with your software provider.
- Investor/RT
- MarketDelta
- Sierra Charts
- eSignal
- CQG
- DTN ProphetX
- TradeMaven
There are other packages that have limited profiling capabilities, such as Ensign and TradeStation, to name a few. most of them, however, are rather crude with less functionality than the ones mentioned above. These solutions will most likely prove to be difficult in the long run, although they are probably adequate in very beginning until you decide whether or not this is something you are going to continue to pursue. Please feel free to email me with any questions or concerns you may have regarding the matter and I will do my best to help in any way that I can.
