Today, on 4th Feb 2025, our algorithm took a well-structured trade on CAMPUS stock. This strategy is purely driven by Market Profile levels and designed to capitalize on institutional activity—or the lack thereof—during the initial balance period.
How This Strategy Works
The key premise of this approach is identifying weak initial balance (IB) volume in the first hour of trading and using that insight to spot a potential reversal.
- Assessing Initial Balance Volume:
- Calculate the average daily volume of the last 10 trading sessions.
- Determine the percentage of IB volume relative to this 10-day average.
- If the IB volume is below 20%, it signals weak participation from institutions, making the price action more influenced by retail traders and small prop desks.
- Triggering the Trade:
- A bullish 5-minute candle with strong volume confirms the reversal entry.
- (Comment below if you want to know the technical definition of strong volume!)
- Setting Targets and Stop Loss:
- First target: IB Low
- Second target: VPOC levels inside IB or IB Halfback
- Stop Loss: Either the reference level where the price reversed or the day’s low, whichever is closer.
The Logic Behind This Strategy
A weak initial balance volume suggests a lack of institutional participation early in the session, leaving retail traders and smaller desks to dictate price action. When prices reach key reference levels like Previous Day Low, VPOC, Poor Low, or Swing Low, institutional players often step in with responsive buying. This influx of institutional demand drives prices back toward initial balance levels, making it a lucrative opportunity for a reversal trade.
This is just one example of how Market Profile concepts can be used to craft effective trading strategies. If you're interested in learning more about Market Profile and Order Flow, check out our website www.algoploy.com for deeper insights and real-time applications.
Got Questions?
Drop a comment below if you have any questions about this strategy or want to explore the nuances of market profile based trading further!
Disclaimer: This post is for educational purposes only. Always conduct thorough research before making trading decisions.