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Reference

The glossary

Every term the journal uses, in plain words. Market profile reads the market as an auction: price moves to find buyers and sellers, and value is where they agree.

Day types and shapes

b-shape: The mirror of a P: a thin upper part and a fat lower distribution, typical of long liquidation. It was built by longs getting out rather than new sellers, so it can lack follow-through.
D-shape: A symmetrical, bell-curve profile with the POC near the middle and activity thinning out at both extremes: a balanced day. These are the profiles where you can scalp and day-trade the edges of the value area under balance rules.
Double distribution trend day: The day starts in balance with a narrow IB, then traders drive the market aggressively one way with little counter-trade until it finds new value. The two distributions are separated by single prints with no overlap, and the close is within 25% of the extreme.
Inside day (week, month): A session whose high and low are both inside the prior session's range, and the same for a week or a month: balance. Watch the extremes; a breakout that holds on a pull-back is the safer entry, and beware of fake-outs.
Neutral day: Buyers and sellers are both active: range extension breaks both the IB high and the IB low, and the market closes in the middle of its range, back inside the IB.
Neutral extreme day: Like a neutral day, both sides of the IB are broken, but the close is at one extreme. It suggests the side that won the close is in control, and continuation is likely in the coming days.
Normal day: Despite the name, not all that common: the big players enter early and trade aggressively, setting a wide initial balance, and the market then trades sideways inside it. The IB high and IB low both hold, or are only barely extended.
Normal variation day: The IB is still fairly wide, usually about half of the day's range, and one side of it is broken. Range extension on that side typically takes the day to about twice the IB.
P-shape: A profile with a thin lower part (a buying tail or singles) and a fat upper distribution, like the letter P. It typically marks short covering rather than new buying, so the next session shows whether fresh buyers take over.
Trend day: The market perceives a significant change in value and moves one way all day with only modest pull-backs, one-time-framing as it goes. It has a large range and closes at or near the extreme, within 25% of the day's range.

Opens and gaps

Gap rules: After a true gap the market either continues (discovery mode until an opposing force slows it), reverses back into the prior balance, or consolidates into a new balance. Trade in the direction of gaps that don't fill quickly on the open: the larger the gap the smaller the odds it fills that day, most fills come in the first hour, and 50% of the gap is often a good target.
Open auction (OAOR): The market opens without momentum and rotates either side of the opening price in similar-sized swings, a temporary acceptance that inside the prior range usually leads to a balanced day. When it happens outside the prior day's range I call it an open auction out of range (OAOR).
Open drive: The market opens and drives straight one way, usually from outside the prior day's value, and never trades back through the opening price. Don't fade it: look for impulsive moves, little or no pull-back and tight stair-step consolidation, and plan for it pre-open, because it is abrupt.
Open location: Where the RTH open sits against the prior day's value and range: inside value, outside value but inside range, or outside range. Opens inside balance tend to be slower (an open auction or a test), while opens outside the range bring a faster response and matter most.
Open-rejection-reverse: The market opens and tries to continue in one direction, often from above or below the prior value area, but a strong opposing force rejects it and the auction reverses back through the open. It shows less conviction than a drive, and the rejected opening extreme becomes a reference.
Open-test-drive: Like an open drive, but first the market quickly tests a significant reference, such as the prior close or a recent high or low, then turns and drives the other way. Risk is clearly defined at the test, which makes it one of my favourite set-ups, especially when a gap to the prior close fills and fails in the first few minutes.
Settlement gap: An open away from the prior settlement or close but still inside the prior day's range. It fills far more often than a true gap; my early posts called these inside-range (IR) gaps.
True gap: An open beyond the prior day's high or low, leaving prices the market skipped: the only kind I call a gap. As Dalton says, gaps announce that something has changed, so don't fade the initial price discovery.

Volume and order flow

Absorption: Passive limit orders soaking up aggressive market orders at a level, so heavy volume trades but price does not move. If the absorbing side holds, the aggressors get frustrated and the auction reverses; if its liquidity runs out the break can be brutal, because stops sit beyond the level.
Absorption at highs: Passive sellers soaking up buying at the top of a range, so the market prints non-excess highs that look like buying pressure. In a slow-paced, balanced auction that is actually a sign of buying weakness, and a short set-up.
Delta and cumulative delta: Delta is the volume traded at the ask (aggressive buyers) minus the volume traded at the bid (aggressive sellers), in a bar or at a price; cumulative delta is its running total through the session. Watch it against price: delta moving hard one way before a level breaks is a clue.
Footprint chart: A chart that shows the volume traded at the bid and at the ask at every price inside each bar, breaking down what you see within the candle. It is my main tool for reading order flow and absorption at key levels; only reading the tape itself beats it.
High-volume aggression: My marker for a bar where one side hit the market hard: RVOL of at least 200%, a wide range, a body of at least 60% of the bar and a close at an extreme. I ring these on the charts because they show where the aggressive money came in.
Passive and aggressive orders: Passive traders rest limit orders and let the market come to them; aggressive traders are price takers who cross the spread with market orders. Aggressive orders move price, while passive orders absorb it.
RVOL (relative volume): Volume against its normal level for the same time of day, given as a percentage or a multiple (0.94x the 10-day average, for example). An RVOL of 200% means twice the usual volume for that bar or session.
Stop run: A push through a level where stops are likely to sit, such as poor highs or lows or obvious weekly extremes, that triggers them. In thin markets stops can set off a cascade of other automated stops and a sudden crash, so be careful trading near those areas.