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Guideline · 2022-06-01

Market profile spike and singles guidelines

By 2022-06-01

A spike is emotional trading, and it leaves MGI we can trade against later. How I tell acceptance from rejection after a spike higher or lower, how I trade each, and my singles rules.

Spike rulesExcessAcceptanceSingles markers

The idea

What exactly is a spike? A spike is simply an initiative price move caused by a shortage of available liquidity to match demand from opposing buy and sell orders. As a result, the market moves away from a previously established balance. When participants are less willing to execute orders in a controlled, passive way, they become price takers, typically using market orders.

This activity can only be regarded as emotional trading, and it leaves significant MGI that can be traded against later. When we see a spike on a given timescale, we're looking for one of two things: acceptance, or rejection (excess).

As a general rule, these are some good spike trading principles.

How to spot it

Spike higherAn open below an upward spike is considered excess, and a negative: the spike higher was rejected, leaving a selling tail. This can be described as an excess selling tail. An open above the spike high is considered acceptance of the positive move.

Spike lowerAn open above a downward spike is considered excess, and a positive: the spike was rejected, leaving a buying tail. An open below the spike is considered acceptance of the negative move.

On the day: Spike higher: buying tails, spike base and multiple singles markers.

How to trade it

Spike higher, rejectedAn upward spike that creates excess can be used to sell into the market, with stops at the highs of the spike or the spike base.

Spike higher, acceptedLong positions can be entered. The lows of the spike base serve as the stop loss.

Spike lower, rejectedA downward spike that creates excess can be used to buy into the market, with stops at the lows of the spike or the spike base. This can be described as a buying tail.

Spike lower, acceptedShort positions can be entered. The highs of the spike base serve as the stop loss.

On the day: Spike lower: selling tail, spike base at 4156, singles marker 4141.5.

Singles markers

Singles markers and single prints on our profile charts work on the same logic, but they occur within the profile. They're excellent visuals for gauging support and resistance, because a breach of their integrity singles out an opposing force's willingness to reverse previous actions.

Singles markers can be a good way of defining a distribution. As a rule, on a smaller scale, I treat each mini distribution as a separate entity, always looking to trade my general trading rules.

Singles trading rules: fade into the singles markers where an LVN has been left. It's a clear sign of rejection, and price should move away quickly. Keep stops above or below the singles marker, depending on market direction.

I hope you find this article interesting. If you'd like to learn more about trading with market profile and footprint, visit me on YouTube, where I trade live most days.

Trade well and prosper. BT

On the day: Profile distributions help to identify distribution ranges. Any singles out there? They act as an additional tool to identify the edge of distributions.

Key takeaways

TakeawayA spike is emotional trading, and it leaves significant MGI that can be traded against later. After a spike, look for one of two things: acceptance or rejection (excess).
TakeawayAn open above the spike high is acceptance: long positions can be entered, with the lows of the spike base as the stop loss. An open below an upward spike is excess: sell into it, with stops at the highs of the spike or the spike base.
TakeawayFade into the singles markers where an LVN has been left. It's a clear sign of rejection, and price should move away quickly. Keep stops beyond the singles marker.

See it in the journal

Real sessions where this happened, written up on the day.

2022-06-08Spike · Spike baseDebrief · 8 June 2022 · Sellers soak up buyers, then the eight-day balance breaks2022-06-07Spike · Spike baseDebrief · 6 June 2022 · The out-of-range open fails back into the six-day balance2022-07-12Spike · Spike baseDebrief · 11 July 2022 · Summer markets: a sluggish normal day2022-07-06Spike · Spike baseDebrief · 5 July 2022 · Charts only, as recession fears hit oil2022-07-01Spike · Spike baseDebrief · 30 June 2022 · Month end: a true gap, a choppy neutral day and a buying tail
Auction concepts · 2 of 8
  1. Market profile guidelines and trading balance
  2. Market profile spike and singles guidelines
  3. Understanding market profile day types
  4. Market profile opening types
  5. TPOs, non-excess extremes and profile ledges
  6. How to trade VWAP
  7. Gaps and how to trade them
  8. Trading an inside day, week or month

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