TPO - Part 1: Introduction
Time Price Opportunity (referred to as TPO) is also known as Market Profile Charts in legacy markets.
Back when traders were in the pit, time was broken down into half-hour time frames known as a bracket.
Each half-hour bracket was identified with a certain letter.
Traders on the floor had a trading card, on which they would have to write down the letter of brackets they had traded in.
Each letter was specific to a half-hour bracket, and these letters became the building blocks for TPO Charts.
TPO - Part 1: Introduction
Time Price Opportunity (referred to as TPO) is also known as Market Profile Charts in legacy markets.
Back when traders were in the pit, time was broken down into half-hour time frames known as a bracket.
Each half-hour bracket was identified with a certain letter.
Traders on the floor had a trading card, on which they would have to write down the letter of brackets they had traded in.
Each letter was specific to a half-hour bracket, and these letters became the building blocks for TPO Charts.
Now, these letters represent a 30-minute candle.
For example, The letter "A" might represent the first 30 minutes of a trading session, the letter "B" could represent the next 30 minutes, and so on.
TPO reveals three things:
1. The price action.
2. The most significant price levels (Volume).
3. The window of time that this occurs.
Using TPO you will be looking at Time, Price, and Volume together, to identify the value of price levels within a given range and newly formed ranges.
★ IMPORTANT NOTE: TPO is NOT a trading strategy. This is a method to organise data on a chart to enhance your trading strategy.
For those that have not completed the Footprint Chart modules, it is necessary to complete those lessons first in order to understand the core principles of TPO.
Key Points of the Lesson
UTILITY
A unique way of organizing market data.
Useful to determine the difference between time, price and volume.
Useful for scalp, day and swing trading.
IMPLEMENTATION
Specialized software is needed such as Exocharts or Atas.
Recommended using the 30-minute time frame and Tick Size 50.
Analyze time, price and volume together ⇒ Will help you make an informed trading decision.
BACKGROUND
Each letter represents a 30-minute candle (column)
A total of 48 letters are used:
Capital A to X: cover the first 12 hours of the day.
Lowercase a to x: cover the last 12 hours of the day.
TPO chart shows Value Areas and POC, both time and volume based.
PRACTICAL EXAMPLE
Large discrepancies between volume POC and time POC can give a heads up to possible future market movements.
AUCTIONING AND RANGING
Market move from range to range, switching between balance and imbalance
“fair value” in the range (balance):
⇒ Sellers at the highs, and lack of aggressive buyers.
⇒ Buyers at the lows, and lack of aggressive sellers.
Range breaks with an increase in volume ⇒ imbalance.
The market will auction higher/lower until the price is considered
“overvalued”/”undervalued”⇒ New trading range is created.
Market participants will attempt to buy/sell at what is perceived to be good value.
TIPS & TRICKS
It is key to see acceptance between time, volume and price.
TPO chart helps to trade in a defined range and recognize when price is breaking balance.
A lot of time spent at a level without volume is considered weak ⇒ no acceptance.
TAKE HOME MESSAGE
30-Minute intervals and letters.
Decipher balance and imbalance.
Use time, price and volume to make an informed trading decision.