Markets in Profile

Markets in Profile explores the confluence of three disparate philosophical frameworks: the Market Profile, behavioral finance, and neuroeconomics in order to present a unified theory of how markets work. The Market Profile is an ever-evolving, multidimensional graphic that gives visual form to the market’s continuing auction process, revealing the myriad underlying dynamics that influence market activity. Behavioral finance posits that investors are driven more by emotional factors and the subjective interpretation of minutia than by “rationality” when making investment decisions. And neuroeconomics is the study of how investor psychology permeates and affects the financial markets. Mr. Dalton explicates the ways in which irrational human behavior influences the market’s natural auction process, creating frequently predictable market structure, which results in opportunities for investors to ameliorate risk. The book will improve investors ability to interpret change in markets, enabling better, more confident investment decisions.

Table of Contents

CHAPTER 1 The Only Constant

CHAPTER 2 Information

CHAPTER 3 Timeframes

CHAPTER 4 Auctions and Indicators

CHAPTER 5 Long-Term Auctions

CHAPTER 6 Intermediate-Term Auctions

CHAPTER 7 Short-Term Trading

CHAPTER 8 Day Trading Is for Everyone

CHAPTER 9 Profiting from Market-Generated Information

About the Authors

James F. Dalton

After spending several years trading and mentoring traders, Jim was asked to return to UBS Financial Services in 2001 to direct and reorganize its nonproprietary hedge fund research. This opportunity greatly expanded his exposure to many of the world’s most successful traders and their strategies. Jim then retired in August 2005 after having held the titles of manager, Hedge Fund Research, and director of research for managed accounts. He currently trades for his own account and is the lead author of Markets in Profile. His earlier book, Mind Over Markets (by the same authors), was originally published in 1990 and continues to be popular among professional traders, providing a wealth of tactical trading strategies based on the Market Profile. The book was recently translated into Chinese. Jim has been a member of both the CBOT and CBOE, and he served as executive vice president of the CBOE during its early formative years. Additional experience includes four years active duty in the Marine Corp. and several years with IBM and Merrill Lynch. From his experience, he has learned that “expert opinion” rarely pans out in the active market. He has also observed that superior trading results over the longer term are always the result of a more flexible, adaptive approach to markets. These observations set the stage for Jim’s introduction to the Market Profile, a method of arranging data that enables the visualization of evolving market

Robert B. Dalton

After a brief stint as assistant editor of a small-town Midwestern newspaper, Rob pursued a hodgepodge of endeavors, from wandering the Middle East to crafting hardwood floors in Tucson and playing at rock starin Greenwich Village. He returned to the written word in the guise of a PR hack for various fashion agencies in Manhattan before fleeing the East Coast for sunny Seattle, where he founded Jie23, a new media design firm. He is now a freelance writer living in the woods on Bainbridge Island with his wife and two young boys. When he’s not servicing clients like Microsoft, Vail, Holland America, and British Airways, he crafts the occasional poem and writes for a strange melange of start-ups, creative collaboratives, and arts and environmental nonprofits. Not to mention the occasional book on neuroeconomics.

Eric Jones began his career around markets, investing and trading while working as a foreign exchange analyst at a small commodity research and investment management firm founded by his father. It was there that he developed an appreciation for the power of quantitative trading systems. Also while there he met Jim Dalton, who introduced him to the Market Profile, the concept of market-generated information and the tremendously expanded potential of organizing data according to price, time, and volume, instead of just price alone, as was traditionally done. On and off over the years, Jim and Eric have worked together in various capacities: as partners in a futures market research and trading firm, as investment advisors to clients, as developers of new investment products and platforms, and as leaders of investment research teams. Most recently, Eric was senior vice president, director of product development and investment manager research for UBS Financial Services’ Advisory and Consulting Solutions, a unit comprised of managed account, alternative investment and fee-based brokerage products. In this role, Eric was responsible for the strategic development, integration, and market positioning of managed account and alternative investment products and platforms