History and Development of Market Profile: Guide for Beginners

History and Development of Market Profile charts and concepts are relatively new to the investment and trading world. The idea for the profile began in the early 1980s. In an attempt to create greater transparency for off-floor traders and attract new business to the exchange, the Chicago Board of Trade (CBOT) started to make some market data and information available to the public that was never previously available off of the trading floor.

The purpose of this information ( History and Development of Market Profile ) was to allow off-floor traders to gain some insights into the activities of floor traders. At that time, Les Rosenthal was the chairman for the exchange and Peter Steidlmayer was the CBOT director who was responsible for market information.
Steidlmayer and Rosenthal were both strong advocates of a more transparent market. They worked together, searching for ways to open up the markets and attract more business to the exchange. This idea of information sharing was not embraced by everyone; there were many skeptics and foes against this information-sharing effort. Many local traders were concerned that their livelihood may be in jeopardy and felt that market data and floor information was a privilege reserved only for those traders on the floor.

On the other hand, Steidlmayer and Rosenthal were true visionaries that believed differently. They felt that openness would help to grow the markets and generate greater revenue and prosperity. They believed that the more information they disseminated, the more participants would be attracted to trading on the exchange. They understood the nature of the markets and that the new technologies being developed would create many new opportunities for future growth. However, these opportunities were contingent on the availability and accessibility of market information and data.

Using the concept of a statistical bell curve, Steidlmayer developed a new charting system to display actual trading data from the market and show the type of market activity that was taking place in every session. The seeds for the Profile were planted, and this new charting system developed by the CBOT demonstrated that as the trading data for each instrument was organized in a statistically normal distribution, the classic shape of the normal or bell curve frequently emerged.

A form of order and organization was observed for all commodity markets. The Profile chart was born and gradually started to gain the acceptance and respect of market participants. Initially, only professional traders and experienced investors utilized Profile charts. However, over the past two decades, History and Development of Market Profile charts and concepts have become accessible to everyone that is interested in learning to use them. Advances in technology, sophisticated new trading platforms, and longitudinal studies of market data now make it possible for us to scrutinize and analyze valuable market data in ways that were unimaginable in the past. As a result, the Profile has evolved to become one of the most powerful analytical tools for traders, investors, and market analysts.

Ankit Maheshwari

Ankit is an avid writer with experience of working Investment Banking domain for over 7 years. He has been tracking Indian markets for over 10 years now for educational and learning purpose.

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