Pioneer Range and Range Extension in Market Profile

The pioneer range is a term that was identified by Steidlmayer, and it is defined as the range of TPOs that print for the first time when a price is hit in a session. It is important for a trader to observe market behavior during a pioneer range, to study and analyze the market’s response as prices explore new territory. It helps to see whether the market is accepting these new price levels or if in fact, the market is rejecting them.

We should recognize that the first or opening range for any day session is a pioneer range. This is why we have given the initial balance such a special significance. It always gives us an early idea about market sentiment.

Range Extensions

Range extensions or expansions are price movements that extend beyond the initial balance or beyond a specified period of activity on the chart. A range extension or expansion below the initial balance can be observed in below image. As the market auctions, a price range can be extended up or down. A range extension can often provide us with some insights into the potential direction of the market. Prices extended to the upside may be an indication of bullish sentiment in the market. If prices move to the downside and continue to extend lower, this may signal a bearish sentiment in the market.

Pioneer Range

As the market auction process moves from one period to the next, there are several possible outcomes for the price range of each new period. First of all, the new period range may simply be contained within the range of the prior period. In this case, the market is consolidating in an identified value area. The range of traded prices may also move higher in the new period, thus extending the range of the prior period to the upside. An extension to the upside signals that buyers are in control.
On the other hand, the price range may also extend lower than the prior period’s low, dropping the range. This indicates that the sellers are in control during the new period. It is also possible for the price range to extend both above and below the prior period’s range. When this type of price range extension occurs above and below the prior period’s range, this is an indication of volatility and uncertainty in the market about possible future direction. On the other hand, if we do not get any range extensions above or below the prior period’s range, the market is signaling that it is not ready to move away from the current price range. This may simply mean that the market is resting before continuing in the direction of the existing trend, or it may, in fact, signal a possible transitional period in the market prior to a change. These various types of possible range extensions are visually illustrated in the next article.

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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