1 The Story
The trader who made the auction visible
J. Peter Steidlmayer joined the Chicago Board of Trade in 1963 and traded there for decades. In the early 1980s, seeking a way to read value as it formed during the day, he organised price and time data into a bell-shaped distribution he called the Market Profile, and while on the CBOT Board of Directors (1981–83) he initiated both the Profile and the Liquidity Data Bank.1
The Market Profile was introduced to the public in 1985, and Steidlmayer taught it through the Market Logic School and books including Markets and Market Logic (1986) and Steidlmayer on Markets.2
2 The Big Idea
The market is a two-sided auction seeking value
Price advertises opportunity; the market spends most of its time trading at value.
Steidlmayer's insight was to treat every market as a continuous auction whose job is to find the price that facilitates trade — 'value.' Most of the time price hovers there; it probes the extremes to discover whether higher or lower prices attract business. The Market Profile makes that process visible.1
3 The Method
Reading the auction with the Profile
The auction seeks value
The market continuously auctions to find the price that facilitates the most trade. Read whether it's accepting or rejecting prices.
The Market Profile (TPO)
Organise the session's prices into a distribution. A wide 'value area' (~70% of trade) forms around a 'point of control' — the most-traded price.
Balance vs. imbalance
A bell-shaped profile means a balanced, two-sided range; an elongated profile means an imbalanced, trending day.
Market-generated information
Let the auction itself — not an indicator — tell you whether buyers or sellers are in control and where value is shifting.
4 Try It Today
Test the idea for yourself
A no-risk exercise
On a charting site that offers a 'volume profile' or 'market profile' (many do), pull up a session and find the widest part of the distribution — the point of control — and the value area around it. Notice how price kept returning to value and was rejected at the extremes. That's Steidlmayer's auction in action.
5 The Books & Their Big Ideas
What he wrote — and what to take from it
6 Watch & Read
Go deeper
- BOOKMarkets in Profile & Mind Over Markets (James Dalton) — the popular guides.
- CONCEPTSupport & Resistance (value & the auction)
- CONCEPTOrder Flow & Tape Reading & VWAP
- COURSEMasterclass: the "Auction Market Theory" module
§ Sources
- "Market profile," Wikipedia — en.wikipedia.org/wiki/Market_profile
- J. Peter Steidlmayer & Steven Hawkins, Steidlmayer on Markets: Trading with Market Profile.