Profile and histogram
Profile and histogram charts are used to visualize traders’ positionings.
Description
On X-axis we have the number of traders and on Y-axis we have concentration. There are two ways traders can increase their position size :
- New traders come into market
- Existing traders increase their exiting position (higher concentration and/or higher number of traders come into market)
We are mostly focusing on existing traders because it is less likely new big traders come into market in a short period of time.
Profile charts can help us to assess how much bigger a long or short position
can get and if traders are using most of their power or not (tail of the chart).
There is a line in the profile chart to show the average traders positionings based on concentration and number of traders.
The areas are quartiles to show normal positioning areas and extremes.
Each gray bubble represent a week, the darker the color the higher the price has been.
The big bright green and red bubbles are recent week and other green and red bubbles are data for previous weeks. The smaller the bubble the older the data, and we call it progressive tail.
We can use tail to study traders’ past weeks actions.
There is a line in the profile chart to show the average traders positionings based on concentration and number of traders.
The areas are quartiles to show normal positioning areas and extremes.
Each gray bubble represent a week, the darker the color the higher the price has been.
The big bright green and red bubbles are recent week and other green and red bubbles are data for previous weeks. The smaller the bubble the older the data, and we call it progressive tail.
We can use tail to study traders’ past weeks actions.
Being on tails means traders have used all their power to go long/short and trend is about to end.
Application
Profile chart signals are as follow :
- Longs on tail and shorts are in the middle of profile chart or at the beginning of the chart –> longs about to be liquidated, we have room for traders to go short and if we are on supply zone there might be good shorting opportunities.
- Shorts on tail and longs are in the middle of profile chart or at the beginning of the chart –> shorts about to be covered, we have room for traders to go long and if we are on demand zone there might be good long opportunities.
- Progressive tails gives us clue about how traders are trading. Constantly adding longs and shorts? or they are adding longs while shorts are untouched/reduced? and vice versa.
- The gray bubbles’ color can show us in what kind of positioning environment we had higher prices or lower prices.
Examples
This is the profile chart from leveraged funds in Canadian dollar.
One is for longs and shorts separately and the other one is for net OI and net number of traders.
The blue circles are the tails of the profile. Standing on those areas mean traders have used all their power going long/short (Extreme).
Canadian Dollar
Look at the Money Managers profile chart in Coffee.
We have consecutive reduction of longs and increasing of shorts which caused the price to fall down. There should be a fundamental reason behind their positioning but we don’t care! We trust them and follow them as they are market movers and the smartest traders.
Coffee
Histogram charts gives an insight about where we are standing relative to all data.
Gray areas are histogram for all data and colored areas are for the past three years.
Standard deviations are plotted as dashed lines and solid lines are the most recent week data.
We have histogram for longs, shorts and net OI, and also for the change in longs, shorts and net OI.
The following example shows the histograms of money managers in coffee market.
Coffee histogram
