Who this entry is for — For anyone who knows candles and indicators but lacks a framework for reading where the market accepts price and when it rejects it. Steidlmayer introduces the market as an organised auction, not as a series of isolated patterns.
Source: Steidlmayer & Koy, Markets and Market Logic (1986), chapters 1–2 and 10; Chicago Board of Trade, CBOT Market Profile®, Part I (1996), pp. 2–5. Cross-check:
raw/sources/steidlmayer/files/_extract-markets-and-market-logic.txtandraw/sources/steidlmayer/files/chapters/cbot/part-01-lettura-grafico.txt. Mind Over Markets (Dalton, 1990) is a later interpretation, not the primary source for these definitions.
Prerequisites
Trading volume, Order book. Useful: Volume Profile for comparison with Market Profile.
Who Steidlmayer is and what he changed
J. Peter Steidlmayer (b. 1938), a trader at the Chicago Board of Trade, formalised the Market Profile in the 1980s: a representation that organises each session by price and time, showing where trading concentrates. His central thesis — developed in Markets and Market Logic — is that the market is a continuous two-sided auction seeking equilibrium prices. Price is what is offered; value is what buyers and sellers agree to trade in volume. Biography: J. Peter Steidlmayer.
In plain terms — The candlestick chart says how much price rose or fell. Market Profile says which prices attracted the most participation and how long the market «lived» there.
Price vs value
| Concept | Operational definition | Visual tool |
|---|---|---|
| Price | Last traded transaction | Candlestick, line chart |
| Value | Band of prices accepted by consensus | POC, Value Area |
| Disagreement | Shift towards new prices | Imbalance, IB extension |
Steidlmayer separates two questions: «at what price is it trading now?» and «at what price has the market found agreement?» When the answers diverge — price outside the previous Value Area with no return — the auction is in imbalance towards new value. The theoretical framework is Auction Market Theory (AMT).
Market Profile as a map of the auction
Classic Market Profile plots the distribution of time at price through TPOs. A Volume Profile instead distributes volume by price: the two metrics may produce different POCs and Value Areas. Each session may therefore produce:
- a POC (Point of Control) — the price with the highest count in the stated metric;
- a Value Area — the band containing the selected share of that same metric;
- time letters (TPO) or bars showing when price visited each level.
Example — The futures contract opens inside yesterday's Value Area and rotates around the POC for three hours: auction in equilibrium, mean-reversion strategies make sense. If instead it opens above the VA and does not re-enter all morning, the auction has accepted higher prices — look for longs on pullbacks, not shorts at yesterday's POC.
Cyclepedia operational path
| # | Entry | Focus |
|---|---|---|
| 1 | This introduction | General framework |
| 2 | Two operating states | |
| 3 | Reference levels | |
| 4 | First 60 minutes | |
| 5 | Normal, Normal Variation, Trend and Neutral |
Card — Steidlmayer tradition
- Author: J. Peter Steidlmayer (CBOT, 1980s).
- Tool: Market Profile (TPO); volume as a separate dataset.
- Framework: Auction Market Theory — continuous auction.
- Analytical output: equilibrium vs imbalance, day type.
Sources
- J. Peter Steidlmayer and Kevin Koy, Markets and Market Logic, 1986, chs. 1–2 and 10 — auction, price, value, and the Market Logic framework.
- Chicago Board of Trade, CBOT Market Profile®, Part I: Reading the Market Profile Graphic, 1996, pp. 2–5 — profile construction and TPO terminology.