MPD stands for Market Profile Development, which is a trading strategy used in the forex market to identify key areas of support and resistance. The MPD technique was developed by a trader named James Dalton in the 1980s, and it has since become a popular method among professional traders.
The Market Profile Development technique is based on the concept of market auction theory, which states that financial markets are similar to auctions, where buyers and sellers compete to buy or sell financial assets at the best possible price. In the forex market, this means that traders are constantly competing to buy or sell currency pairs at the best possible price.
Market Profile Development involves analyzing the market activity over a period of time to identify the areas where price has spent the most time. These areas are known as the value area and are considered to be the most important levels of support and resistance in the market.
The MPD technique involves creating a market profile chart, which is a graphical representation of the price activity over a particular period of time. The chart is divided into price levels, with the highest price level at the top and the lowest price level at the bottom.
The market profile chart is then analyzed to identify the areas where price has spent the most time. These areas are shaded in on the chart and are known as the value area. The value area is considered to be the area where most of the trading activity has taken place and is therefore the most important level of support and resistance in the market.
Traders using the MPD technique will look for price to break above or below the value area to identify potential trading opportunities. A break above the value area indicates that buyers are in control of the market, while a break below the value area indicates that sellers are in control.
Traders will also use other technical indicators to confirm their trading decisions, such as moving averages, trend lines, and momentum indicators. By combining the MPD technique with other technical indicators, traders can increase their chances of success in the forex market.
In conclusion, MPD stands for Market Profile Development, which is a trading strategy used in the forex market to identify key areas of support and resistance. The MPD technique is based on the concept of market auction theory and involves analyzing the market activity over a period of time to identify the areas where price has spent the most time. Traders using the MPD technique will look for price to break above or below the value area to identify potential trading opportunities. By combining the MPD technique with other technical indicators, traders can increase their chances of success in the forex market.
