Key Price Levels (KPL)
Client can now work with the key levels as based on the Auction theory which will allow you to find many relevant key price levels. We focus on three particular ones:
- the level of the equilibrium of a session (mark 4 here below)
- the Value Zone of a market (between mark 5 & 6)
- the Initial Balance (between 8h and 9h on Future CAC40) between mark 2 & 3
The image above shows an uncompressed view (parameter C = 1) as well as a compressed view (parameter C = 0), which is the usual form of this type of price representation. The uncompressed version is shown to better understand how the compressed version is being derived.
Every column represents a time lapse of 30 minutes and the height of a "letter" measures 1 tick.
Each letter therefore constitutes an OTP (Opportunité Temps Prix), or in other words, the opportunity to trade at a given price level (vertical axis) during a given period of time (horizontal axis). This is called a 2-dimensional representation of both time and price.
To derive the compressed form, all OTP values are horizontally relocated from right to left and stacked to form a Gaussian style distribution.
The different parameters of the Key Price Levels window:
1 - Open: Open price of the future
2 - IB Low: Lower band of the Initial Balance (1st hour of trading)
3 - IB High: Higher band of the Initial Balance (1st hour of trading)
4 - Equilibrium: the most dense accumulation of OTPs
5 - VA Low: Lower band of the Value Zone (70% of the OTPs)
6 - VA High: Higher band of the Value Zone (70% of the OTPs)
7 - Close: Close price of the Future
A - width of an OTP (Opportunité Temps Prix) = 1 * 30 minutes
B - duration of the profile one quote session of the Future contract
C - value = 0 for a compressed and a value = 1 for a non compressed representation
D - size of the VZ (Value Zone): 70%
E - period of the IB (Initial Balance or first hour of trading): 2 * 30 minutes
When the vertical scale is tightened, the letters are replaced by colors: