Price vs Value

As said earlier, both price & value are different things for JD. For him, ‘In any auction, Price is simply an advertising mechanism for opportunity, Time regulates those opportunities & Volume measures the degree of success of any auction’. Both price & value are different things for JD. For him, Price includes all price ranges available throughout the day at which any asset or instrument was traded; while Value means only those prices which facilitated maximum volumes of trade. Here, he uses basics from statistics esp. normal distribution curve to filter in those prices which makes Value.

Thus, for him, ‘all prices are not equal’- some prices are below value, while some are above value; it also means not all traders are equal- some traders act on opportune or advantageous prices, while some other acts on disadvantageous prices! A trader buying at a price below value has advantage over the one buying above value; similarly, a trader selling at a price above value has advantage over the one selling below value. Also different traders have different time horizons for their trades, hence their perceptions of value will also defer.

But how to evaluate Value on continuous basis while trading? This is where Peter Steidlmayer’s approach called Market profile, which was adopted & popularized by JD comes into play. It is kind of a way to present price data in the form of graphic, and this graphic is used to analyze market.