TPO / Market Profile (Time Price Opportunity)
A short-term trading analysis that stacks letters by how long trading stayed at each price level during a day, to see where price stayed longest.
In plain terms
Slice the day into 30-minute chunks and assign one letter to each (A, B, C…). For each price traded in that 30 minutes, you mark that letter. Stack these sideways along the price axis and some prices get long rows of letters, others short. The long-row price is where trading stayed long that day.
Stacked up, it usually forms a bell shape bulging in the middle. The bulging middle is the price zone people found fair and stayed at; the short stretches above and below are prices it just passed through. The key is reading the chart by "time," not price.
What it tells you
TPO shows where price stayed longest, aiming to read which price zone market participants accepted as fair.
A zone where price stayed long is seen as sometimes acting like support/resistance later. So short-term traders use it as a reference for gauging flow.
Formula
TPO = for each fixed time unit (usually 30 min), mark one letter at each price traded in that interval, stacked sideways along the price axis a price with a long row of letters = a price where trading stayed long
What high or low means
The single row where letters stacked longest is called the POC (Point of Control), and the middle zone where about 70% of all trading gathered is called the Value Area. These two are the most-watched points in Market Profile.
Price above the Value Area is sometimes read as trading on the expensive side of the day's average, below it on the cheap side. But this is only the day's trading distribution — a different matter from judging the company's actual value.
TPO is essentially an intraday short-term trading tool drawn from minute- and hour-level data. Its very time frame differs from long-term, fundamental investing that views a company over days to years, so they should not be mixed on the same yardstick.
The "value (Value Area)" in TPO means not accounting-based company value but the price zone where trading gathered that day. The similar name makes it easy to confuse with value concepts like margin of safety or DCF, but it is an entirely different matter.
Stocklore is finance- and fundamentals-centered and does not draw TPO charts directly. This term is defined only so you can understand its meaning when you hear it on market TV or a professional trading platform.
TPO / Market Profile is an analysis created in the early 1980s by Peter Steidlmayer, a trader at the Chicago Board of Trade (CBOT). In an era when real-time charts were scarce, he hand-recorded a day's trading as 30-minute letters to draw the price distribution.
Originally a tool floor futures traders used to quickly read "what price the market sees as fair today," it is specialized from birth for intraday short-term flow. So it helps to remember it is a different flavor from long-term value-investing yardsticks like the margin of safety.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see TPO and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.