1.

Core Philosophy: The Market as a Continuous

Auction
Dalton teaches that markets are ongoing auctions where buyers and sellers constantly
negotiate price. Instead of just watching price candles, Market Profile shows where the
market spends time and how volume accumulates across prices — helping you see
where value is being accepted or rejected.

●​ Price is an advertising mechanism — it signals opportunity, not direction.​

●​ Time confirms conviction — price sustained over time suggests stronger agreement.​

●​ Volume measures success or failure of those advertised opportunities.​

Goal: Understand when the market is balanced (value accepted) or imbalanced (likely to
trend).

🎯 2. Market Profile Building Blocks

To use Dalton’s method, you must become fluent with these concepts:

🟦 Value Area (VA)

●​ Range where around 70% of trading activity occurred in a session.​

●​ Serves as “fair value” — areas above or below often see rejection or rejection
attempts.​

🔵 Point of Control (POC)

●​ Price level with the most trading activity — market equilibrium for that session.​

●​ Useful anchor for assessing market acceptance of price.​

🟥 High Volume Nodes (HVN)

●​ Support/resistance zones where the market spent significant time.​

●​ Often areas where price stalls or reverses.​

🟨 Low Volume Nodes (LVN)

 ●​ Areas with low trading activity — often transition zones where price moves quickly.​

●​ Breakouts through LVNs frequently lead to continuation moves.​

🕰 Initial Balance (IB)

●​ The price range established in the first hour (commonly used for futures).​

●​ Provides early clues to market structure and possible directional bias.​

📈 3. Typical Daily Routine — Step by Step

Here’s how to structure your day if you’re applying Dalton’s Market Profile method:

✅ Step 1: Top-Down Context

1.​ Check higher timeframes (weekly, daily) first to see broader trend or range context.​

2.​ Identify key reference levels (previous high/low, composite VA levels).​

✅ Step 2: Profile the Session

1.​ Build your Market Profile with TPOs/letters (e.g., 30-min blocks).​

2.​ Mark the Initial Balance early in the session.​

3.​ Note the evolving Value Area and POC in real time.​

✅ Step 3: Identify Market Condition

Ask yourself:

●​ Balance / Equilibrium: Price moving around VA with low conviction.​

●​ Trend / Imbalance: Price expanding beyond IB on strong participation.​

Look for these clues to gauge if the session is likely to trend or remain rangebound.​

✅ Step 4: Trade Triggers Based on Context

Dalton emphasizes context and confirmation, not blind signals:

📌 If Market Is Balanced:
●​ Fade extremes: Consider counter-moves toward VA.​

●​ Use HVNs as short-term support/resistance.​

●​ Be cautious — balanced markets often stay rangebound.​

📌 If Market Shows Imbalance / Strong Auction:

●​ Enter breakouts from IB or LVNs on strong volume.​

●​ Only trade breakout direction if volume and time participation support it.​

●​ Use POC retests as potential continuation signals.​

📌 4. Execution Principles
Dalton’s strategy is less mechanical and more about reading the auction. That means:

🧠 Stay Objective – Let the Market Tell the Story

●​ Don’t force trades at arbitrary levels — look at how price and volume behave over
time.​

●​ Dalton warns that many traders fall into cognitive dissonance — seeing what they
want to see.​

🪄 Let the Trade Come to You

●​ Instead of chasing setups, wait for clear auction context — high conviction, clear
volume participation, or rejection from value areas.​

⏱ Use Time and Volume Confirmation

●​ A breakout without participation and time behind it often fails.​

●​ If price breaks but quickly retreats, you may be looking at noise, not a trend.​

📌 Inventory & Participation

Dalton judges whether markets are too “long” or “short” — another way of saying are buyers
or sellers stacked up?​
He looks at signs of volume tapering for reversal clues.

💡 5. Risk Management & Discipline

No strategy succeeds without discipline:

●​ Define risk before entry — use logical stop levels (e.g., beyond profile extremes).​

●​ Cut losers quickly — if price invalidates your context, don’t hold on.​

●​ Let winners run when the market confirms structure and participation.​

🧠 6. The Trader’s Mindset

Dalton stresses understanding yourself as much as the market:

●​ Recognize emotional capital (fear, hope) often influences price more than rational
analysis.​

●​ Practice observation routines — the market teaches you by repeating patterns over
time.​

🧩 7. Dalton’s Common Misunderstandings

It’s worth noting what Dalton doesn’t teach:

❌ He doesn’t offer a strict mechanical set of entry triggers or “black-box” signals.​

❌ Value Area alone isn’t a guaranteed pivot — focusing only on exact levels can be
❌ Market Profile isn’t a standalone system — it organizes information, not makes
misleading.​

decisions.

Instead: It gives context so you can make better probability-based decisions.

📌 Summary Checklist for Execution

Use this as your daily trading checklist:
✔ Top-down context: trend, composite value levels​
✔ Draw Initial Balance early​
✔ Mark Value Area & POC developing through the session​
✔ Determine if market is balanced or trending​
✔ Trade with context — not against it​
✔ Confirm with time, volume, and auction structure​
✔ Manage risk with defined stops and size​
✔ Observe, reflect, and learn from each session

If you want, I can provide visual examples of TPO profiles, common trading scenarios by
Dalton’s rules (like inside night, trend day, and failure pivots), and a ready-to-use Market
Profile checklist you can print and use every session. Would that help?

yes please go on

👍
Perfect — let’s go deeper and make this practical and executable, the way Dalton actually
intends it ​
I’ll break this into (A) visual intuition, (B) common Dalton day types, (C) concrete trade
scenarios, and (D) a printable execution checklist.

A. How to “Read” a Market Profile

(Mental Visuals)
Think of Market Profile as a horizontal bell curve, not a vertical chart.

1️⃣ Balanced Market (Normal / Range Day)

███
███████
███████████ ← Value Area
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What it means

●​ Market agrees on price (value is accepted)​

●​ Two-sided trade​

●​ No urgency from big players​

Dalton behavior
 ●​ Fade extremes​

●​ Expect rotation, not trends​

●​ Small targets, fast trades​

2️⃣ Imbalanced Market (Trend / Discovery)

█
██
███
████
█████
██████

What it means

●​ Market is discovering new value​

●​ One side is dominant​

●​ Urgency + initiative activity​

Dalton behavior

●​ Go with direction​

●​ Hold winners longer​

●​ Avoid fading strength​

3️⃣ Poor vs. Healthy Structure

Poor High / Poor Low

●​ Flat, single-print-less extremes​

●​ Suggests short-term traders, not strong conviction​

●​ Often revisited later​

Excess
 ●​ Long tail, single prints​

●​ Clear rejection​

●​ Stronger reference for future trades​

Dalton LOVES excess. It shows real decision-making.

B. Dalton’s Core Day Types (You must

recognize these)
Dalton doesn’t trade randomly — he first classifies the day.

1️⃣ Normal Day

●​ Initial Balance (IB) contains most of the session​

●​ Balanced profile​

How to trade

●​ Fade IB highs/lows​

●​ Target POC or mid-VA​

●​ Do NOT expect big moves​

2️⃣ Normal Variation Day

●​ IB breaks on one side​

●​ But range still somewhat controlled​

How to trade

●​ Trade in direction of IB break​

 ●​ Expect extension, not runaway trend​

●​ Trail stops conservatively​

3️⃣ Trend Day (Most Profitable)

●​ Strong IB break​

●​ No return to value​

●​ POC migrates in trend direction​

How to trade

●​ Enter pullbacks, not breakouts late​

●​ Hold partials​

●​ Avoid counter-trend trades completely​

4️⃣ Neutral Day

●​ IB breaks both sides​

●​ Volatile, emotional day​

How to trade

●​ Be selective​

●​ Often best traded late, not early​

●​ Focus on value migration​

5️⃣ Non-Trend / Rotational Day

●​ Tight range​
 ●​ Overlapping TPOs​

●​ Very slow​

How to trade

●​ Either fade extremes or don’t trade​

●​ Many professionals skip these days​

👉 Dalton insight:​
Knowing what kind of day you’re in is already half the trade.

C. High-Probability Dalton Trade

Scenarios
Now let’s talk actual execution.

Scenario 1: Open Outside Value → Rejection Trade

Context

●​ Market opens above yesterday’s value area​

●​ Price fails to attract new buyers​

●​ Returns back into value​

Trade logic

●​ Other timeframe buyers didn’t show up​

●​ Auction failed​

Execution

●​ Entry: Acceptance back inside VA​

●​ Target: POC or opposite VA edge​

 ●​ Stop: Above rejection high​

This is classic Dalton.

Scenario 2: Initial Balance Breakout (With Acceptance)

Context

●​ IB breaks​

●​ Volume increases​

●​ Price holds outside IB for time​

Trade logic

●​ Market is in discovery​

●​ Initiative traders active​

Execution

●​ Entry: Pullback to IB high/low​

●​ Target: Measured move or LVN​

●​ Stop: Back inside IB​

⚠️ Dalton rule:​
No acceptance = no trade

Scenario 3: LVN Acceleration Trade

Context

●​ Price enters a Low Volume Node​

●​ No opposition​

Trade logic

●​ Market previously rejected this zone​

 ●​ Fast movement likely​

Execution

●​ Entry: LVN break​

●​ Target: Next HVN​

●​ Stop: Back inside LVN​

These are fast, clean trades.

Scenario 4: POC Migration Continuation

Context

●​ POC moves steadily in one direction​

●​ Pullbacks are shallow​

Trade logic

●​ Value is migrating​

●​ Strong trend structure​

Execution

●​ Entry: Pullback toward developing POC​

●​ Target: Trend extension​

●​ Stop: Failure of POC migration​

D. Dalton Execution Checklist (Print

This)
🔍 Pre-Market
✔ Where is price relative to higher-timeframe value?​
✔ Is the market balanced or in discovery?​
✔ Key references marked (VAH, VAL, POC, highs/lows)?

⏱ First Hour
✔ Initial Balance defined​
✔ Observe behavior (rotation vs urgency)​
✔ No rush — Dalton is patient early

📈 During Session
✔ Is price accepted or rejected?​
✔ Is value building or migrating?​
✔ Is volume confirming direction?

🎯 Before Entry
✔ Do I know what kind of day this is?​
✔ Is this a responsive or initiative trade?​
✔ Is my stop beyond a logical auction failure?

🛑 Risk Rules
✔ One idea = one trade​
✔ If context is wrong, exit fast​
✔ Size smaller in balance, larger in trend

E. One Crucial Dalton Mindset Rule (Very

Important)
“The market does not know you are in the trade.”

Dalton teaches:

●​ You are not predicting​

●​ You are responding​

 ●​ The auction is always right​

If price does not behave as expected — get out. No arguing.

S&P 500

JAMES DALTON MARKET PROFILE —

ES EXECUTION GUIDE
1. Contract & Session Structure (ES-Specific)
Instrument
●​ ES (E-mini S&P 500 Futures)​

●​ Tick: 0.25​

●​ Highly liquid → Market Profile works extremely well​

Sessions That Matter

Dalton focuses on Regular Trading Hours (RTH):

●​ RTH: 9:30–16:00 ET​

●​ Initial Balance (IB): 9:30–10:30 ET​

⚠️ Overnight (Globex) is context, not execution.

2. What “Value” Means in ES

ES Is a Mean-Reverting Index
Most days:

●​ ES rotates around value​

 ●​ Trend days are rare but powerful​

●​ Fading works only when value is respected​

Dalton’s ES bias:

“Fade balance, follow imbalance.”

3. The ONLY Levels That Matter (ES)

Forget clutter. Mark these every day:

🔹 Higher Timeframe
✔ Prior day VAH / VAL / POC​
✔ Prior day High / Low​
✔ Composite POC (3–5 days)

🔹 Overnight (Globex)
✔ ON High / Low​
✔ Overnight POC​
✔ Is overnight balanced or directional?

These are the reference points institutions react to.

4. ES Open Types (Critical for Dalton)

1️⃣ Open In Value
Price opens inside yesterday’s value.

Expectation

●​ Rotational day​

●​ Two-sided trade​

How to trade

●​ Fade moves away from VWAP / POC​

●​ Target mid-value​
 ●​ Small size, quick exits​

2️⃣ Open Above / Below Value

Price opens outside prior value.

Now you wait.

Key question

Does price get accepted or rejected?

Rejection

●​ Quick move back into value​

●​ Poor continuation​

➡️ Fade back to POC

Acceptance

●​ Holds outside value for time​

●​ Volume increases​

➡️ Trade in direction of acceptance

This is one of Dalton’s highest-edge ES setups.

3️⃣ Open Drive (Rare, Powerful)

●​ Strong directional move from the open​

●​ No rotation​

❌
Dalton rule​

✅
Do NOT fade​
Enter pullbacks only

Most traders lose money fighting open drives.

5. Initial Balance Rules (ES)

IB = First Hour (9:30–10:30)

IB Holds

●​ Normal / non-trend day​

●​ Fade IB extremes​

IB Break + Acceptance

●​ Directional day​

●​ Expect 1.5–2x IB range​

⚠️ ES loves false IB breaks​

Acceptance = time + volume, not just price.

6. High-Probability ES Trade Setups (Dalton Style)

🔥 Setup 1: Open Outside Value → Failure (Bread & Butter)

Context

●​ ES opens above VAH​

●​ Buyers fail to push higher​

●​ Price re-enters value​

Execution

●​ Entry: Acceptance back inside VA​

●​ Target: POC​

●​ Runner: Opposite VA edge​

●​ Stop: Above failed high​

📌 This works very often in ES.

🔥 Setup 2: IB Break + Pullback (Trend Day)
Context

●​ Strong IB break​

●​ No return to IB​

Execution

●​ Entry: Pullback to IB high/low​

●​ Target: Measured move, LVN​

●​ Stop: Back inside IB​

🚫 Do NOT chase late.

🔥 Setup 3: LVN Speed Trade
Context

●​ Price enters LVN from balance​

●​ No opposing volume​

Execution

●​ Entry: LVN break​

●​ Target: Next HVN​

●​ Stop: Back into LVN​

ES moves fast through LVNs.

🔥 Setup 4: Poor High / Low Repair

Context

●​ Flat top/bottom (poor structure)​

●​ Created by short-term traders​

Execution
 ●​ Trade toward poor extreme repair​

●​ Target: Prior poor high/low​

●​ Stop: Beyond structure​

Dalton uses these as unfinished business.

7. Risk & Trade Management (ES Reality)

Position Sizing
●​ Balance day → small​

●​ Trend day → press winners​

Stops
●​ Always beyond auction failure​

●​ Not arbitrary tick stops​

Exits
●​ Scale at HVNs​

●​ Let runners go in trends​

8. ES-Specific Mistakes (Avoid These)

❌ Trading Globex levels blindly​
❌ Fading strong acceptance​
❌ Overtrading rotational days​
❌ Using Market Profile as “support/resistance only”​
❌ Ignoring time (Dalton is VERY time-aware)

9. A Real Dalton ES Thought Process (Example)

 “We opened above value, but buyers couldn’t hold VAH.​
Time above value was short, volume dried up.​
Auction failed.​
I short acceptance back into value, targeting POC.​
If we hold below VAH, I press. If not — I’m out.”

That’s Dalton thinking. Calm. Objective. No prediction.

10. Your ES Daily Playbook (Short Version)

✔ Mark prior VAH/VAL/POC​
✔ Identify open type​
✔ Define IB​
✔ Decide: balance or discovery​
✔ Trade acceptance, not price​
✔ Exit quickly if context breaks

📋 JAMES DALTON — RULES-BASED

ES CHECKLIST

🔹 A. PRE-MARKET (MANDATORY)
Do not trade if this is incomplete.

Market Context
☐ Yesterday was balanced or trending​
☐ Today opens in / above / below yesterday’s value​
☐ Composite value (3–5 days) is flat or migrating

Key References Marked

☐ Prior VAH​
☐ Prior VAL​
☐ Prior POC​
☐ Prior High / Low​
☐ Overnight High / Low​
☐ Overnight POC

⚠️ Rule:
 No levels → no trades

🔹 B. OPEN TYPE DECISION (9:30–9:45 ET)

Choose ONE. No guessing.

☐ Open In Value
●​ Expect rotation​

●​ Bias = neutral​

☐ Open Outside Value

●​ Expect test of acceptance/rejection​

☐ Open Drive
●​ Strong directional move​

●​ No rotation​

🚫 Rule:
Do not trade until open type is clear

🔹 C. INITIAL BALANCE RULES (9:30–10:30 ET)

Define IB
☐ IB High​
☐ IB Low​
☐ IB Range Size (ticks)

IB Decision Tree

☐ IB Holds

●​ Market is balanced​
 ●​ Fade extremes only​

☐ IB Break + Acceptance

●​ Market in discovery​

●​ Trade direction of break​

⚠️ Acceptance =​
✔ Price holds outside IB​
✔ Volume expands​
✔ No immediate rejection

🚫 Rule:
No acceptance = no breakout trade

🔹 D. ALLOWED TRADE SETUPS (ONLY THESE)

If it’s not here, you don’t trade it.

✅ SETUP 1: Open Outside Value → Failure

Conditions​
☐ Open outside VA​
☐ Price re-enters VA​
☐ Holds inside for time

Execution

●​ Entry: Inside VA​

●​ Target 1: POC​

●​ Target 2: Opposite VA​

●​ Stop: Above/below failed extreme​

☐ Context valid​
☐ Risk defined​
☐ Trade allowed

✅ SETUP 2: IB Break + Pullback

Conditions​
☐ IB broken​
☐ Acceptance confirmed​
☐ Pullback holds outside IB

Execution

●​ Entry: Pullback to IB level​

●​ Target: 1.5–2x IB or LVN​

●​ Stop: Back inside IB​

🚫 Rule:
Never chase late breakouts

✅ SETUP 3: LVN Acceleration

Conditions​
☐ Price enters LVN​
☐ No opposing volume​
☐ Direction aligns with context

Execution

●​ Entry: LVN break​

●​ Target: Next HVN​

●​ Stop: Back inside LVN​

☐ Fast trade only

✅ SETUP 4: Poor High / Low Repair

Conditions​
☐ Poor structure identified​
☐ No excess at extreme​
☐ Market rotating

Execution

●​ Entry: Rotation toward poor extreme​

●​ Target: Repair level​

 ●​ Stop: Beyond structure​

🔹 E. TRADE FILTERS (ALL MUST PASS)

Before clicking buy/sell:

☐ What kind of day is this?​

☐ Is this responsive or initiative?​
☐ Is value building or migrating?​
☐ Is volume confirming idea?

🚫 Rule:
If you can’t answer in 10 seconds, don’t trade

🔹 F. RISK MANAGEMENT RULES (NON-NEGOTIABLE)

Stops
☐ Stop beyond auction failure​
☐ Not based on ticks alone

Size
☐ Balance day → small size​
☐ Trend day → press winners

Max Risk
☐ Daily loss limit defined​
☐ One idea = one trade

🚫 Rule:
When context fails, exit immediately

🔹 G. TRADE MANAGEMENT
Balanced Market
☐ Scale quickly​
☐ Target HVNs​
☐ No runners
Trending Market
☐ Hold partial​
☐ Trail using structure​
☐ Do not fade trend

🔹 H. END-OF-DAY REVIEW (10 MIN)

☐ What was the day type?​
☐ Did value migrate or stay flat?​
☐ Did I follow the checklist?​
☐ What did the auction teach today?

🚫 Rule:
Judge process, not P&L

🧠 DALTON “HARD RULES” (MEMORIZE

THESE)
❌ Do not fade acceptance​
❌ Do not trade without context​
❌ Do not fight open drives​
❌ Do not overtrade balanced days
✅ Trade value, not candles​
✅ Trade time + volume, not price​
✅ Let the auction prove you right

🔑 FINAL NOTE (Important)

This checklist will:

●​ Reduce overtrading​

●​ Kill impulse entries​

●​ Make ES trading boring (in a good way)​

Dalton traders survive by not trading as much as by trading well.