pDb

Nick Lancaster

— 3 min read
The PBD Trading Strategy: A Guide to Profile Entries

The PBD Protocol: Precision Entries for Swing Trades

This tutorial simplifies the PBD Logic. It combines Market Profile structures with price action (closing prices) to identify the best times to enter a new trade or add size to a winner.

The Core Concept: Markets spend 70% of the time in "Balance" (Fair Value) and 30% of the time in "Trend" (Imbalance). The PBD logic helps you identify when the market is accelerating out of balance so you can ride the wave.

Part 1: The Three Shapes (P, B, D)

We use Volume/Market Profile to visualize who is dominating the market. We simplify complex data into three letters.

P The P-Shape (Bullish Setup)
Structure: Thin volume at the bottom, heavy volume (bulb) at the top.
Meaning: Aggressive buying (or short covering) has pushed the price up. The market is finding acceptance at higher prices.
b The b-Shape (Bearish Setup)
Structure: Heavy volume (bulb) at the bottom, thin volume at the top.
Meaning: Aggressive selling (or long liquidation) has pushed the price down. The market is finding acceptance at lower prices.
D The D-Shape (Balance/Range)
Structure: Volume is centered (looks like a Bell Curve).
Meaning: The market is in equilibrium. Buyers and sellers agree on price. This is a "choppy" or sideways market.

Part 2: The Strategy (The Breakout vs. The Fake-out)

The shape alone isn't enough. We must watch Closing Prices relative to the profile's Value Area (where 70% of the volume is).

Scenario A: The Trend Continuation (Adding Size)

This is the ideal scenario for adding to a winner or entering a breakout.

  1. The Setup: Market breaks out of a range and forms a P-Shape (for longs) or b-Shape (for shorts).
  2. The Logic: Aggressive participants are pushing price into "Unfair Value" territory.
  3. The Trigger: Wait for candles to Close outside the previous balance area.
  4. Confirmation: If price holds within the "bulb" of the P or b, the trend is accepted. This is your safe zone to enter or add size.

Scenario B: The Reversal (The Trap)

Sometimes a P-Shape forms, but it is a trap. This is equally profitable if identified.

  1. The Setup: Market pushes up aggressively, forming a P-Shape.
  2. The Failure: Price fails to hold the high ground. The candles start Closing back inside the previous range (the thin part of the profile).
  3. The Trade: This is a "Break-in." The breakout failed. The target is now the other side of the balance area (mean reversion).
Critical Rule: Do not just blindly buy a P or sell a b. You must wait for the Closing Price to confirm acceptance. If it closes back inside the previous range, the setup is invalid for trend continuation.

Part 3: Execution Summary

  • Identify the Phase: Are we in Balance (D-Shape) or Imbalance (P or b)?
  • Mark the Edge: Identify the edge of the Value Area (the breakout point).
  • Watch the Close:
    • Close Outside: Imbalance confirmed. Go with the momentum. (Trend Trade).
    • Close Inside: Rejection confirmed. Go against the breakout. (Reversion Trade).

Note: This strategy works best on futures, highly liquid stocks, and ETFs where volume data is reliable.

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