This article is only a personal trading study note and does not constitute investment advice. Trading involves risk. Make independent judgments and take responsibility for your own decisions.

Market Profile and Time Price Opportunity, part 2, discusses the application of POC and IB.

Bitcoin TPO distribution with the densest stack of orange letters marking the Point of Control, POC, as the fair-value center

Point of Control, or POC, refers to the price area with the largest accumulated distribution inside a range. In the chart above, the orange letters stack into the tallest price band, which is the POC. In general, POC represents a reasonable-value price. You can think of it as a magnet: when price moves away from POC, there is a pull that draws price back.

BNB TPO trend keeps an untested orange horizontal POC above price, corresponding to a naked POC that remains fresh

Like many other trading concepts, POC works best when it remains fresh and untested. At that point, we call it a naked POC, or nPOC.

Price rallies sharply with consecutive long bullish candles, touches the orange nPOC above, then quickly moves away, matching strong momentum testing and then continuing

nPOC can be used as an exit point, but usually not as an entry point because behavior after entry is not easy to predict. Similar to the price action discussed in Auction Market Theory, part 3, if price touches nPOC with strong momentum, it is very likely to later move away from that price area.

Initial Balance

A 30-minute chart uses the highs and lows of the first two candles after the open to define the day's Initial Balance range

Initial Balance, or IB, is the price range of the first hour after the open. In the 30-minute chart above, the two candles after the open define that day’s IB.

After a narrow IB forms in the first hour, price expands upward outside the range, matching a small Initial Balance that is more likely to develop into a trend day

After a wider IB forms in the first hour, price repeatedly tests both sides of the range, matching a large Initial Balance that is more likely to become a range day

IB is the baseline range for TPO. When IB is small, the day may develop into a trend day. When IB is large, the day is more likely to become a ranging day.

From the perspective of bull and bear strength, when price falls below IB, bears have control of the market. Conversely, when price rises above IB, bulls have control.

How to Define Initial Balance

Because IB is defined using the first hour after the open, the time used for IB changes across markets with different opens. For cryptocurrency, the session opens at midnight London time, which is 8:00 a.m. UTC+8, so IB is counted from that hour. Foreign exchange is different. Although FX, like crypto, trades 24 hours a day, it is mainly split into three trading sessions and does not have one fixed opening time. Penchan thinks liquidity is better during the European and U.S. sessions, so using those opens as IB is more reasonable. The European, London, session opens at 7:00 a.m. London time, or 3:00 p.m. UTC+8. The U.S. session opens at 9:30 a.m. New York time, which is 9:30 p.m. UTC+8 during daylight saving time and 10:30 p.m. during standard time.

Next time, we will continue discussing TPO details and introduce them more carefully. For TPO indicators, Penchan mentioned some options that can be used on TradingView in a past post, for reference: https://www.instagram.com/p/ClBAQBqpElT/ .

FAQ

Q: What is POC?

POC, or Point of Control, is the price with the most concentrated volume or time distribution on a TPO chart. It represents the fair value recognized by the market and is often used as a support or resistance reference.

Q: What does IB mean in TPO analysis?

IB, or Initial Balance, is the price range during the first period after the open, usually the first 30 minutes or 1 hour. The size and breakout behavior of IB can hint at the day’s likely market type.