Excess in Market Profile: How to Trade Failed Auctions for Profit

Understanding Excess in Market Profile Trading

Excess in Market Profile represents one of the purest expressions of auction market theory—a failed attempt to find value at a specific price level. When properly identified and traded, excess provides 75-85% probability setups with excellent risk/reward ratios.

Why excess matters:

• Represents auction failure (market rejected that price immediately)
• Single TPO prints = minimal acceptance = strong conviction against price
• Creates powerful support/resistance with 75-85% reliability
• Professional traders build positions around excess levels
• One of the highest probability setups in Market Profile

What is Excess in Market Profile?

Excess Definition and Characteristics

An excess in Market Profile occurs when:

• Price reaches a new extreme (high or low of session)
• Single TPO print appears at that extreme (typically 1-2 letters)
• Immediate sharp reversal occurs (no acceptance)
• Price never returns to that level during the session
• Creates "tail" or "wick" in the TPO profile

Visual identification:

• Single letter "sticking out" from main profile body
• Clear gap between excess letter and next TPO cluster
• Resembles a tail or spike on the profile
• Most dramatic when totally isolated (4-5 point gap)

Two types of excess:

• Excess high: Single TPO at top, failed buying auction, creates resistance
• Excess low: Single TPO at bottom, failed selling auction, creates support

The Psychology of Excess Formation

How excess high forms:

1. Market rallying, making new highs
2. Aggressive buyers push price to new high (FOMO, momentum chasers)
3. NO buyers appear at new high (value too high)
4. Sellers overwhelm the few buyers instantly
5. Price reverses sharply, trapping the aggressive buyers
6. Excess high created—market said "TOO HIGH, REJECT"

How excess low forms:

1. Market selling off, making new lows
2. Aggressive sellers panic to new low
3. NO sellers remain at new low (value too low)
4. Buyers step in aggressively
5. Price rallies sharply, trapping the panic sellers
6. Excess low created—market said "TOO LOW, REJECT"

What makes excess so reliable:

• Market's FIRST opinion was clear: "Not here, wrong price"
• Trapped traders exist at that level (emotional memory)
• Future attempts to auction there face same resistance
• Only breaks if fundamental value changes significantly

How to Identify High-Quality Excess

Excess Quality Grading System

Grade A Excess (Best - 85% reliability):

• Single TPO letter only (perfect isolation)
• 4-5+ point gap to next TPO cluster
• Sharp reversal (20+ point move within 30 minutes)
• High volume on reversal candle
• Clean rejection (never came close to retesting)

Grade B Excess (Good - 75-80% reliability):

• 1-2 TPO letters
• 2-3 point gap to next cluster
• Moderate reversal (10-20 points)
• Clear rejection visible

Grade C Excess (Lower quality - 65-70% reliability):

• 2-3 TPO letters
• Minimal or no gap
• Weak reversal (< 10 points)
• Some acceptance at the level (multiple attempts)
• Action: Require additional confirmation before trading

Step-by-Step Excess Identification

After session close:

1. Review TPO profile visually
2. Look at session high:
   • Count TPO letters at high
   • 1-2 letters = potential excess high
   • 3+ letters = too much acceptance, not excess
3. Look at session low:
   • Count TPO letters at low
   • 1-2 letters = potential excess low
4. Verify reversal occurred:
   • Price should have moved away sharply
   • No return attempt during session
5. Measure gap to next cluster:
   • Larger gap = stronger excess
   • 4+ points ideal
6. Grade the excess (A, B, or C)
7. Mark on chart with horizontal line
8. Add to excess tracking watchlist

Complete Excess Trading Strategy

Trading Excess Highs (Resistance)

Setup requirements:

1. Grade A or B excess high identified
2. Days or weeks pass (patience critical)
3. Price rallies back toward the excess high
4. Market within 5-10 points of excess level

Entry trigger (3-way confirmation required):

1. Price: Reaches excess high (within 2-3 ticks)
2. Rejection signal: Reversal candle forms (shooting star, bearish engulfing, long upper wick)
3. Volume/delta: Increased selling pressure visible (negative delta spike, high volume)

Entry execution:

• Conservative: Enter short on close of rejection candle
• Aggressive: Enter short as price touches excess (requires experience)
• Position size: Standard to 1.5x (high probability setup)

Stop placement:

• Place stop 3-5 ticks ABOVE the excess high
• If excess breaks, auction succeeded this time—thesis wrong
• Tight stop acceptable because rejection should be immediate

Profit targets:

1. Target 1 (40%): 2x risk (if risk = 6 pts, target = 12 pts)
2. Target 2 (40%): 3x risk (target = 18 pts)
3. Target 3 (20%): POC or next major support level

Example trade:

• Excess high at ES 4580
• Entry: Short 4579 (shooting star at excess)
• Stop: 4586 (6 ticks above excess)
• Risk: 7 points
• Target 1: 4565 (14 points, 2x risk)
• Target 2: 4558 (21 points, 3x risk)
• Target 3: POC at 4550

Trading Excess Lows (Support)

Setup requirements:

1. Grade A or B excess low identified
2. Time passes (days/weeks)
3. Price declines back toward excess low
4. Market within 5-10 points

Entry trigger:

1. Price: Reaches excess low
2. Reversal: Bullish candle (hammer, bullish engulfing, long lower wick)
3. Volume/delta: Positive delta spike, buying pressure

Entry execution:

• Enter long on close of reversal candle or as price bounces
• Position size: Standard to 1.5x

Stop placement:

• 3-5 ticks BELOW the excess low
• If breaks, level failed

Profit targets:

• Same structure as excess highs (2x, 3x, then POC/resistance)

Advanced Excess Concepts

Multiple Excess at Same Level (Reinforcement)

What it means: When 2-3 sessions create excess at the same price zone

Example:

• Monday: Excess high at 4580
• Thursday: Excess high at 4582
• Next Tuesday: Excess high at 4579
• Result: 4579-4582 becomes MEGA resistance zone

How to trade:

• Treat entire zone as one massive excess
• ANY touch of zone = fade opportunity
• Reliability increases to 90%+
• Use 2x position size
• Target 3-4x risk (this WILL hold)

Excess on Weekly and Monthly Composites

Why composite excess is more powerful:

• Weekly excess = failed auction over entire week (more significant)
• Monthly excess = failed auction over entire month (extremely significant)
• Larger timeframe = more traders trapped = stronger level
• Reliability: 80-90% on weekly, 85-95% on monthly

How to identify:

1. Build weekly or monthly composite TPO profile
2. Look for single prints at composite high/low
3. Same rules: 1-2 TPOs, immediate rejection, no return
4. Mark as MAJOR support/resistance level

Trading differences:

• Wider stops (10-15 pts for weekly, 20-30 pts for monthly)
• Larger targets (40-80 pts for weekly, 80-150 pts for monthly)
• May take weeks/months to set up
• Worth the wait—these are institution-grade levels

When Excess Fails (The 15-25% Cases)

Excess breaks when:

• Fundamental value changes (major news, earnings, Fed decision)
• Strong trend overwhelms the level
• Trapped traders capitulate (give up defending)

What happens after excess breaks:

• Often explosive move in break direction
• Trapped traders' stops trigger (adding fuel)
• No more resistance/support above/below
• Can run 30-50+ points quickly

How to trade excess breaks:

• If excess high breaks decisively: Go long (all resistance gone)
• If excess low breaks decisively: Go short (all support gone)
• Entry: On break + volume confirmation
• Stop: Below/above the broken excess (it's now support/resistance)
• Target: Measure from excess to POC, project that distance beyond break

Excess vs Poor Highs/Lows: What's the Difference?

Excess and poor highs/lows are related but distinct:

Concept	Excess	Poor High/Low
Definition	Failed auction at ANY extreme	Excess specifically at session high/low
Location	Can occur anywhere in range	Only at session high or low
Identification	Single TPO + rejection	Single TPO at extreme + rejection
Usage	Broader term, includes poor H/L	Specific subset of excess
Power	Varies by location	Very strong (extremes = trapped traders)

In practice:

• All poor highs/lows are excess
• Not all excess is a poor high/low
• Poor highs/lows are the BEST type of excess (highest reliability)
• Trade them the same way (fade with confirmation)

Real Excess Trading Examples

Building Your Excess Trading System

Daily Excess Tracking Routine

End of day (5 minutes):

1. Review today's TPO profile
2. Check for excess at session high (1-2 TPOs + rejection?)
3. Check for excess at session low (1-2 TPOs + rejection?)
4. Grade any excess found (A, B, or C)
5. Mark excess on chart with horizontal line
6. Add to excess watchlist spreadsheet
7. Set price alerts for existing excess levels being approached

Weekly composite review (Sunday, 15 min):

1. Build weekly composite profile
2. Identify weekly excess at composite high/low
3. Mark as PRIORITY levels (institutional grade)
4. Review entire excess watchlist
5. Archive any excess that broke (remove from active list)

Excess Watchlist Template

Track these fields:

• Date formed: When excess occurred
• Price level: Exact price (e.g., ES 4625)
• Type: Excess high or excess low
• Quality grade: A, B, or C
• Timeframe: Daily, weekly, or monthly
• Gap size: Points to next cluster (larger = better)
• Status: Active, tested & held, or broken
• Alert set: Yes/No (have you set price alert?)

Conclusion: Excess as Your Trading Edge

Excess in Market Profile represents auction market theory in its purest form. You're not trading technical indicators or patterns—you're trading the market's clear statement: "We tried that price. It failed. We rejected it."

Key takeaways:

• Excess = failed auction, shown by single TPO prints with immediate rejection
• Creates powerful support (excess low) or resistance (excess high)
• 75-85% reliability when properly identified and traded
• Quality matters: Grade A (single TPO, clean gap) = 85% reliability
• Requires patience—may take days or weeks for price to return
• Entry needs 3-way confirmation: price reaches excess + reversal candle + volume
• Tight stops possible (3-5 ticks beyond excess)
• Target 2-4x risk minimum
• Weekly/monthly excess even more powerful
• Track daily, maintain watchlist, set alerts

Implementation roadmap:

1. Week 1: Start identifying daily excess, mark on charts
2. Week 2-3: Build watchlist, grade quality, set alerts
3. Week 4: Take first excess trade (paper trade initially)
4. Month 2: Add weekly composite excess tracking
5. Month 3: Refine quality grading, increase size on Grade A setups
6. Month 4+: Add monthly composite excess (institution-level trading)

Excess is one of the most underutilized yet powerful concepts in Market Profile. While other traders chase indicators and patterns, you'll be trading the market's own memory—where it ALREADY told you the price was wrong.

That's an edge worth having.