Exploring Auction Market Theory in Forex TradingAuction Market Theory (AMT) is a conceptual framework used to understand the dynamics of financial markets, viewing them as auctions where buyers and sellers interact to determine prices.
Although the AMT was initially developed to understand & analyse price action movements in the stock market, some of its core concepts can also be applied to any market, including forex.
Within the forex market, currency pairs are traded 24/5, with price driven by a multitude of factors such as economic data releases, geopolitical events, and market sentiment. Despite this complexity, AMT provides a framework for understanding market dynamics through the concepts of value, balance, and imbalances .
Value represents the equilibrium price at which buyers and sellers agree on the fair value of an asset. Market balance occurs when supply and demand are roughly equal, resulting in stable price ranges, while imbalances arise from deviations from this equilibrium due to shifts in market sentiment or unexpected events. These imbalances can create trading opportunities for astute traders who can identify them and act accordingly.
Lets now take a look into how this can be visually identified on a line chart using only price action.
Example 1
On the left, we can see an area of market balance. This is usually evident when the market is range bound as we can see in this case.
The midpoint of the range is the point of equilibrium. Value can be interpreted as the equilibrium price at which buyers and sellers agree on the fair value of a currency pair.
This equilibrium is constantly shifting as new information becomes available and market participants reassess their expectations.
When these expectations shift as a result of either economic data releases, geopolitical events, and/or market sentiment, price shifts away from the balanced price range and creates an imbalance within the market.
Identifying value areas are important because these can act as an area of future support/resistance for price. Notice how in this example, after price displaces from the balanced range, it later came back and found support near the fair value within that range.
Practical Application
One practical application of AMT in forex trading is through the analysis of price action and market profile. By observing how price behaves at different levels and how volume interacts with price movements, you can gain insights into market sentiment and potential areas of support and resistance.
For example, if a currency pair consistently fails to break above a certain resistance level despite multiple attempts, it may indicate strong selling pressure at that level, presenting an opportunity for short trades. Conversely, if a currency pair finds strong support at a particular price level, traders may look for buying opportunities as the market reverts to equilibrium.
To conclude, Auction Market Theory offers a valuable framework for understanding the dynamics of the forex market. By analysing price action, volume, and market profile through the lens of AMT, you can gain a deeper understanding of market sentiment and identify potential trading opportunities. While no theory can guarantee success in trading, incorporating Auction Market Theory into your analysis can help you make more informed trading decisions.
Please leave a comment if you've found this post helpful or if you have any questions.
Happy Trading
Auctionmarkettheory
NQ Power Range Report with FIB Ext - 1/29/2024 SessionCME_MINI:NQH2024
- PR High: 17507.50
- PR Low: 17456.25
- NZ Spread: 114.75
Evening Stats (As of 12:15 AM)
No significant calendar events
Slight dip for inventory to start week
- Holding Friday's range
- Weekend Gap: N/A
- Gap 1/26 -0.05% (open > 17579)
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 214.35
- Volume: 33K
- Open Int: 299K
- Trend Grade: Bull
- From BA ATH: -1.5% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 17700
- Mid: 16391
- Short: 15819
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
BA: Back Adjusted
BuZ/BeZ: Bull Zone / Bear Zone
NZ: Neutral Zone
NQ Power Range Report with FIB Ext - 1/4/2024 SessionCME_MINI:NQH2024
- PR High: 16563.00
- PR Low: 16543.25
- NZ Spread: 44.25
Key economic calendar events
08:15 | ADP Nonfarm Employment Change
08:30 | Initial Jobless Claims
09:45 | S&P Global Services PMI
11:00 | Crude Oil Inventories
Inventory correction continues
- Trading within prev session lows
Evening Stats (As of 12:05 AM)
- Weekend Gap: +0.09% (filled)
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 196.73
- Volume: 17K
- Open Int: 273K
- Trend Grade: Bull
- From ATH: -6.4% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 17700
- Mid: 16391
- Short: 15819
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 1/2/2024 SessionCME_MINI:NQH2024
- PR High: 17037.00
- PR Low: 17013.75
- NZ Spread: 52.0
Key economic calendar event
09:45 | S&P Global US Manufacturing PMI
Gapped up over the long weekend on low volume
- Gap filled
- Volume feels relatively low
- Ranging around Friday's close
Evening Stats (As of 12:05 AM)
- Weekend Gap: +0.09% (filled)
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 182.06
- Volume: 19K
- Open Int: 283K
- Trend Grade: Bull
- From ATH: -3.8% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 17700
- Mid: 16391
- Short: 15819
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 12/20/2023 SessionCME_MINI:NQH2024
- PR High: 17034.25
- PR Low: 17020.00
- NZ Spread: 37.75
Key economic calendar events
10:00 | CB Consumer Confidence
Existing Home Sales
10:30 | Crude Oil Inventories
Continuing to lift supply
- Trading slightly above prev session high
Evening Stats (As of 12:25 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 203.18
- Volume: 20K
- Open Int: 276K
- Trend Grade: Bull
- From ATH: -4.4% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 17700
- Mid: 16391
- Short: 15819
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 12/8/2023 SessionCME_MINI:NQZ2023
- PR High: 16028.50
- PR Low: 16016.00
- NZ Spread: 28.0
Key economic calendar events
08:30 | Average Hourly Earnings
- Nonfarm Payrolls
- Unemployment Rate
Back inside prev week range yet again
- Daily print painted as a pivot long
- Marking for a breakout above 16183 supply
Evening Stats (As of 1:55 AM)
- Weekend Gap: -0.05% (closed)
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 209.83
- Volume: 19K
- Open Int: 264K
- Trend Grade: Neutral
- From ATH: -3.2% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 16105
- Mid: 15819
- Short: 15533
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 12/6/2023 SessionCME_MINI:NQZ2023
- PR High: 15929.75
- PR Low: 15891.00
- NZ Spread: 86.75
Key economic calendar events
08:15 | ADP Nonfarm Employment
10:30 | Crude Oil Inventories
Back above last weeks inventory zone
- Wholesale marketing for longs with daily pivot
Evening Stats (As of 12:05 AM)
- Weekend Gap: -0.05% (open > 16030)
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 210.41
- Volume: 28K
- Open Int: 265K
- Trend Grade: Neutral
- From ATH: -4.8% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 11/30/2023 SessionCME_MINI:NQZ2023
- PR High: 16050.25
- PR Low: 16037.00
- NZ Spread: 29.75
Key economic events
08:30 | Core PCE Price Index (x2)
- Initial Jobless Claims
10:00 | Pending Home Sales
Another day of virtually no change
- Maintaining weekly range
- Failed breakout attempt above 16180 supply zone
Evening Stats (As of 1:55 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 200.87
- Volume: 28K
- Open Int: 280K
- Trend Grade: Neutral
- From ATH: -4.2% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 11/29/2023 SessionCME_MINI:NQZ2023
- PR High: 16057.75
- PR Low: 16040.50
- NZ Spread: 38.75
Key economic events
08:30 | GDP
10:30 | Crude Oil Inventories
Maintaining weekly range
Evening Stats (As of 12:05 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 203.10
- Volume: 27K
- Open Int: 287K
- Trend Grade: Neutral
- From ATH: -4.2% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 11/27/2023 SessionCME_MINI:NQZ2023
- PR High: 16010.00
- PR Low: 15982.75
- NZ Spread: 60.75
Key economic calendar events
08:00 | Building Permits
10:00 | New Home Sales
Still hovering above last weeks low
- Key inventory zone around 15830
Evening Stats (As of 12:25 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 216.43
- Volume: 30K
- Open Int: 278K
- Trend Grade: Neutral
- From ATH: -5.0% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 11/20/2023 SessionCME_MINI:NQZ2023
- PR High: 15903.75
- PR Low: 15848.00
- NZ Spread: 125.0
No significant economic events
- Heavy FOMC week Tue and Wed
Strong volatile open to start the week
- Wide NZ spread
- Maintaining lows from prev Thu & Fri
Evening Stats (As of 12:05 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 223.52
- Volume: 26K
- Open Int: 279K
- Trend Grade: Neutral
- From ATH: -5.4% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 11/17/2023 SessionCME_MINI:NQZ2023
- PR High: 15900.00
- PR Low: 15882.25
- NZ Spread: 39.75
Key economic calendar event
08:30 – Building Permits
Minor change from prev session
- Maintaining inventory at key level ~15832
Evening Stats (As of 1:55 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Session Open ATR: 230.04
- Volume: 22K
- Open Int: 282K
- Trend Grade: Neutral
- From ATH: -5.4% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 11/8/2023 SessionCME_MINI:NQZ2023
- PR High: 15374.75
- PR Low: 15362.75
- NZ Spread: 27.0
Key Economic Events
09:15 – Fed Chair Powell Speaks
10:30 – Crude Oil Inventories
Daily supply lift continues
Evening Stats (As of 12:25 AM)
- Weekend Gap: N/A
- Gap 10/30 +0.47% (open < 14272)
- Gap 8/2: -0.33% (open > 15807)
- Gap 7/20: -0.11% (open > 15939)
- Session Open ATR: 243.71
- Volume: 22K
- Open Int: 265K
- Trend Grade: Neutral
- From ATH: -8.5% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
NQ Power Range Report with FIB Ext - 10/27/2023 SessionCME_MINI:NQZ2023
- PR High: 14302.00
- PR Low: 14244.00
- NZ Spread: 129.25
Key Economic Event
08:30 – Core PCE Price Index
Month End
Session gap up (details below)
- First major buy response off June inventory
- Prev session gap down filled during A period
- Retrace ~50% of prev session range
Evening Stats (As of 1:25 AM)
- Weekend Gap: +0.21% (filled)
- Session Gap 10/27: +0.28% (open < 14216)
- Session Gap 8/2: -0.33% (open > 15807)
- Session Gap 7/20: -0.11% (open > 15939)
- Session Open ATR: 270.30
- Volume: 37K
- Open Int: 264K
- Trend Grade: Neutral
- From ATH: -14.7% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 15247
- Mid: 14675
- Short: 13531
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
GBP/USD Daily Analysis 13/10/2023My long position was stopped out earlier today at a 0.5% risk setting after. I still currently believe that the market will turn bullish and take out the upside liquidity so I will analyse the market over the next week and look for a potential re-entry or I will look for downside continuation if I can see the set up there. Win some and Lose some but consistency is key.
GBP/USD Daily Analysis 12/10/2023My Long position was triggered, which lined up with my analysis. Unfortunately my short position was not triggered on the way down, the gap between the market movement and my short entry was very small (Marked out by the small circle between the wick and the red line), I will have to look into my analysis and reevaluate my entry strategy/level as I missed a few pips as the short would’ve hit take profit with minimal to no drawdown. I have also set an alert for my partial profits level for my running long position which is at the lowest point in an imbalance which was created on the way down to my entry.
GBP/USD Daily Analysis 11/10/2023Unfortunately my take profit zone on my previous trade was mitigated throughout the day, however I have altered my take profit to the next liquidity point which was an imbalance a few pips above and I have also set the previous, now mitigated, take profit zone (marked by the red line) as an area for a quick short entry to take as I believe price will bounce off of this level and down to the next low to take out the downside liquidity before travelling back up to align with my original analysis.
BXY Analysis 10/10/2023As you can see with the current state of the BXY market, it is currently in and upwards trend creating higher lows consistently marked by the circles on the closes of the wicks. The red rectangle marks out the area where price was operating below my entry price on GBP/USD and as you can see the arrows show the date range that buyers and sellers were actually successfully transacting below this price as seen by the open and closed candles in this range. The total time spent with buyers and sellers transacting below this range was 8 days and 8 hours and this is the lowest it has transacted in the last 7 months. This is why I have set my stop loss around this area as I do not believe that price will transact much lower than this due to the large wicks you see which represent buyers and sellers not able to find fair value and price bouncing away instead of solid closes due to buyers and sellers being unable to find a price they are both happy to transact at.
DXY Analysis 10/10/2023This is just my brief analysis of the Dollar Index (DXY) to support my idea that the GBP/USD market will push to the downside then retrace up to the next liquidity point. As you can see the DXY is making lower highs on its way down, creating points of liquidity to be taken as it moves. I believe these points will be taken, creating a move to the upside taking out the stop losses above before coming back down.
Please note - The DXY moves inverse to the GBP/USD market.
GBP/USD Analysis 10/10/2023I have located a long position that I would like to take in the GBP/USD Market where I will target the next liquidity high point after I believe there will be a move to the downside to take out lower stop losses before the main move the upside. I have noticed points of liquidity on the British Pound Index (BXY) and the Dollar Index (DXY) that support this theory. I have set my entry off of an order block to the downside which I believe will be filled and I have placed my stop 10 pips below that and I am looking at around a 1:5 RR on this trade with 0.5% risk on my demo account.
XAU/USD Daily Analysis 10/10/2023During today’s analysis there has not been much movement in the market, however the market is creating new liquidity points by forming higher lows (where stop losses will lie below them) and higher highs, which looks like an uptrend is forming. However I will be looking for a liquidity grab into the daily demand zone over the next few days before I will look to enter a long position into the next liquidity point.
Side note - I may potentially look for short positions as the liquidity is grabbed based on market movements and/or order blocks or other confluences.
XAU/USD Daily Analysis 09/10/2023With my Daily Analysis of charts I have marked out some areas of liquidity on the XAU/USD market (e.g. a double top on the H1, a few unmitigated Asian session highs and a few unmitigated imbalances to the upside). The market appears as though it will make an upwards move over the next few days however I can see liquidity being created on the downside as the market moves upwards. Until I can see a clear entry I will continue with my analysis and wait for clear confluences and indications.
NQ Power Range Report with FIB Ext - 9/27/2023 SessionCME_MINI:NQZ2023
- PR High: 14729.75
- PR Low: 14713.00
- NZ Spread: 37.25
Major Calendar Events:
08:30 – Core Durable Goods Orders
10:30 – Crude Oil Inventories
Inventory decline below 14800
- Trading into 8/18 pivot
- Holding above prev session low
Evening Stats (As of 12:05 AM)
- Weekend Gap: N/A
- Session Gap: -0.01% (open > 14949)
- Session Gap: -0.33% (open > 15807)
- Session Gap: -0.11% (open > 15939)
- Session Open ATR: 228.03
- Volume: 26K
- Open Int: 241K
- Trend Grade: Neutral
- From ATH: -12.1% (Rounded)
Key Levels (Rounded - Think of these as ranges)
- Long: 16105
- Mid: 15247
- Short: 14675
Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
