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Auctionmarkettheory

⚖️ Auction Market Theory📍Auction Market Theory, developed by J. Peter Steidlmayer and expanded upon by Jim Dalton in his book Mind Over Markets, explains how financial markets function as auctions where buyers and sellers interact. The theory focuses on two main objectives: facilitating trade through a two-way auction process and determining the fair value of assets. Supply and demand dynamics and price discovery play a crucial role in this process. Auction Market Theory is represented using tools like Market or Volume Profile, which utilize bell-shaped curves to identify the value area, representing 68% or 1 standard deviation from the mean. 🔷 In a balanced market , buyers and sellers agree on prices based on their perception of fair value. This leads to lower volatility and prices that remain relatively stable, resulting in a ranging market. The fair value can be recognized using the Market or Volume profile, which appears as a Gaussian bell-shaped curve. However, financial markets rarely stay in balance indefinitely. New information, whether fundamental or technical, causes markets to move away from fair value and transition into a different environment. 🔷 Imbalance refers to the opposite of balance, where there is a disagreement about fair value. In this scenario, one side of market participants becomes more aggressive, leading to a trending market. Typically, markets tend to trend only about 20% of the time and range about 80% of the time. When the market is within the value range, it is more likely to remain in balance and explore within that range. However, in the case of an imbalance, the market often drifts higher or lower until it reaches a stop, typically within a previous value area. 💥Key Takeaways: 🔸 Auction Market Theory explains how financial markets function as auctions, focusing on facilitating trade and determining fair value. 🔸 Supply and demand dynamics and price discovery are essential in the Auction Market Theory process. 🔸 Tools like Market or Volume Profile use bell-shaped curves to identify the value area, representing 68% or 1 standard deviation from the mean. 🔸 In a balanced market, buyers and sellers agree on prices based on their perception of fair value, leading to lower volatility and a ranging market. 🔸 Financial markets rarely stay in balance indefinitely, as new information causes them to move away from fair value and transition into different environments. 🔸 Imbalance occurs when there is disagreement about fair value, leading to a trending market. 🔸 Markets tend to trend about 20% of the time and range about 80% of the time. 🔸 When the market is within the value range, it is likely to remain in balance and explore within that range. 🔸 Imbalanced markets often drift higher or lower until they reach a stop, usually within a previous value area. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
2
The Steamroller Secret: Why Chasing Small Gains Could Cost YouSimply put, the current market seems to be reaching its limits and it's wise to be cautious. As the saying goes, "Never pick up nickels in front of a steamroller," we shouldn't take unnecessary risks for small profits when there's a chance for significant losses. The tools we use to analyze the market usually go through highs and lows. It appears that there might be one last upward move before the cycle heads back down. When looking at the volume profile, we see we're entering risky territory since we're now two standard deviations away from the volume point of control. This implies that the market might be reaching a level that can't be sustained for long. In short, the current market conditions seem pretty uncertain to the upside, and it's essential to consider these factors when deciding on trading actions. #cycletheory #auctiontheory #PrimeIQLabs #volumeprofileanalysis
NASDAQ:AAPLShort
by leerider
1
USDJPY ShortHi! I use Auction Market Theory to trade the markets! For me, the markets have trading too high in price as seen in that reject of 125.000. So I use concepts from James Dalton such as long liquidations, short covering rallies, and ledges to determine what the state of the market is. As of right now, USDJPY has shown rejection at 125, price is perhaps too high for most traders and as a result is trading lower. Right now, I believe price to be in a form good trade between current large buyers and sellers, but eventually that will exhaust. I anticipate that price will reach that 118.57 because that is an area where price had recently rallied from. Price will move to seek trades that allow for buyers and sellers to have enough orders between them.
Short
by DaWayofRon
3
6E1! eur/usd Setup IdeaI will be looking for opportunities for a long position. The price has returned to the value range with a fairly good volume. If it turned out that it reads the chart well, it will show one of the scenarios for a possible connection. A scenario that is quite conservative and has a relatively good risk-reward ratio. 1. Red square. I will expect sellers here. I hope that the level will be defended and the sale will be absorbed by passive traders (limit orders). How long will it take? It's hard to say. When the pressure goes away, I would like to see that the price goes down by a few / a dozen ticks, but this time without pressure or volume. Then, if the setup is to work, there should be traders with aggressive buy orders across the market. 2. Green square. This is her place where, with the above in mind, I would look for a position. What's the funniest thing about this game is that I don't care what happens. And I have absolutely no idea which way the listing of this contract will go. The price may just jump up or down. If it jumps up, good. I will be looking for the next configuration for a long position. If it jumps down, good too. After all, a short position is also a position. The most important thing in trading, in my opinion, is to have well-defined conditions for concluding a transaction and the context of this venture. Greetings.
CME:6E1!Long
by smartmany
ES1! Long but test first.I'd rather be hooked up to long positions but before that happens, scenario no. 1 is the absolute minimum for me. So far, the price is fine after the break and it would be useful to test last week's Vpoc. Ideally, the price should reach the lower limit of distribution and find buyers who will push the market higher (scenario 2). Of course, I have no idea what the future holds. These scenarios are only a form of preparation for situations that may arise. I will look for a short position in the small marked squares. Good luck!
CME_MINI:ES1!Long
by smartmany
Auction Market Theory + Supply and Demand ETHUSDI have tried to move away from indicator based trading into more fact based TA and would like to breakdown how to use this form of analysis with just candlesticks and volume. This is a larger time frame breakdown though similar patterns can be identified (though significantly more volatility prone) in smaller time frames and one can find that these principles explain moves across many markets. What's interesting with Ethereum is the similarities to precious metals. The demand has no specified cap while the supply is limited. Using supply as a constant and demand as dependent variable paired with a basic understanding of auction market theory, each move in an asset can be analyzed. I only chose ETHUSD due to the rising buzz around cryptocurrency. There are 3 main discussion points in this post They are numbered on the chart in order and the numbers will also be used to tie them to their principle. 1. Aggression: Who is currently more aggressive in the market? Buyer or sellers? Aggression in markets simply is the continued buying or selling at higher or lower prices respectively, causing rapid fluctuations. I try to mark the more significant areas of aggression as they often have more importance in the broader scheme of things. For ETHUSD, in 2021, we have seen tons of buyer aggression causing large breakouts, often followed by selling aggression after new highs are created. These types of moves can not be predicted, nor can we establish how long they will carry on, though after the fact they are of upmost importance. For reference, (1), (2), (4), (5), (6) are all areas of aggression I identified on this chart. To identify these I look for volume that is relatively higher than usual as this shows the increase of interaction between buyers and sellers. I then find the bias which is simple on a candle chart- red or green. Typically with larger aggressive moves there is a scenario that occurs referred to as imbalance. An imbalance is formed when buyers raise the bid or sellers lower the ask quickly creating larger fluctuations in prices. These imbalances are often POI's during a retrace. 2. Absorption: Absorption is when there is a large group of resting limit buy or sell orders that temporarily or fully halt selling or buying action. This information can be accessed in real time with level 2 data in the stock market though I'm not to sure how to identify them best real time in the cryptocurrency market as it is decentralized. Though absorption isn't dependent on aggression, it can easily be identified when there is an aggressive party in the market. First, the assumption must be made that prices with downward/upward momentum will continue in the same direction as long as the majority of the money in the market retains bull or bear bias. Theoretically, one must assume that as long as there is no worthy contest, prices will remain moving to infinity or 0. Second, the study of volume. If there is an obvious directional movement, volume is continuing to increase, and prices are unchanged as buy/sell pressure continues, then it is safe to assume that there is larger amount of limit orders than active/aggressive orders, in a nut shell that is all absorption is. Example- . What happens next is a competition of the buyers or sellers for the best possible prices and trends form in that direction until their position is fully formed, example-(COMP). Absorption areas are often referred to as support and resistance and in a consolidating market these areas are easy to identify. They often creating a mix of limit buyers/sellers along with "market" buyers/sellers resulting from the fact that both of these parties have identified these levels and they both are in agreement that it is a buy/sell zone . If these supports and resistances are broken (typically a result of aggression) those on the sidelines may see a chance to enter the market causing aggression/breakouts, for example- (5). 3. Supply and Demand- Supply and demand is essential for understanding any market and is arguably the biggest influence on price. When it comes to understanding demand in the form of Cryptos or any other asset it is not always easy to identify, as it is all relative. However, as stated earlier we know for a fact that the total supply in my example, ETHUSD, is always going to be capped. Demand on the other hand, is constantly going to be changing. One way demand can be inferred is fundamental analysis, technically if enough people were to say "to the moon" and the unspoken HODL agreement is maintained, price could rise forever as people continue to put money into the market. Another way to find demand is looking at historical price relative to historical volume, find areas where volume was low yet price still pushed higher. This occurs when enough are people are actively buying the asset but there is a majority of people intentionally holding the bag. This is a phenomenon known as a supply crunch and is exclusive to assets with capped supply. As these people continuously buy, the asset's price moves higher in search of absorption or where market participants may want to sell their holdings. As mentioned before, these can be found with time/price based volume studies that for simplicity sake I will refer to as "volume wells" (3A and 3B). More often than not these volume wells a result of ranging markets and come in different sizes depending on the longevity of the consolidation/accumulation period. Tying it Together- Using these three principles to breakdown markets, one can better establish an understanding of price action and envision the market as whole rather than piece by piece. Furthermore, the understanding of how buyers and seller are interacting minimizes the risk when trading. I hope this was helpful and remember, there is no right or wrong way to trade and I intend for this post to be strictly educational. Feel free to leave your thoughts or questions in the comments.
BITSTAMP:ETHUSDEducation
by crawfordpaul
1
BTC1! Intra day situation.Hi, First, a sequence that I will repeat sometimes. I have no idea what the market will do, only what I can influence is the implementation of my strategy. If the market makes certain assumptions, I emphasize if, in the marked places, I want to connect to a specific direction .. I have no convictions about the direction and no expectations. BTC is at its highs, and I think it should spend some time here before determining the direction. Definitely, if I were pro long, I wouldn't want to see the market trading in large volumes in the blue zone (somewhere around 43,000-42,000). And the more that the zone is run over. This is an area where the price has been rejected and is potentially an opportunity for long positions. Activity there could be a hint that there is no acceptance for higher prices. Good luck.
CME:BTC1!
by smartmany
6E1! AMT RULEZOf course, I have no idea what will happen. If someone claims that he knows, he is a clown and ignorant (or works for a goldman and has the volume to move the market;)) But I know what I will do if one of the scenarios comes true. The little blue squares are the markings where I would be looking for L position. If it were to specifically collapse, 1.20500 could stop the storm for a while. The previous distribution range where the price was most accepted. The stimulus is coming, so the chance for the euro is high. Good luck!
CME:6E1!Long
by smartmany
1
S&P500: where to buy?Hello Traders! 3300 - 3410 price zone is the first, where bulls might step in and show some buying interest. If this is the case, the first take profit target is around 3500 level. Follow your personal risk-management rules before opening position. ^^ Make sure you follow me for more upcoming ideas and feel free to share your opinion via comment. If you agree with my analysis support my work by hitting like.) ^^ More info: link in bio ;) Contact me if you have any questions. ^^ Risk disclaimer: This is not an investment advice and you should carefully consider whether trading is right for you in light of your particular circumstances and financial resources.
OANDA:SPX500USDLong
by GIgor_021
GBPUSD: possible swing trade scenario1,28800-1,29500 price zone might act as support, where GBP buyers can show demand in which case the first target should be around 1,31250... If the price breaks below 1,28800 the next support area will be between 1,26700-1,27800. Possible move is on the chart. ^^ Make sure you follow me for more upcoming ideas and feel free to share your opinion via comment. ^^ Risk disclaimer: This is not an investment advice and you should carefully consider whether forex trading is right for you in light of your particular circumstances and financial resources. Trading spot foreign currencies (“FX”) is not appropriate for all investors, and the risks of FX trading can be substantial.
Long
by TradeWarr_Official
Possible swing trading setup in EURUSDHello everyone! Since end of July the price is stuck between 1,16-1,20 price zone and EURUSD is trading sideways, however the trend on higher timeframe is still bullish . Recent price action indicates that there was a possible false breakdown below 1,17000 price and we might see further weakening of the greenback . 1,17400 - 1,17770 is the closest price zone, where (if we pullback from current 1,18100 level) the bulls might show another interest for buying and the demand might exceed the supply, which will support the price going north… …the main risk for continued USD weakness remains the US stimulus deal to be struck and the US Q3 earnings disappointment, which might generate strong demand for the greenback resulting EURUSD long squeeze. A possible swing trade setup is on the chart for you. // Feel free to share your opinion/position via comment and follow me for more upcoming ideas/setups + support my work by hitting like. :) For more information please check the link in my profile status... // Risk disclaimer: This is not an investment advice and you should carefully consider whether forex trading is right for you in light of your particular circumstances and financial resources. Trading spot foreign currencies (“FX”) is not appropriate for all investors, and the risks of FX trading can be substantial.
Long
by GIgor_021