GBPJPY USDJPY EURJPY {image} {image} {image}
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Auction Market Theory and Market Profile
- #24,061
- Dec 7, 2023 10:48pm Dec 7, 2023 10:48pm
- Joined May 2018 | Status: Tadpole | 2,719 Posts
!!! - #24,062
- Dec 8, 2023 6:16am Dec 8, 2023 6:16am
- Joined Jan 2018 | Status: Trader | 17,298 Posts
{quote} you should be in bed sleeping
you're right, my friend.
I couldn't miss out on that, so it's the weekend.
best wishes to your family and to your dog and cat
Wow, what a week for USDJPY! Thursday's price action saw the spot price of USDJPY, fall over 500 pips! Some even naming the event a 'flash crash':
https://www.forexfactory.com/news/12...py-flash-crash Hindsight name calling aside, we know that Thursday's repricing, was extremely significant to the whole market!
That being said, on the same day the 'crash' occurred, price also stabilized itself, before starting a new successful auction upwards. In one day we saw the sum total of the interaction between all market participants across many, many different price levels. This makes it possible to get a deep understanding of the markets intentions, at many different price levels, in just one daily market profile!
Knowing this, lets analyse Thursday's market and volume profile to see if there's any clues and/or potential high probability setups.
While price is engulfed by Thursday's huge range, we can use it to guide our future trades, especially when price is inside the value area. This gives us the knowledge that the market is balanced (in equilibrium), finally, and we should proceed with a responsive activity mindset. The area of excess is a prime area for fast, aggressive and volatile stop hunts/wicks. The value area highs/lows (VAH/VAL) coincide with price action support/resistance:
We see price rotating around the fairest price (P.O.C), coming close to VAH/VAL'S before reversing. This is responsive activity - mean reversion activity. It is therefore logical to continue to anticipate this type of activity going forward, to be then confirmed via order flow and price action! Here's a look at JPY futures volume profile (Thursday 7th - Friday 8th) with significant areas highlighted (remember the chart is inverted):
There are several untested high volume clusters at the start of the pump/crash these could turn out to be important S/R zones. The areas where there are a confluence of levels from both market and volume profiles as well as price action support/resistance are very significant, you then have yourself a strong trading level!
https://www.forexfactory.com/news/12...py-flash-crash Hindsight name calling aside, we know that Thursday's repricing, was extremely significant to the whole market!
That being said, on the same day the 'crash' occurred, price also stabilized itself, before starting a new successful auction upwards. In one day we saw the sum total of the interaction between all market participants across many, many different price levels. This makes it possible to get a deep understanding of the markets intentions, at many different price levels, in just one daily market profile!
Knowing this, lets analyse Thursday's market and volume profile to see if there's any clues and/or potential high probability setups.
While price is engulfed by Thursday's huge range, we can use it to guide our future trades, especially when price is inside the value area. This gives us the knowledge that the market is balanced (in equilibrium), finally, and we should proceed with a responsive activity mindset. The area of excess is a prime area for fast, aggressive and volatile stop hunts/wicks. The value area highs/lows (VAH/VAL) coincide with price action support/resistance:
We see price rotating around the fairest price (P.O.C), coming close to VAH/VAL'S before reversing. This is responsive activity - mean reversion activity. It is therefore logical to continue to anticipate this type of activity going forward, to be then confirmed via order flow and price action! Here's a look at JPY futures volume profile (Thursday 7th - Friday 8th) with significant areas highlighted (remember the chart is inverted):
There are several untested high volume clusters at the start of the pump/crash these could turn out to be important S/R zones. The areas where there are a confluence of levels from both market and volume profiles as well as price action support/resistance are very significant, you then have yourself a strong trading level!
Seeking Fair Value
As we start a new week, although volatile, EURUSD's market profile shows us a unique view on the current situation price finds itself in. Both Thursday 7th and Friday 8th had overlapping value areas, there a reoccurring theme going on here, lets look deeper:
Friday's trading range roughly represents a 'double distribution' market profile, with excess at the very bottom. A prime area for fast, aggressive and volatile stop hunts/wicks and/or future consolidation area.
That aside, price has created an initial/opening within both Thursday's and Friday's value areas. I interpret this, according to Auction Market Theory, as a market that's balanced and as such will begin with a responsive activity mindset.
With this knowledge, the lower value area (VAL) and the higher value area (VAH) are to be seen as support and resistance respectively. If price were to become unbalanced and breakout, the inverse could be true.
Friday's volume profile confirms the double distribution market profile however, it could still be traded as a balanced 'D' distribution volume profile. There are several significant high volume clusters that can be important support/resistance zones, including the Point Of Control (orange line).
Friday's trading range roughly represents a 'double distribution' market profile, with excess at the very bottom. A prime area for fast, aggressive and volatile stop hunts/wicks and/or future consolidation area.
That aside, price has created an initial/opening within both Thursday's and Friday's value areas. I interpret this, according to Auction Market Theory, as a market that's balanced and as such will begin with a responsive activity mindset.
With this knowledge, the lower value area (VAL) and the higher value area (VAH) are to be seen as support and resistance respectively. If price were to become unbalanced and breakout, the inverse could be true.
Friday's volume profile confirms the double distribution market profile however, it could still be traded as a balanced 'D' distribution volume profile. There are several significant high volume clusters that can be important support/resistance zones, including the Point Of Control (orange line).
Seeking Fair Value
Hi Kette,
You got it, that's the one! See the overlapping/similar value areas, we opened within that area and once again are trading back inside it. If price remains within/around the value area(s) and there's no economic news/data releases to cause a sudden change in sentiment, I'll expect further responsive activity (mean reverting) for now.
Apart from that and what I posted earlier, nothing has changed for me AMT wise my friend. While today has been quiet with little volatility, I managed to have some activity on EURUSD today, see this post on my thread for a full explanation. However to sum it up, those same volume clusters I highlighted on my post here last night, came into contact with price and I took a long based on my other strategy.
Although my other strategy was not built with Auction Market Theory in mind, they are harmonious, I still (like today) ended up buying where I should (according to AMT in a balanced market), at the low of the value area. Also mean reverting in balanced markets and vice versa.
You got it, that's the one! See the overlapping/similar value areas, we opened within that area and once again are trading back inside it. If price remains within/around the value area(s) and there's no economic news/data releases to cause a sudden change in sentiment, I'll expect further responsive activity (mean reverting) for now.
Apart from that and what I posted earlier, nothing has changed for me AMT wise my friend. While today has been quiet with little volatility, I managed to have some activity on EURUSD today, see this post on my thread for a full explanation. However to sum it up, those same volume clusters I highlighted on my post here last night, came into contact with price and I took a long based on my other strategy.
Although my other strategy was not built with Auction Market Theory in mind, they are harmonious, I still (like today) ended up buying where I should (according to AMT in a balanced market), at the low of the value area. Also mean reverting in balanced markets and vice versa.
Seeking Fair Value
- #24,073
- Edited 8:36pm Dec 11, 2023 7:43pm | Edited 8:36pm
- Joined Jun 2022 | Status: Evolving | 236 Posts
Hey guys. I have been using Market and volume profile on sierra charts. I discovered it only a few months back so I'm a complete and utter novice. Right now, I am just looking for reactions off VAL and VAH areas on the daily chart. My question is: is there a way of determining directional bias somehow? I know nothing is 100% but is there something that we can look for so that I can take a trade and let it move in the intended direction? Its all about increasing the probabilities at the end of the day. Thanks
Monday's (11/12/2023) trading range created a standard bell curve 'D' distribution profile, according to Auction Market Theory, that is a balanced market.
On Tuesday price created an opening range within Monday's, balanced, value area. I interpret this as a continuation of the balanced market state (equilibrium amongst buyers and sellers) and as such will start the day with a responsive activity mindset. As I said in the previous post, this translates to taking mean reversion trades only, until a catalyst happens causing a shift in the perception of value. In that situation, I flip to look for initiative activity.
The daily volume profile of Monday confirms a balanced 'D' distribution but also gives us potentially important support/resistance zones, those being areas of high volumes (volume clusters). This allows us to create powerful trading setups using a confluence of market profile value levels, significant volumes areas, price action support/resistance and order flow
Any responsive style trades have to be covered, or at least risk adjusted, ahead of any important economic news/data releases. Todays most important events:
Seeking Fair Value
- #24,074
- Dec 12, 2023 4:52am Dec 12, 2023 4:52am
{quote} Here is my current view (AMT based) on EURUSD as we start Tuesday. Monday's (11/12/2023) trading range created a standard bell curve 'D' distribution profile Todays most important events: {image}
This is my GBPUSD sierra chart Weekly TPO (black background). Also on yesterday's daily TPO (also attached - white background) both are showing a lot of the trading volume was to the downside. We also broke yesterday's low. I know we can bounce betwee the VAL and VAH but there is usually the 'move of the day' which is in sync with the trend. Can this be determined from these charts? Is it safe to assume we're mostly bearish today on GU?
