Auction Market Theory and Market Profile

Order flow (footprint charts) is a whole other discipline than Auction Market Theory (AMT) and one I've dedicated a large chunk of my life to. You can trade off of order flow alone, although its not generally recommended.

You need to study order flow on a deep level, to understand aggressiveness in markets (how to spot it via order flow) and how it effects the price. Knowing this your trading will automatically improve, you'll see the same but individually different confirmations on each successful trade.

Without an understanding of order flow you wont understand what I'm saying however, I look for bid x ask imbalances (real market imbalances, not wannabe SMC trash), large passive (limit) orders, aggressive buyers/sellers, heavy total volumes as well as delta/cumulative delta confirmation. You will naturally be able to picture every order flow confirmation I just named when armed with an understanding of AMT and Order Flow.

There is no magic divergence indicator, we are not trading your useless retail indicators like an R.S.I for example, but I do have an idea for you. When I want to see if there's a divergence between price and cumulative delta, I'll load up a 1 minute line chart of a specific market and underneath put a 1 minute line chart of cumulative delta of said market. This allows me, at a glance, to see if there's any price - delta divergence. Price going up, delta going down = bearish delta divergence and vice versa.

The more objective you make the process of looking for order flow confirmations, the less trades you'll end up taking per month etc.

Yes i have heard of cumulative delta divergence. I need to check it out since you say so. I dont have the confidence (and probably patience!) to read orderflow - i think cumulative delta makes things a lot easier since im quite visual!

Will definately explore ;-)

Thanks as always!

Hello everyone, I hope you all had a great Wednesday!

Looking at the market profiles on EURUSD of both yesterday and today, the power and undeniable forecasting abilities of Auction Market Theory and market/volume profile immediately jump out. Today was textbook responsive price action around VAH's / VAL's and predictable periods of balanced (equilibrium) and unbalanced price behaviour. I thought I'd briefly go over it here, as the ability to interpret these kind of days and setups, only stands to massively improve your AMT trading performance!

In the following chart screenshot, I labelled the most significant moments on the chart (1-4) and will elaborate on how we (Auction Market Theory traders) can take advantage of our deep understanding of price behaviour, in relation to value. I also highlighted the moments price gave us the best opportunities of the day.

Firstly before we go into the list, I interpreted the previous day's market profile as a balanced 'D' profile, by the end of the day. I know there is excess at the top of the profile (stacked single prints) however it was a one off occasion candle, no follow through and was immediately sold off back into value.

1) Price created an initial balance/opening range within Tuesday'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 and we expect price to go back and forth in-between them. If price were to become unbalanced and breakout, the inverse could be true.

2) The grey rectangle highlights 99% of the trading range pre economic news/data release and it happens to be the previous days value area... Using price action with candlesticks alone, it would be impossible to anticipate the upcoming consolidation's price range.

1. The two red circles highlight the moment price came into contact with first, the value area low and lastly the value area high. We knew these specific levels in advance and expect to see responsive activity there as we have confirmed the market is balanced.
2. When price touches these areas and you see responsive activity, there is a high probability price will rotate, back into value and potentially the other side of the value area. I do however, recommend taking profit at the P.O.C of the profile your trading off of, as this is potentially the exact price level that market participants find has the most value and thus can be strong support/resistance.
3. In this specific scenario, as price sold off into the VAL. There was a multitude of really, really strong confirmations on order flow, all indicating responsive activity is prevalent. I'll attach the screenshot below but will not go into the confirmations for simplicity:

3) When trading Auction Market Theory and responsive activity more specifically, we can only expect balanced markets when all information is known and priced into the market creating equilibrium between buyers and sellers. When we do not expect balanced markets is when important economic news/data is released. Luckily for us, for the most part, all important news releases are scheduled and publicly available.

If we have positions that are based upon responsive activity, the trade should be covered just ahead of the release time, as we expect volatility and unbalanced price behaviour. This will save you time and time again and is the correct way to trade responsive activity.

4) The red rectangle I placed is to highlight why we exit balanced market, responsive style trades ahead of significant economic news/data. The pure unbalanced and aggressive price action that came after the event can be seen via single prints. Let me reiterate, while we did not know direction or extent, we knew it was coming!

So armed with an understanding of AMT and market profile, you could know the market was balanced, you could anticipate the upcoming price range and know the specific price levels where price has a decent chance of turning and know what activity to look for to confirm that. To top all that off, we knew exactly when to expect the market to become unbalanced again and to get out.

So that's it, just a brief discussion on Auction Market Theory, mainly about responsive activity and how it related to EURUSD today.

EURCAD

liquidity gap

Your valuble posts give this thread a good light. You get my interest to study the basics again after dropping it in the past. Thanks for sharing your knowledge with picture and explanations.

Wow you are one of the better educated poster here! You remind me of the days when mzvega and evak who sets the standards in their numerous post on this topic which help educate the newbies, even though they have since move on to AMVA.

thx and keep them coming

EURUSD

hello
your footprint chart is the m5 EUR- Future

Thank you very much for your kind words sir, I am very happy to hear I was able to help re-spark your interest in Auction Market Theory basics!

Thank you @qawaza as well for the amazing words, I appreciate your support!

Hello my friend, good to see you, yes it is! I should make clear in the posts with order flow discussion/analysis, what markets I'm analysing and then what markets I'm trading.

When I am interested in EURUSD (for whatever reasons but say my strategy has a setup) I will look at the order flow on EUR Futures (code 6E), but why? The foreign exchange market is decentralised meaning every broker shows (slightly) different prices and volumes, the futures market is centralised - everyone see's the exact same price and volume!

EUR Futures (6E) 100% positively correlates to spot EURUSD.

The (CME) FX Futures market is also much more transparent/regulated and less shady than any one broker, however I do still trade via spot FX after looking to FX Futures for confirmation as this is cheaper (transaction cost wise) but this is a bit off topic.

Example: When I am looking at USDJPY, I look to JPY Futures (6J) for order flow confirmations.

EURUSD
short foot print analyse

is this strategy good or working?please explain how do you use this strategy? thanks

hello
it is not a strategy, you can follow the trend
or trade at certain sessions. the result is what counts.

Hello everyone, a new week is upon us and as such, new Auction Market Theory and market profile opportunities have already presented themselves! Please note, the following discussion and analysis is on EURUSD.

The screenshot below shows three market profiles, the first two (Thursday 14th & Friday 15th December) show a vague double distribution trading range. Price has consistently opened within value the past two trading days, this is an inclination to a balanced market however we have to factor in the possibility of price shooting up/down to the other range / balance area.

A double distribution (in a textbook scenario) is separated by single prints, this is aggressive price activity. I think here is a perfect time to refer to one of the original books on Market Profile and Auction Market Theory, Mind Over Markets by James F. Dalton. He talks clearly about excess and the meaning behind it, I will quote some of it below.

Excess

"To achieve its primary goal of trade facilitation, the market auctions lower to find buyers and higher to attract sellers." ... "the market must auction too high to know when prices are perceived to be above value and too low to know which prices are considered to be below value. The potential for market excess occurs any time price trends significantly out of balance, or away from value. Excess is created when the other timeframe recognizes an opportunity and aggressively enters the market, returning price to the perceived area of value."

...

"Let’s take a moment to look at excess from another, more conceptual, perspective. Any time a given price level is rejected quickly by the market, excess is formed. The single prints separating the two areas of a Double Distribution Trend day are a variety of excess. Just like a tail, they represent prices perceived as away from value by the other timeframe." ... "The importance of any type of excess is that it represents an area that should serve as support or resistance to price in the future."

Knowing this, if the market remains in balance within one of the trading ranges, we can expect responsive activity around the area of balance until it breaks. When you accompany excess (single prints on the chart) with a balanced market (responsive activity is prevalent) and confirm the setup via order flow and price action, you start to have some real propensity behind the trade!

The circle highlighting the first touch of the excess (resistance zone) shows the impact such an area has on price. I will attach a screenshot of the order flow confirmations present within that rejection and go over them briefly however, I will not go into detail as I understand this isn't a order flow thread and not everyone will be interested.

1) Within the rejection wick, on all price levels, the ask was larger then the bid (likely significant limit orders are present there). These will act as a barrier against future price movements. There was also an uptick in volumes as price came into contact with the area of excess, always a good confirmation for a successful rejection.

2) Aggressive sellers creating inverted imbalances are a key confirmation when looking to trade excess as ultimately excess is past aggression! So its very logical and a great confirmation to see real time aggression in an area of past aggression.

So that's all, I plan to refer to the original AMT/Market Profile books more often wherever applicable to provide greater clarity and understanding of my posts/analysis. Thank you all for reading, trade safe.

Now I'm Long EU & GU M15

EURUSD
Hello
london has been waiting , trading only at daily poc .
very good trade

look at the volume, some knew where the journey was going

AUDUSD



trade what you see

CHFJPY

USDJPY H1 ....SELL