USDJPY H1 ....SELL
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here are some interesting levels and volumes so that you can secure your profits.
super trade
Auction Market Theory and Market Profile
Hello everyone, I hope you've all had an amazing Christmas and are well rested! Back to work trading for another two days before a long New Year weekend, it's been a busy end to the year and a great trading day for me.
On Wednesday 27th December, EURUSD created a ‘double distribution’ market profile. This can be distinguished by two trading ranges/distributions, separated by single prints (aggressive price movement). After the market rollover, price created an initial balance / opening range within Wednesday’s value area.
Auction Market Theory when related to market profile suggests that this is a market that is in balance and as such responsive activity should be prevalent. The following are some paragraphs I've picked on the subject taken from James F Dalton’s book ‘Mind Over Markets’ and I think it's just as relevant today as it was then:
“Open within Value—Acceptance - When a market opens within value and is accepted (overlapping TPOs signify value, or acceptance), this generally indicates that the market is in balance and that market sentiment has not changed dramatically from the previous day. Trade risk and opportunity are both relatively low. The day’s range usually will be contained within the previous day’s range or overlap one of the previous day’s extremes slightly to one side. It is a trader’s dream to know ahead of time what the day’s range will be. When a market opens and builds value within the previous day’s value area, it is possible—very early on—to make a rough estimate of the developing day’s range potential. As mentioned before, the mere fact that a market opens and auctions within value indicates market sentiment has not changed significantly. Thus, generally, the developing range will rarely exceed the length of the previous day’s range.”
“Summary - Simply keeping track of where the market opens in relation to the previous day’s range and value area is valuable market-generated information. A market that opens within value is generally in balance and awaiting new information. A market that opens outside of value is out of balance, and carries with it greater opportunity and risk.”
The top TPO of the prior day’s profile is a single print (variation of excess) and as such, in a balanced market, we can expect responsive activity here also! This reduces any arbitrary rules that may hurt performance (personally I love to see a daily high/low break and/or stop run before I enter a responsive style trade, but I have since changed my trading strategy so that I don't always have to see these things).
It is in this area, that yesterday, buyers fell short and other timeframe sellers viewed prices as above value and began selling with conviction (single TPO at the extreme of the profile is evidence of this). This is also called, according to the authors of the original AMT book as an ‘overreaction’ or more suitably a ‘selling tail’. Some insight from the same author and book as above, on this specific topic follows:
“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. As long as conditions have not changed markedly, the other timeframe participant that drove price so vehemently should react similarly at those same price levels. This is why a tail can be used to estimate range potential, for it is a reliable benchmark by which to gauge future activity.”
As it was the Asian session, volumes were not very heavy. There were consistent inverted imbalances as price creeped higher. The last bearish candle was the entry candle, 2 inverted imbalances (aggressive selling) and a negative delta were confirmations but there was also another very important aspect that led to me entering. Cumulative Delta - Price Divergence:
Price was rising but the delta was falling! This is bearish delta divergence and as such you can expect price to turn to follow delta.
The stop loss was placed out of the way, above the previous day’s trading range. The take profit was placed just ahead of the previous day’s P.O.C, this is because out of the whole day, this specific price level was perceived as having the most value / fairest price.
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. Any responsive style trades have to be covered, or at least risk adjusted, ahead of any important economic news/data releases.
Lastly, a brief look of the trade entry and exit on a plain chart:
Trade reached full profit target (at prior day's P.O.C) for a gain a little over 1.75%.
On Wednesday 27th December, EURUSD created a ‘double distribution’ market profile. This can be distinguished by two trading ranges/distributions, separated by single prints (aggressive price movement). After the market rollover, price created an initial balance / opening range within Wednesday’s value area.
Auction Market Theory when related to market profile suggests that this is a market that is in balance and as such responsive activity should be prevalent. The following are some paragraphs I've picked on the subject taken from James F Dalton’s book ‘Mind Over Markets’ and I think it's just as relevant today as it was then:
“Open within Value—Acceptance - When a market opens within value and is accepted (overlapping TPOs signify value, or acceptance), this generally indicates that the market is in balance and that market sentiment has not changed dramatically from the previous day. Trade risk and opportunity are both relatively low. The day’s range usually will be contained within the previous day’s range or overlap one of the previous day’s extremes slightly to one side. It is a trader’s dream to know ahead of time what the day’s range will be. When a market opens and builds value within the previous day’s value area, it is possible—very early on—to make a rough estimate of the developing day’s range potential. As mentioned before, the mere fact that a market opens and auctions within value indicates market sentiment has not changed significantly. Thus, generally, the developing range will rarely exceed the length of the previous day’s range.”
“Summary - Simply keeping track of where the market opens in relation to the previous day’s range and value area is valuable market-generated information. A market that opens within value is generally in balance and awaiting new information. A market that opens outside of value is out of balance, and carries with it greater opportunity and risk.”
The top TPO of the prior day’s profile is a single print (variation of excess) and as such, in a balanced market, we can expect responsive activity here also! This reduces any arbitrary rules that may hurt performance (personally I love to see a daily high/low break and/or stop run before I enter a responsive style trade, but I have since changed my trading strategy so that I don't always have to see these things).
It is in this area, that yesterday, buyers fell short and other timeframe sellers viewed prices as above value and began selling with conviction (single TPO at the extreme of the profile is evidence of this). This is also called, according to the authors of the original AMT book as an ‘overreaction’ or more suitably a ‘selling tail’. Some insight from the same author and book as above, on this specific topic follows:
“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. As long as conditions have not changed markedly, the other timeframe participant that drove price so vehemently should react similarly at those same price levels. This is why a tail can be used to estimate range potential, for it is a reliable benchmark by which to gauge future activity.”
As it was the Asian session, volumes were not very heavy. There were consistent inverted imbalances as price creeped higher. The last bearish candle was the entry candle, 2 inverted imbalances (aggressive selling) and a negative delta were confirmations but there was also another very important aspect that led to me entering. Cumulative Delta - Price Divergence:
Price was rising but the delta was falling! This is bearish delta divergence and as such you can expect price to turn to follow delta.
The stop loss was placed out of the way, above the previous day’s trading range. The take profit was placed just ahead of the previous day’s P.O.C, this is because out of the whole day, this specific price level was perceived as having the most value / fairest price.
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. Any responsive style trades have to be covered, or at least risk adjusted, ahead of any important economic news/data releases.
Lastly, a brief look of the trade entry and exit on a plain chart:
Trade reached full profit target (at prior day's P.O.C) for a gain a little over 1.75%.
Seeking Fair Value
