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Auction Market Theory and Market Profile

  • #3,121
  • Aug 19, 2011 2:19pm Aug 19, 2011 2:19pm
you have stated before that "volume coming in" is important for you, can I ask what you look for as far as volume is concerned?
  • #3,122
  • Aug 22, 2011 12:18am Aug 22, 2011 12:18am
Quoting inks2002
you have stated before that "volume coming in" is important for you, can I ask what you look for as far as volume is concerned?
I assume you understand concept of VSA. High volume on up or down move could be indicative of strengths & weaknesses. But i will explain in context of auction process & order flow.

So for a down move as price rapidly being mark down & if volume increases this could indicates potential swift of balance between aggressive sellers who are willing to sell down a dipping market & aggressive buyers who is willing to absorb. Once the sellers hitting the bid are fully absorb by buyers willing to lift the offer. The transaction volume eventually gets very high near the end till we see a reversion. Hence on candlestick a pin bar can be indicative especially near into excess of previous support or reference as we calls it.

But u have to watch for valuation here. As we are talking about auction process after all. If price is too deep down deem unfair that is where u want to trade & lookout for excess, which is WHERE we want to gauge if there is a major shift in the market.
  • #3,123
  • Aug 22, 2011 1:53am Aug 22, 2011 1:53am
On the right chart the daily profile have seen twice, the rejection when price probe into Wed's POC. No control to be had hear then as price dip back down to Thurs value range now. So the immediate reference for this day timeframe would be to see the reaction of thursday's lows & the control price.

As Friday end with a double distribution day, the odds are the LUA could be fill as price ledge in between the distribution. Session profile on the left indicate UK POC could be the attraction here providing the destination, round number of 4300 should be consider too for excess reference. Inventory now is short as price is now developing into balance. Triangle indicated an approximate bell.

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  • #3,124
  • Aug 22, 2011 3:07am Aug 22, 2011 3:07am
This could be the nuances that we need to look at. I have my suspect last week but i did not consider it for analysis somehow. oh well.

The spike base of previous UK session provides the support for the TK session test that could have trigger the initiatives on this current UK move up of TK session VAL. Now the immediate reference could be the previous UK high since the previous NY excess make that a point to take it out. Assuming we are not into a trend day, if so, the TK session high could be the conduit for this scenario.

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  • #3,125
  • Aug 22, 2011 7:49am Aug 22, 2011 7:49am
Quoting Evak
This could be the nuances that we need to look at. I have my suspect last week but i did not consider it for analysis somehow. oh well.

The spike base of previous UK session provides the support for the TK session test that could have trigger the initiatives on this current UK move up of TK session VAL. Now the immediate reference could be the previous UK high since the previous NY excess make that a point to take it out. Assuming we are not into a trend day, if so, the TK session high could be the conduit for this scenario.

http://img705.imageshack.us/img705/4...6aug221604.gif

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What was I thinking, a trend-day on Monday...

So the TK session high did provide the conduit for a slight pullback which saw price struggling above previous UK high.

But the caution her as with the current P-formation suggesting a short-covering rally, odds are we could be seeing resistance soon.

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  • #3,126
  • Aug 22, 2011 8:13am Aug 22, 2011 8:13am
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quoting Evak
What was I thinking, a trend-day on Monday...

So the TK session high did provide the conduit for a slight pullback which saw price struggling above previous UK high.

But the caution her as with the current P-formation suggesting a short-covering rally, odds are we could be seeing resistance soon.

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I'm right about in JD book, when I find the form of the profile is important even the session/ day is not over. And you just gave a live example, thank's...seems you have a very good understanding of market profile
  • #3,127
  • Aug 22, 2011 10:29am Aug 22, 2011 10:29am
Quoting s7c
I'm right about in JD book, when I find the form of the profile is important even the session/ day is not over. And you just gave a live example, thank's...seems you have a very good understanding of market profile
Welcome, i may only be scratching the surface myself, feel free to post your thoughts too. So have you settle on your chosen platform for MP yet?
  • #3,128
  • Aug 22, 2011 10:35am Aug 22, 2011 10:35am
Quoting Evak
What was I thinking, a trend-day on Monday...

So the TK session high did provide the conduit for a slight pullback which saw price struggling above previous UK high.

But the caution her as with the current P-formation suggesting a short-covering rally, odds are we could be seeing resistance soon.

http://img828.imageshack.us/img828/1...9aug222035.gif

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I make my entry as price deteriorates further, on the pullback to vwap. I am not sure how it goes. I suspect this is another pullback..if it is true then the posible interim support would be at previous NY low with which we may see an excess. But any further deterioration would result in a double distribution day, on the day time frame, destination to 4300 perhaps.

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  • #3,129
  • Aug 22, 2011 11:08am Aug 22, 2011 11:08am
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
i'm using ensign platform, which is a good platform but need's improvement on MP study...we have last 2 sessions in balance(bracket) as you see in the chart and we had a break of this 1h ago but the price went into an area considered unfair from last thursday...
JD said "For short timeframe traders,we recommend that you trade with any directional auction following a neutral/balancing day; when markets come out of balance, there is always at least a short-term opportunity to take advantage of the ensuing auction."
despite this, i went long after price got into unfair area and it passed 3xinitial range from nyse opening all this being correlated with vsa analyses and decided is a good risk/reward entry at decent probability...
haw you will interpret JD opinion on this facts and my entry?
thank's...
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  • #3,130
  • Aug 22, 2011 12:12pm Aug 22, 2011 12:12pm
Quoting s7c
i'm using ensign platform, which is a good platform but need's improvement on MP study...we have last 2 sessions in balance(bracket) as you see in the chart and we had a break of this 1h ago but the price went into an area considered unfair from last thursday...
JD said "For short timeframe traders,we recommend that you trade with any directional auction following a neutral/balancing day; when markets come out of balance, there is always at least a short-term opportunity to take advantage of the ensuing auction."
despite this, i went long after...
For GU i have a very strong bearish bias. Last Friday session trend-day type actually took out UK session high, this is an excess failure. Which eventually have to leave it to today's TK session to do pause for balance. By UK opens price hardly created any excess opportunity & with price opens within value of the day time frame which exacerbate any potential long opportunity, if any.

UK session continues to balance where TK left off so now the nuances is to look out of shorter reference of TK. The failure to auction further above TK high could also be attributed to lack of minus development in this morning moves (or the lack of excess). Therefore it weaken the prospect of any up moves. And with the the flatten nature of both the TK & UK session which is indicative of an unsecured low (base), Odds are the base could be taken out to further the cause for price to deteriorate ...

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  • #3,131
  • Aug 22, 2011 12:19pm Aug 22, 2011 12:19pm
Quoting s7c
i'm using ensign platform, which is a good platform but need's improvement on MP study...we have last 2 sessions in balance(bracket) as you see in the chart and we had a break of this 1h ago but the price went into an area considered unfair from last thursday...
JD said "For short timeframe traders,we recommend that you trade with any directional auction following a neutral/balancing day; when markets come out of balance, there is always at least a short-term opportunity to take advantage of the ensuing auction."
despite this, i went long after...

Its great to see see someone new actually post a comment & chart!!!.
The only thing that can ruin the most perfect short term analysis, is when the OTF tf choses to become initiative or responsive. I always forget to ask myself "where am I in relation to the higher tf profile". Are you above or below the weekly va? Is otf traveling down from the top of value toward the bottom of value or visa verse? Are we above or below last weeks poc? Is this week poc moving lower or higher? I often find myself standing in the way of otf activity. Dont forget to ask yourself, where you are in relation to the Higher TF Again, great to have you post! Looking forward to more!
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  • #3,132
  • Aug 22, 2011 12:26pm Aug 22, 2011 12:26pm
Quoting Evak
Welcome, i may only be scratching the surface myself, feel free to post your thoughts too. So have you settle on your chosen platform for MP yet?
Great posts! I always enjoy your charts and analysis
Markets are not efficient, rather they are effective - Jones
  • #3,133
  • Aug 22, 2011 11:44pm Aug 22, 2011 11:44pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
I have allot to learn, thank you for your ideas...
It's allot of information, in september I need to rearrange and clarify everything i read here on forum and in JD second book. And after see haw I will integrate MP in my way of trading.
Looks like the last london&new York sessions are trying to say Pb, whatever would that mean...we will find tomorrow, I guess.
  • #3,134
  • Aug 23, 2011 5:16am Aug 23, 2011 5:16am
Quoting mzvega
Great posts! I always enjoy your charts and analysis
Welcome. I would like to hear more of your thought process too if u are free to post...
  • #3,135
  • Aug 23, 2011 5:33am Aug 23, 2011 5:33am
Quoting s7c
I have allot to learn, thank you for your ideas...
It's allot of information, in september I need to rearrange and clarify everything i read here on forum and in JD second book. And after see haw I will integrate MP in my way of trading.
Looks like the last london&new York sessions are trying to say Pb, whatever would that mean...we will find tomorrow, I guess.
Would like to see more of your thought process too on anything MP, most of us are still learners here irregardless.

With regards to GU, There was a "change" as NY developed & finally settle down into balance. The price was settled above the previous European session low which it did not take out.

TK opens & initiates (high confidence opening within balance) just below NY control price & Frankfurt continues on with an out of balance moves (go with market). Price facing resistance on probing the POC of Fridays' NY.

Hence the nuances here IMO is the subtle "change" of auction which was deem an excess as it try to probe previous European low.

Chart set to pit open for TK & Frankfurt, NY to electronic open.
http://img707.imageshack.us/img707/3...0aug231817.gif

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  • #3,136
  • Aug 23, 2011 10:16am Aug 23, 2011 10:16am
This is the 2nd P-formation short covering rally which calls for extreme caution now if u intend to play it long. Current US pit opening suggest auctioning for now as it test probe UK low. Since price is trading back into previous range, any range extension as price adjust back upwards could face rejection if UK POC lose control

Chart on /6E. All session set to pit open. Note: Spike base support was prominent for the last 2 days.
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  • #3,137
  • Edited 11:48am Aug 23, 2011 11:16am | Edited 11:48am
as posted previous, imo P & b profiles are very much up to interpetation.
Your chart is a good example of my opinion. As per "mind over markets" there is criteria to a P profile all 3 need to be met. 1) we need to have been in a downtrend (imo weve been in a balanced market) If it was, the downtrend would have continued. So when it has a p shape but does not meet the criteria of "short covering rally" as per mind over markets. I dont see it as the market being "too short" indicative of short covering, I see it as incomplete neutral or incom. norm vairation. And I often trade in the direction to complete the profile. After the P, the next day if you combine the next days profile with the P you have a neutral market, not a temporary pause in a current downtrend indicative of short covering rally.

As per my post #3042
" I also wanted to make note on day types in reference to "P" &"b" profiles. From one of the webinars I posted way back when, Just because a profile has a p or b shape, doesnt mean its short covering rally or long liquidation break. If the completed P or b profile isnt a short covering rally or long liquidation break , What is it classified as?!?! "Incomplete norm. variation day" or an "incomplete neutral day", and the following days action usually completes the Norm. var. day pattern or neutral day pattern. If I cant classify the day as short covering or long liquidation, I trade next days action in the direction that would complete the profile making it a complete Norm var. day or neutral day. Just a little food for thought, worthy of observation."



as per "mind over markets" page 131:

"Summary of Short Covering and Long Liquidation”
A Profile beginning to develop the shape of a "P" or a "b" does not infer that short covering or long liquidation is occurring. Remember, all facts are surrounded by other circumstances. Properly evaluating short covering or long liquidation patterns requires that the trader make careful note of the underlying conditions prevailing in the market and the requisite characteristics that signify each pattern. The main considerations are: (1) the recent market direction compared to the formation, (2) the open—near the low for a short covering and near the high for long liquidation, (3) the subsequent non-continuation after a drive away from the open, and gradually retracing auctions as the short-term buying or selling releases temporary"

So imo/interpretation of “Mind over Markets” pages 126-131 , So if it looks like a P or b ask these questions first. you need to answer yes to all the prerequisites, before you can identify it as “Short covering rally” or a “Long liquidation break”

Short covering check list:
Recent market direction= Short covering often follows a day (or several days) of strong selling
activity. As the market moves farther out of balance, participants simply become "too short”. So if your too short it implies that the market has been in a Downtrend. Has the market been in a down trend? The first prerequisite is that there needs to be a downtrend/Down day.

The open= where did the market? the open—near the low for a short covering rally. Did we open on the lows?

The subsequent non-continuation after a drive away from the open= Did we fail to make higher prices after the initial drive and do we have gradually retracing auctions ?

Long liquidation check list:

Recent market direction= Long liquidation often follows a day (or several days) of strong Buying
activity. As the market moves farther out of balance, participants simply become "too Long”. So if your too long it implies that the market has been in a Uptrend. Has the market been in a up trend? The first prerequisite is that there needs to be a uptrend.

The open= where did the market? the open—near the high for Long liquidation. Did we open on the highs?

The subsequent non-continuation after a drive away from the open= Did we fail to make lower prices after the initial drive and do we have gradually retracing auctions ?

Cut & paste from mind over markets
http://www.forexfactory.com/showthre...16#post4679016

Am I reading from the book incorrectly?????
interpretation of “Mind over Markets” pages 126-131
Will some one read it and comment/help me with my interpretation.
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  • #3,138
  • Aug 23, 2011 11:28am Aug 23, 2011 11:28am
Who here will give me their definition of "Short Covering Rally"?
Markets are not efficient, rather they are effective - Jones
  • #3,139
  • Aug 23, 2011 11:47am Aug 23, 2011 11:47am
Quoting mzvega
Who here will give me their definition of "Short Covering Rally"?
LOL Claudia, even as of now we are still struggling with the interpretation. Problem lies herein in, on several occasion in JD's MOM book he tend say things - "trader make careful note of the underlying conditions prevailing in the market and the requisite characteristics that signify each pattern", after describing certain patterns or situations. This cause a lot of ambiguity on our end & not the least guess work.

I suppose my identification of P-formation for EU could have satisfied criteria 2 & 3 or partially to each. But the 1st criteria could be the problem for this interpretation as i agree with u since the mkt have not been too short what is it trying to cover.

PS: in one of the JDs blog that i recall some time ago, he describe a liquidation break which is quiet similar to what happen to ES today. So i suppose he is making reference to shorter timeframe basis.
  • #3,140
  • Aug 23, 2011 11:51am Aug 23, 2011 11:51am
Quoting Evak
LOL Claudia, even as of now we are still struggling with the interpretation. Problem lies herein in, on several occasion in JD's MOM book he tend say things - "trader make careful note of the underlying conditions prevailing in the market and the requisite characteristics that signify each pattern", after describing certain patterns or situations. This cause a lot of ambiguity on our end & not the least guess work.

I suppose my identification of P-formation for EU could have satisfied criteria 2 & 3 or partially to each. But the 1st criteria...
Markets are not efficient, rather they are effective - Jones
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