Auction Market Theory Flashcards
“Much learning does not teach understanding”
Heraclitus /ˌhɛrəˈklaɪtəs/; 535 BCE
TPO
Time Price Opportunities: building blocks of Market Profile; a block is created when price has traded at a price level during a specific time block;
OTF (Other timeframe)
Outside Buyers and Sellers (longer term, not on the floor, bigger orders)
local
pit trader, market maker, middleman filling the orders of the OTF buyer and sellers; locals operate in the less than one day time frame as opposed to the OTF buyer and seller
Understanding what the OTF is doing is….
vital in successfully trading the futures market
major moves in the market are caused by….
the OTF, only OTF can move price substantially, the locals are not responsible for big moves*
* = not directly responsible
market profile range
refers to the entire height of the profile from High to Low
initials balance
represents the period of time in which the locals attempt to find a range where two-sided trade can take place (a range where both buyer and seller agree to conduct trade
all activity below the initial balance is…
OTF seller range extension
all activity above the initial balance is…
OTF Buyer range extension
the area where 70 % of the day’s business is conducted (roughly 1 SD)
the Value Area
single print buying tail indicates…
the OTF buyer responded strongly to price advertised below value; the longer tail the stronger
single print selling tail indicates…
the OTF seller
the longest line of TPO’s closest to the center of the range is called
POC Point of Control
POC Point of Control is…
the longest line of TOP’s closest to the center of the range
the closing range
the last indication of overall sentiment for the day; to compare as a reference point against the following day’s open to see fi the underlying market sentiment has changed
The market auctions up until…
the buyer will buy no more
the market auctions down until….
the seller will sell no more
the futures market is a constant auction looking for balance between who?
OTF seller and OTF buyer
you must understand what the OTF is doing and…
position yourself with them
Initial balance is what? (OR)
the early morning market activity (slightly more ambiguous today than once was)
narrow OR or Initial Balance tends to…
be broken easier
Wider OR or Initial Balance tends to…
contain the days auction extremes
7 day types:
No Trend Normal Neutral Center Normal Var Neutral Extreme Double Distribution Trend Trend