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Information and Concepts in the True Auction™ Value Bars


Our patented True Auction™ Value bars are an incredibly powerful charting technology. They are still new, but we are impressed ourselves by what they are capable of presenting, and revealing.

Display

Once again: in True Auction™ Value display, the candle body outlines the True Auction™ Value area: it doesn't correlate with the candle's open or close. The displayed value area is the True Auction™ Value area; and the color of the body reflects the delta within the value area — green for up-delta, red for down-delta, and white if neutral. Note that this delta is only within the True Auction Value area: it may not correlate with the bar's total delta.

A Note On Chart Types

And again: Auction Dashboard™ will work with any chart type that NinjaTrader® supports. You are free to use any type and time frame that you want; and you will find valuable information on any chart. Here we will display intraday time frame charts using a Point And Figure chart type. We ourselves feel that this works well with the True Auction™ Value bars, and an order flow tool in general — the forced reversals on price action are relevant to following order flow, and the intermediary auctions, bid/offer levels, and many other factors are revealed in the structure. Be sure to examine many chart types to see what is revealed.

What is True Auction™ Value

The "True" Value lies in the technology behind the value area. Because of the specific way we identify and measure the trading and activity, we find a True Value that is vastly enhanced over simple time and sales analysis. The foundation lies in the technology's basis; and the Aggressor Absorption™ is a very important factor. Mr. Coco has a white paper on that technology, and we can summarise important points from that to provide more information.

Once again, Aggressor Absorption™ is volume executed by traders adding behind the current bid and offer. Absorbed bids were traders tailing the current bid, and, ultimately getting executed in. The reverse for offers. Aggressor Absorption™ is at least two things: executed volume, and activity. (There is more.) It differs from a bid or offer delta, like the deltas on the Inside Auction. Those deltas show up important activity, and reveal the potential willingness of the traders to get executed in; and they also reveal the volume available to be presented to the market in that way. Aggressor Absorption™ gains a relevance because of the fact that those contracts have executed.

Aggressor Absorption™ can be used to reveal deep and extremely powerful information. We cannot fully cover it here. For one, we know the value is auctioned from "both sides of the book" — those traders on the bid and offer are an extremely important part of the auctioning; and they can be compared at least to the aggressive traders. The same strategies that traders use to decide when, where, and how much to buy and sell, is applied to bidding and offering; and when those bids and offers execute, we learn more very important information about both sides of the auction — which includes both the adding limit orders, and also the aggressors accepting. The same vast array of studies traders are used to can be performed on this volume. Further, Aggressor Absorption™ can be studied independently from or in combination with the market trading, and also the transient activity on the bid and offer, and level 2.

A brief example:

Say we have a 25 bid and a 25 next best bid. If we have 50 aggress short into those bids, then they have swept both bids, and ticked the price down two ticks; and the bid has ticked down at least three ticks. If we change this scenario to have 51 absorb on the bid, then instead, the aggressor has affected no price action, and furthermore the bid has not changed. The one left on the bid leaves a very different market. The first scenario had lowered the bid far enough to potentially present some other types of opportunities from spreads, and simply nearly any other type of auctioning and trading: it has presented different price action and bid activity to other traders whose strategies may react to the new auction. At the same time, the absorbers have executed volume: it is quite different from simply adding delta to the bid or offer. Furthermore, the executed contracts don't appear on the time and sales; and, in fact, it is the aggressing sellers that print.

Continuing with the above example, the 25 on the next bid had been willing to execute under the first scenario. They still remain under the one bid. Their ability to execute at that price is reduced, and there are many factors affecting the following outcomes, since the price and bid have not changed.

There is a vast array of information, strategy development, and many more studies that can be made from the Aggressor Absorption™ alone, and when combined with the surrounding state of the market. In addition, it is a specific, very real, and equally powerful auctioning acumen: traders with skills here may be able to simply out-auction other traders. The activity itself may not be completely new; but the specific technology is, and traders who have this in their hands have an edge over other traders that could be extremely powerful.

So this continues to expand on the first: since the absorbers are live and active participants in the auction, the other traders must account for this real volume, and auction from the state the security is left in. The security can be auctioned this way.

Therefore, to define True Auction™ Value we again note that value area is based on Aggressor Absorption™ properties in addition to the market trading; and has been designed to outline the most important value area in the bar based on the activity. You should easily find extreme correlation with the agreed upon value prices and the intermediary auctions developing into the session's curve.

The Information

The bars are able to expose and chart new information in:
  • Activity
  • Acceptance
  • Volume
  • Price Action
Modern traders have become accustomed to the presence of charting; even if they do not trade heavily against a chart. This industry has also seen many evolutions in charting technologies: candlesticks alone yield countless indicator studies and pattern recognitions. The True Auction™ Value bars are a bit like both something new, and something old. The specific technologies in Auction Dashboard™ are certainly new: they are proprietary, and have only been invented recently. Yet the concept those technologies focus on is not new: the points stated above are the focus, and none of that is new to traders. Some of it may be new to electronic trading; and certainly, the bolded point on Activity is a much more new technology; and it is extremely relevant. (The point is bolded because Aggressor Absorption™ is not found through a simple analysis of traded volume: the activity on the bid and offer must be captured, and made available on the bar and price.)

So we certainly can read new and powerful information in these bars. We do not have a long list of candle patterns, and other studies that can easily be applied to any chart; but we can make many observations on the fundamental information revealed by Auction Dashboard's™ bars. The information we present here can be applied to any time frame. And in fact, True Auction Value charts can reveal illuminating information in many new ways on any type of chart.

Auction Dashboard™ specifically has a focus on "feedback", and our chart is designed to be ergonomic: you do not necessarily need to focus in great detail on patterns (unless you are in fact looking), and the chart should normally be presenting a clear picture that is easily absorbed by the trader with acumen.

Fundamental Value

Without needing to identify specific patterns or information, any True Auction™ Value chart should plot a much better picture of the market. The chart more clearly organizes the True Value in the market "like running a rake through standard candlesticks". The chart is re-organized; and smoothly keeps the trader more in lock step with the intermediary auctions and developing value.

The trader should be able to trade easier and with more confidence with this chart available. The relevant development that is plotted frees the trader from "peering into" what is otherwise plotted in an arbitrary way on standard charts. Glancing at a True Auction™ Value chart gives you the picture you expect: where is the True Value?

Key Patterns

Bell-Shaped

Firstly, the bars heavily tend to develop shapes that follow the developing bell-shaped curve:
We observe that most markets tend to heavily exhibit "intermediary auctions", which develop from satisfied traders above, and below, and converge or resolve to find the intermediary value price. At this price, the auction tends to exhibit new initiative activities. We find that the True Auction™ Value bars reveal these intermediary auctions so frequently, that it seems they never miss one. Further, the bars nearly always identify the value price where the intermediary auction has agreed. You should find patterns like this, or roughly outlined in some way by the bars very frequently on an intraday chart. The same patterns also develop in the same ways on long time frame charts.

Satisfied Acceptance

Notice in the chart above that during the converging value, the value areas reveal the satisfied acceptance above and below: the value areas alternate. That is a frequent piece of information revealed. Notice also that there, the alternating value areas rotate around essentially the same median price — by which we mean to specifically point out that the bodies stack directly above and below one another. That is another piece of information frequently revealed by the bars.
The above chart shows the same information. Notice also that a key price is clearly revealed. The zones of value stack above and below: not just bar-by-bar, but also as intermediary value shifts, develops, returns, pivots, etc. The trader will frequently observe confluence at these points; and the value areas on our chart frequently reveal the support, resistance, rotation, etc. Notice specifically that the bar value areas on the longer bars are confluent with the transition in value zones.

Value Shifts — "Tails"

[This chart is compared to standard OHLC candles below.]
"Tails" frequently appear on candles where value is shifting. The shape is obvious: the value area contains the densest volume and activity; and the "tail" contains less. There was much less contention in the ensuing price action; and traders were agreeing much more on the final value that did develop. For instance: if there are thin bids, then the market is not contesting sellers, and down-ticking: the value is "allowed to shift" as traders facilitate into new value acceptance.

Look closely at each transition in the above chart to understand more about how the bars are plotting.

The above chart expands more on the points so far described. We observe "double tails" in many areas. It can indicate value tested and traded back in two directions — especially with reversal bars. In this chart, at the second marked double-tail, we observe the less "directed" trading as price drifts back and stays in the value acceptance. That ultimately becomes expanding acceptance. And then twice, value tested away, but stayed (both of the following marked tails return to the tailed bar's value, and also return within the developed value zone here, which began with the double tail).

Ultimately, after yet another test, value shifted down and away. At that point the value stopped to develop more in what was a prior value area that had less development: which as at the first marked double tail.

… Notice The Wicks …

Don't overlook the wicks if you're noting of all of the traversed price range. The True Auction™ Value area is the most important range, but each candle did traverse from tip to tail.

Consequence — Activity After Patterns

The above chart also reveals types of activity that can appear after patterns of value develop. In fact, the tails are one kind of this activity. The value has been traded in and accepted; and the tail leaves behind the shift to a new value area: the previous pattern in the bars is further revealed, and is contrasted with the tail. We also see points where price action shifts strongly: after acceptance, there was less agreement, or expanding agreement, and price moved more violently. And, the reverse: after more violent price action, or expanded acceptance, we see more satisfied acceptance begin again in the same value area.

At the start of the above chart, we note where the violent price action led to intermediary acceptance: another sign of a "consequence". (And looking more carefully, we see the development in that new accepted value zone does become evenly satisfied: the trading that fills in that satisfaction is more ragged, but it does show satisfaction above and below.)

The acceptance expanded, and then traders took advantage to lift the value away. These moves are more short-lived, and violent. Each one is followed by a bar with more acceptance in the tailed bar's value area. And then above, the high after the lift was rejected; and traders traded back into the prior value area, and continued to develop value there.

So again, what we see here includes: a few cases of even acceptance that is followed by price action. We also see the reverse: price action that is followed by even acceptance. We also saw two double tails that constituted developed value in the bar's value area: each was confirmed here by following acceptance, or even a return for more acceptance after value shifted away.

Confluence

In all of the previous charts, we can find some confluence with the developed value areas. The reversal bars clearly reveal the support, resistance, and reversals. Notice that very frequently, the True Auction™ Value is confluent through what otherwise might appear as a long shift though on another chart.

In Comparison

The chart above is the same one as the first chart under Value Shifts — "Tails" above. This chart is not plotting True Auction™ Value: these are OHLC candlesticks. We can observe many shortcomings here, and improvements above. Once again: Auction Dashboard's™ chart is designed to be ergonomic; and it seems clear that relevant information is plotted much more clearly on the True Auction™ Value chart. We want to emphasise that there is information revealed in the True Auction™ Value chart here and now: the OHLC chart becomes relevant only after candles close and the chart develops further — after price action and trading has begun, and opportunity is passing. And the auction may change right there, even deliberately! (One tick of spread allows any trader to potentially take profit and reverse on new traders.)

What is very important to us again, is what falls back to Auction Dashboard's™ focus on feedback. Looking at this chart yields no valuable information before the final bar is closed. At no earlier point on the chart do you have any type of concrete information about the auction. That is a subtly deceptive problem with charts that many traders do not outright know or acknowledge. When you look at this chart in the context of trading, you see that it presents a smeared and deceptive picture. Price appears to move more, and there are no indications of value or activity. It takes many, many more moments of looking, and deciphering, and also then confirming, to gain some type of value from what has been plotted here.

We cannot trace the trading, the volume, and the activity on this chart! Though we see the price action, we have no idea about any activity at any point in time. We are relying on price action to tell us something: that is a perfectly invalid thing to attempt to rely on unless the only thing we are using the chart for is to trace out price in time (a line chart may suffice; or a simpler OHLC chart, which will not clutter our view with colors and bodies).

Many factors are arbitrary: the open and close on each bar can provide some types of information in aggregated historical studies, but here and now they are nearly completely arbitrary (again, unless you are looking for a moment when you do want to know where price was when that certain candle did open or close, which is nothing that a chart occupying so much screen real estate and computing resources is needed for). For the vast majority part, it is totally irrelevant. The open and close come at either arbitrary points in time, or, even if they come at reversals, no reversal is a guaranteed value price: candles frequently "walk" into value. And so that is a primary reason that the True Auction™ Value chart is truly in a higher league. The OHLC chart is plotting arbitrary information, and it is doing that with some deliberate intention — by which we do mean to say that the chart is rigidly trying to plot something that is not relevant: you must peer in and compute on your own whether the information is relevant.

The colors of the candles are also totally arbitrary. (Remember that the colors on the True Auction™ Value chart show delta.) In fact, the chart already shows us a price axis: the green and red colors are redundant and not informative in any way. It serves to enhance that single candle's price action, which is now triple-plotted: the price axis, the open and close, and now the color! You have quietly been saturated with something that is not meaningful to an auction.

The bodies also fail to give any relevant information. Again, you may be interested in an open or a close price at some point in time, but the enhanced body is deceptive. Many studies make assumptions about the acceptance and volume based on the body. That is completely random: there is absolutely no correlation between any volume or activity, and the body. And in fact, the above chart shows that it is entirely frequently possible for points of control, value areas, and majority activity and/or agreement to fall completely outside of a candle body! (The orange prices are the points of control: and you can compare to the True Auction™ Value chart that activity and value frequently do not correlate with the OHLC body in any way.) The bodies were nice when they came along, but in 2016, this is "deprecated" computing technology.

Conclusion

Given the information here, it should seem clear at this point that without the True Auction™ technology as found in Auction Dashboard™, it is quite possible to chart something that is very much less relevant to the actual auction. Without our technology plotting the value, points of control may land in quite different locations; and value areas and acceptance could simply be plotted "upside-down"! Beyond the obvious shortcomings of standard charts, even a chart that attempts to make improvements relevant to the auctioning and activity could still fall far short of our patented technology.

We are much more satisfied with our True Auction™ Value chart.