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Methodology and Workflow

Contents

  1. 1 A Brief Outline of the Activity Printed on the Dashboard; and the Auction's Basics in Order Flow
    1. 1.1 Defining the Auction
    2. 1.2 The Snake Eating Tail, or Mobius Figure
  2. 2 Where Are the Buy and Sell Signals?
  3. 3 If You Read and Follow This Methodology; and, Have Enough Skill in the Market to Prevent Your Own Folly; Then AD Will Show You Outright Where Your Trade Plans Can Work, Where Your Entries Are Good, and Where Your Stops and Targets Can Be
  4. 4 How Do I Learn the Order Flow and What Do I Do?
  5. 5 The Entire Point Lies In When You Begin To Follow — A.K.A. The Whole Market is not Moved by a Single Controlling Finger
  6. 6 What Is the Order Flow
  7. 7 It Will Not Take Any Trader Long to Get Comfortable With the Order Flow
  8. 8 Hammering More In Favor of a Raw Tool Based on Pertinent Volume, Activity, and Feedback
  9. 9 Why If They Are So Fancy Have They Only Given You Less Than 1% of the Picture?
  10. 10 A Little More on This Topic
  11. 11 Therefore, What All Traders Are Doing is: Observing the Auction and Deciding (Even Large Traders)
  12. 12 Never Deny the Fundamental Value of "The Best Position in the Pit"
  13. 13 Concrete Activities
  14. 14 Fundamentals
  15. 15 Context
  16. 16 Timeframes Move From Long, to Medium, to Short, to Now
  17. 17 We Believe Markets Exhibit the Same Types of Behaviors on Different Time Frames
  18. 18 Long Term Tools
  19. 19 BackFill
  20. 20 Session and Overlay Profiles
  21. 21 Mark Prices With Shift-Click
  22. 22 Well Known or Researched Levels
  23. 23 Making Composites Over Arbitrary Ranges
  24. 24 Using the Cumulative Delta
  25. 25 We Know the Future
  26. 26 Getting Bid/Ask Information
  27. 27 Volume Filter
  28. 28 Moving In on the Time Frame
  29. 29 True Auction™ History
  30. 30 Confluent High Volume Prices
  31. 31 Peering In
  32. 32 Important Perspective

A Brief Outline of the Activity Printed on the Dashboard; and the Auction's Basics in Order Flow

Defining the Auction

We certainly cannot go into a course on auction market theory, or even auctioning in great detail … But we have to enumerate something basic about what is illuminated in watching the order flow.

The auction always "stands" at some level. The activity is determined by the traders:
  • Some traders have "pent up" energy or "fuel" in the market: they have opened positions, and they stand intending to liquidate — day traders.
  • Some traders have injected supply or demand into the security: they have opened, but they intend to stay open for more than a day.
  • These traders can continue to participate though: they may stay active to "defend" their position, they may hedge, they may continue to execute into the position, and other things.
  • Some traders stand looking for fresh opportunity.
The auction proceeds by the traders activities; and balances and deltas form, liquidation unwinds, and participants take action against the current liquidity that influences the value and/or price action.

The Snake Eating Tail, or Mobius Figure

You should easily find that many prices and levels highlighted on the dashboard coincide essentially exactly with the way the auction proceeds — levels where price travels to as a target, levels where initiation and momentum begins, levels binding ranges, etc. It should seem like there are "tons" of these levels on the chart. In fact there could be so many prices pointed out on the dashboard that we could use it as a form of "snake oil" to entice you: it would be easy to fast forward through trading and "exhibit" the market trading right to these levels essentially continuously. However, the point is in the context at any moment in time.

Each of those levels is significant based on the activity that put the price there — remember that the actual value in the auction is determined by the participants: if buyers come in then that's what happens, and if they don't then that's different. And in fact, any of those levels can keep on turning into more levels: when price reaches an influential level, it naturally auctions there, and then price finds another significant level, and then again — it is just the natural proceeding of the auction. If you back up to a perspective of just looking for levels, you will continuously find them.

What is important is knowing the levels exist, and following. — You want to know something about the levels as a form of "note taking" — and, knowing as much a s possible about all of the types of activity there is very significant and valuable — but you need to have some context in the auction to make any valuable observation. No level has any predetermined proceeding.

Levels can frequently be influential to a point where it seems price must reach the level — if for example, traders moved price and now seem to be in a "sell off", then you may understand something about the volume, liquidity, and price range to understand where delta can unwind price back to — but at that point there is an auction. In one sense that may be phrased as "you need to get in on the right side at any one of those levels: and then you will trade with the value as it moves to the influential target level". But it is always up to the auction at those levels: no level has influence on its own, it is the traders that take action that determines the outcome. So to elaborate further on that point: where the sell-off begins, you will likely see something significant illuminated on the chart, but there is not "one set pattern" that you see that identifies the start of a sell-off, it is again something that can be understood in context: you would understand the potential for a sell-off existing, and then following the order flow, you could see the initiation as it starts.

Some levels get left behind: the traders many trade either way. Levels may come back in from a distance; and there where the direction changes you will likely see another level has formed. … The levels can continuously be generated. When price is being auctioned, you need to keep a context to understand something about what types of potential exist at the levels: what led price action there and what is the state of the market here. There is some need for a little understanding of the natural forces in the auction.

When traders reveal some level, the best thing is being able to follow the auctioning to understand HOW trades are trading hands and what is happening. The force of the money traded into the auction determines how the price moves. Understand what is possible, and you will be following if value is auctioned in some direction. This is where following the order flow becomes your advantage. You should be able to see a lot of information about the traders: the aggressors, any absorbers, shifting liquidity on the book AND the BBO, the balances that are forming (how much volume is transacting, and what the deltas are like), the price action as it reaches levels and possibly "takes them out" (which can form strategic advantage in having reached through to a new low or high price in context), a sense of how many traders are actively participating, and being able to see the traders on the inside auction. All of the forces add together to "put you in the auction" with everyone there. The dashboard's goal is to reveal as much as possible!

You should feel like you are in the midst of everyone here. And this is always an auction: what happens is auctioning … participants want to auction the value in their direction. The outcome is the outcome of an auction. Each outcome leaves the traders there: they may take any arbitrary next move again … And the auction continues proceeding (the order flow continues flowing).

Where Are the Buy and Sell Signals?

Though once again we are not providing a course on auction market theory, there still is a methodology here. AD is not a "black box" strategy that simply generates buy and sell signals; and, this methodology reveals more entry possibilities than any signal generating system could.

If You Read and Follow This Methodology; and, Have Enough Skill in the Market to Prevent Your Own Folly; Then AD Will Show You Outright Where Your Trade Plans Can Work, Where Your Entries Are Good, and Where Your Stops and Targets Can Be

The methodology is really about standing amidst the auctioning; and following. We do expect our users to have a minimum skill in understanding the order flow. We cannot "hold any trader's hand"; and nowhere in the world will you find some trading system with one continuous "buy here", "sell here", "buy here" indicator. Traders are auctioning in your market, and many traders are taking their lumps because they are not auctioning on the right side. This is an auction: if I go in buying and expect to see returns today, I am forced to either buy enough to keep the demand up myself, or go in with enough other buyers that will also keep the demand up. There is absolutely nothing more going on here. Right down to traders who work the inside bid and offer … And take profits on one-tick spreads. They do not predict the future either. It is that simple.

It is also fortunately this simple: since nothing more is going on here, all any trader needs to do is follow the auction! When buyers are auctioning with enough demand, go in that auction yourself! It is truly that simple; and there is no magic snake oil that is revealing that to some other trader. Even there, once you have all entered that auction, you are just there in the auction still: sellers and everyone else in the market are free to begin to auction against you. You need to manage your trade and still follow the auction to understand where that momentum is ending.

How Do I Learn the Order Flow and What Do I Do?

First we can explain in simple terms that professional trading firms vet their traders on pure order flow. Traders do not use charts, but order flow alone. A plain fact that should read the way it looks: order flow tells you factual things; and charts simply do not (nor do any single one of the hundreds of indicators you might run on a chart).

Take another look: a pit trader. This trader is taking more trades today than you might make all year! That is a valid number since today, all of those transactions were taken by this trader; and why not you? This trader is trading their own money, just like you! This trader is making their own decisions, just like you! This trader is looking at each trade one-by-one, just like you! They are not part of some secret society that does know the future, and trading in step. They are simply out-auctioning the other traders, and that is all there is to it.

This trader is standing on the floor with no computer screens! Look: there is no computer there with that trader. They do not have Bollingers, RSI, or anything like that whatsoever! They have nothing but a pencil and paper, and a single board on the wall with bids, offers, and trades! That's all! How could you possibly think that you must depend on certain tools when this trader is out-trading many on a continual basis. Furthermore, what could make you believe that some indicator is somehow able to plot something that could out-auction that trader? They simply will not lose money today. That's all there is to it. Thousands of computer screens with thousands of studies all over the world simply will not out-auction this trader every single day; and in fact many of those traders are going to lose the auction to this trader all day long!

So you must have some sort of skill in the auction. Once again, we just need to feel that if you do not, we would be encouraging you to gamble! We prominently display the FTC disclaimers: there is real risk in trading! We simply could not be running an honest business if we did not deliver a product that is simply designed to give a trader the type of feedback on the actual auction that they need to participate. Nothing will ever tell you in honest truth that "the last sequence of buying means you should stop now". It's just that simple. The auction is always a dynamic thing: your orders become live and visible in the auction, and traders will react!

The Entire Point Lies In When You Begin To Follow — A.K.A. The Whole Market is not Moved by a Single Controlling Finger

You need to auction in your own place in the market, and from the point where you begin to follow and participate. What we can't do is: follow "the auction as one single whole" and then actually generate signals and indicators that "tell you something" — as if the whole market was moved by a single controlling finger. It is all based on perspective: the exact moment where you began to follow, who has been trading, how they have traded, and what is happening now is what the auction means to you there at that time! When transactions go in and come out, that is where the auction is standing right now, and that's all that matters for the participants who will make moves here and now.

Successful trades are taking place on a continual basis, in a flow … You are able to make decisions at arbitrary points, and there's no algorithm that tells you anything about it! Indications that appear will cause you to stumble out of your own stride! It is so arbitrary: there is no single point in any market, any range, or any single bar that means something definitive to you in any way! No one in the world can develop that product. It is why: when you have indications and signals generated on your chart, you still feel that need for the context that will confirm or deny things; and "how to properly read" things, and on and on. There are more caveats than definitive points. That's never going to go away. You begin to follow the auction, and then you simply have become an absorbed participant: enter on the right side of trade, and that's all there is to it!

What Is the Order Flow

We truly mean it is this simple: in NinjaTrader®, open a Time and Sales, a DOM, and a Level-II. That's it! What do you do? You simply follow. Traders trade in, and price moves up. Some traders begin to liquidate, causing some reaction. Some late buyers then also liquidate. Price then begins to travel back. Meanwhile, new sellers may also enter on the reaction, and there might be more price action down. The auction reaches some point of balance: deltas have unwound, and there is a balance price. The new sellers then have their own decisions to make; and things depend on whether other sellers add in, the sellers liquidate out, or whatever. else happens The same activities begin again here. That's all that is going on! It is going on on a continual basis; and traders may push price to higher or lower levels and balance there, and now the market has a new starting point. Traders initiate based on their own reasons and/or strategies, and price action begins in either direction based on the activity and nothing more.

All you have to do is work at following the order flow enough to get comfortable to understand what is going on. That's it; and it doesn't come from magic indications that tell you things by measuring magic metrics that somehow "know" what the activity represents. Traders may enter at any time, and the auction is always just here and now: this is the bid, this is the offer, and who is trading?

It Will Not Take Any Trader Long to Get Comfortable With the Order Flow

Please view this video on our YouTube channel for a straightforward view of following the order flow:

Hammering More In Favor of a Raw Tool Based on Pertinent Volume, Activity, and Feedback

Buy and sell signals must be considered "black box" strategies for important reasons. The most important is what we've already said above:

The Entire Point Lies In When You Begin To Follow

No signal can deliver a "brick wall entry" with no stop. If the signal generates an entry, then it also has "caveats" that are intended to direct you to avoid entries if certain unfavorable conditions are present. If a product leaves out scenarios that could "fool" it, run away from that product immediately. Most define confluent conditions to be met before an entry is considered the most likely to show profit within the stop and other parameters. This type of thing simply develops more and more very quickly: you become removed from the actual activity in the auction, and depend on the signal! That is dangerous!

You can consider this unsightly point also: if such a signal is generally available, then thousands of traders may run that strategy for the sole purpose of seeing where entries are signalled. At this point, traders with size can take any type of action in response; right down to tactics designed to beat traders that may be entering off of that signal. Unsightly, right? We're not focussed on that type of activity here; yet there is much more; and anyone developing a strategy for general consumption would be naive if they believed their code was somehow flawless; much less out-strategy proof. Even the largest traders in the world do not have flawless strategies: witness any flash crash. Traders should be skilled and prepared. (Do you see what is at the core of AD right there? — Methodology includes a diversity.)

Why If They Are So Fancy Have They Only Given You Less Than 1% of the Picture?

Let us explain even more. We'll consider some "average" day in the S&P Mini 500. First, consider a worst-case estimate that the "consistently profitable traders" will constitute only 15% of all traders in the market today — the rest will in fact not show profit at the end of the day. Now, consider that it's said that very large traders may constitute as much as 85% of all the volume transacted (and here we do presume that those traders fall into the successful group). Lets make that more conservative and say on this day they constituted 75%, and 75% of all the traders today came out with profit. In this "average" day, 1.6MM volume transacts, with an average transaction size of 7. That might yield an estimated 250K transactions today. If we look for the 75% of 75% success rate, and admittedly do some fancy estimating here, we might arrive at something like 50K successful transactions that the tool should point out to you, accounting for the size of very large traders. If you looked at an intraday chart on this day, you will find a lot of variance, but perhaps as many as 200-300 bars in the session on a chart that plots a lot of bars. That would yield 166 successful transaction in every bar on that chart! We defy any trader to show us how it is possible to engineer a general purpose product that could understand which of those possible 166 transactions is best suited to your particular strategy, trading style, and acumen. They are all profitable trades! Much more, who, in the world could engineer a product that would understand the parameters of all 50K of those trades?

The market is simply not a machine. There are live, active traders here, and every single transaction is subject to dynamic adjustment and discretion. Furthermore, 'Bots, arbitrage, liquidity providers, and anything else "automated" are simply not strictly 100% machine and no trader. That's not what's going on.

What you do to be most effective with a product like ours is lean on your own skills. If you believe that you could find a product for a trader with no skill, then we unfortunately cannot meet eye to eye there. We are not couching any of this in AD being somehow esoteric and/or "hard" to use. Nor are we couching that in only the top 15% can use the product to advantage. What is going on is that many of those profitable entries are being exposed. You only need to have one or more strategies, and skills (and you may have very many) in order to look, ingest, and understand. Begin to follow, and you will begin to see clear opportunities revealed frequently. And we hope, also ergonomically.

Understand how to follow the auctioning and the traders, at least at a minimal level, and you will see very many ways to reveal signals; and, to feel "comfortable in the seat of your pants" with them.

A Little More on This Topic

We believe that value is auctioned in more than nine ways in the binary auctions:
  • Buyers and Sellers (that's two)
  • Bids and Offers (makes four)
  • But further, we may distinguish between the absorbers and the other bids and offers. Depth may be presented to the market; but it is a very different story for contracts that do execute. (This adds one)
  • Trades that open (one of each kind)
  • Trades that close (also one of each kind)
We're not attempting to be definitive; and if the above possibly seems to fall short of academic in any way, please understand our intent here is to truly point out that traders can trade in at least this many ways. We in fact continue. If you are reading carefully, we can also include two types of absorption (opening and closing) specifically; and, also note that there are absorbing bids, and absorbing offers.

The grand total then could be 16! And we're just going to stop there: you might go on. If it seems large, or this is the first time you've seen this covered this way, the truth about this number cannot be denied. Even if you cut it in half, the binary auction is clearly a diverse thing.

The spirit of the above is that traders may enter to inject supply or demand into the market; or the reverse: remove it. Traders do that in any way that gains them the best strategic advantage; and other traders in the auction are left to auction against that activity. No trader is in the market to "cater" to other traders. If traders are trading, they are doing so strategically to execute their own positions.

Therefore, What All Traders Are Doing is: Observing the Auction and Deciding (Even Large Traders)

If you have a strategy, clearly you must want to execute your position; and that is not hard, nor something that requires "magic snake oil" to tell you when and where to execute. What is hard is auctioning.

What we observe is that the security must reach auctioning that reveals something about the auctioners: it is at this time that you can make observations. In other words, it should seem clear that if the agreed upon value is hard to understand, then you will be in more indecision. (And take heart, because again this certainly applies to all traders as we've said.) We simply need activity to tell us something about the other traders here; which will have more or less bearing on the value.

What we've said above is something to take to heart: traders with well defined strategies — they know the size they want to execute, and many other factors — simply have a much easier time looking for their own entries than a trader that is looking for the many conditions in the market to synchronize to their advantage. The latter trader is simply, by fact, in a tougher spot in the auction. Yet in any case, there is nothing more to do than follow! Even the "comfortable" trader is doing that!

Never Deny the Fundamental Value of "The Best Position in the Pit"

As we have said: you should be aware that the best possible fundamental advantage is in being able to follow. If you are not prepared for any given activity, symptom, or condition, then nothing helps you more than the tools needed to simply understand again.

Please notice that this must be put in the perspective of your strategy: if you are watching for swings or long term activity, you cannot react based on the inside bid and offer right now. You can piece that into a longer view: if you watch behavior at key levels, and take notes, you could be very much more prepared; and witnessing more has the potential to expose anything useful at any time; so it is obviously good to simply be able to be there.

Trading the order flow is nothing more than being comfortable enough to follow the auction. "Driving" the dashboard opens more opportunities; and avoids imposing interpretations: the trader is the more intelligent one in the auction.

Concrete Activities

The following does not directly evolve out of the previous subject matter; since this covers some concrete activities to perform with the tools to find information. But it does begin to lead in to using the tools, and we begin from a perspective that is stepped back and moving in ... So it is included on this page to begin getting a perspective on the state of the market now — we'll begin on the longer time frames and piece together where price seems to have landed now.

Fundamentals

We will not be discussing fundamentals here, yet we expect that in terms of a workflow all traders begin here. You will have your own sources for news, events, and information; and that will truly form the foundation for the way you can frame the market right now.

Context

With fundamentals behind us, we can also expect the trader to desire some measure of context: the state of different markets compared to one another.

Timeframes Move From Long, to Medium, to Short, to Now

When looking at markets you anticipate participating in, and markets you're using for context: in each market, the workflow should tend to work from the longer term view down to the current day.

In addition, again, you must understand your own time frame. If you are looking for swing trades, then you cannot make quick decisions based on the inside bid and offer alone; yet as we've already said, the activity right now can potentially expose information that you can use if it reveals something pertinent to the value.

We Believe Markets Exhibit the Same Types of Behaviors on Different Time Frames

If you perform the same type of analysis on an intraday chart, and a daily chart, you should observe that in some general sense, behaviors are very similar. Accumulation and distribution will take place on levels from scalpers to institutions. Swings, rallies, fades, etc. all truly tend to play out on any time frame. The pace of the activity is likely to rise on shorter frames. Activity will also be commensurate with the volume and liquidity (since the participation level is different on different time frames); and that affects what the final impact on the true value might be.

Long Term Tools

Once again, your perspective may begin on a monthly, weekly, or daily chart; and then progress into hourly timeframes. Here, we'll begin using Auction Dashboard™ itself on an intraday chart; but the context is assumed to have begun:


Finding information on the long term view can be achieved in many ways with Auction Dashboard™. Some information we may look for:
  • Influential levels, zones, and price tiers
  • Accumulation or absorption patterns
  • Flow of volume in or out of the security
  • Trending behavior, congestion, rejection
  • Patterns; and confluence
    • Volume
    • Activity
    • Size
    • Price action
And obviously much more. In fact, you can simply combine some of these to arrive at other studies.

BackFill

The first tool we'll use is BackFill. AD has two ways to BackFill: Bid/Ask BackFill loads all of the trades, as well as the bid and ask data; and so it can provide more detail, as well as information related to trades and the bid/ask: trade sizes, deltas, absorption, etc. TPO BackFill also provides great advantages: it runs quickly without loading data, and so you can use it to fill large ranges of history. The primary tradeoff is in the data loading: Bid/Ask BackFill is more resource intensive and takes longer to complete. The number of days you are able to BackFill with Bid/Ask data will depend on your hardware.

Session and Overlay Profiles

We opened a 120-Day intraday AD chart; and used the TPO BackFill to reconstruct all sessions on the chart. We wound up with 87 prior sessions to look at from the TPO standpoint. The first place we'll visit is the session and overlay profiles:


AD will compose an overlay of the current session with the number of prior sessions that you select. Choose "Select Prior Sessions to Display or Overlay", and set that to all loaded prior sessions. Then change the display setting: "Current & 87 Prior Sessions as Overlay". Also turn on Auto Scale for the profiles so that you'll see the full price range on the chart. This is a great place to start to locate acceptance and rejection — pockets and modes on the profile — in addition to the value area and volume point of control.

We have an obvious P-Shaped profile for this 87-session range. Looking back at the Daily chart reveals why. Still we have a clearer picture of the mode on the "P" defined by the volume value area. We can also now see a well-defined double-development in that range.

Mark Prices With Shift-Click

At this point we will capture our work by marking off the important levels. Shift-Click on the chart OR in the Price Marker Strip to add a marker (clicking on the chart automatically extends a line from the marker). We marked the value area, double development, and also the development and pockets below (good levels to have some perspective to begin with if price travels back down: they will stay on our chart as long as we save the workspace).


Why are these levels relevant? They are points of acceptance and rejection over an 87-session range: clearly there has been a lot of activity at these levels; and if the confluence is this high, there is sure to be some valuable interest in these levels.

Well Known or Researched Levels

Many traders may have other sources for well known levels or sources of research to identify levels. Levels you find based on volume have extreme relevance. You may compare the levels for confluence, or try to determine behavior between your levels and what the profiles reveal; yet in any case, the relevance of levels found by looking at the actual traded volume and activity will reveal relevant and valuable information.

Making Composites Over Arbitrary Ranges

Now that we have BackFill data on the chart, we can create Composite Volume Profiles over arbitrary bars that contain data — even across session boundaries.


Composites can reveal information about how value developed. In our P-Shape, we have a lot of even development; but we can also see some information in the deltas. The delta display on the composites — it is the horizontal display on the bottom — shows a "Min/Max" view (notice also that there are two deltas: the top delta is grey and blank in each composite here since it displays Aggressor Absorption™, and the TPO data has no Bid/Ask data to generate any absorption picture).

The body of each delta is green: each is positive. The text display shows the total volume, the delta, and the delta percent. The thin "wick" on each delta shows how far more positive and/or negative the delta reached before closing at the level shown by the body. The first composite shows a peak in the buying, and a close still positive but notably lower than the peak. But the last composite shows a similar picture, with a much higher peak. It appears possible that the buyers have begun to dwindle in relative terms at this point.

Using the Cumulative Delta

We've said that the BackFill was TPO, and TPO does not load bid and ask data; therefore deltas are estimated. In fact, this is the same "type" of estimation that is performed by standard indicators: they use the OHLC to estimate how much volume is up vs. down. AD in fact tries to take that a bit further with its own algorithms in the TPO reconstruction to refine it just a little further. Therefore, while not exact, we're simply saying that you can use the Cum Delta here to make at least some further observations.

You may note that we highlighted the value area and double development prices in red. There is a reason. Looking at the cum delta, what we observe is a possibility of what seller accumulation can appear like.


We notice that in areas where the delta is positive, it tends to be accompanied by up-price action. When the delta turns negative, it mostly exhibits holding. In comparison, the buying is affecting more price action, but the selling seems to be more like absorption. It is entirely possible for this entire value area range to form a seller accumulation zone. Price has recently been very much up on the daily chart. We now see some holding, and there is confluence with the sellers: the price is not "rejected", yet the sellers do appear, and price holds while volume is steady on average — at least, it is not dwindling by any noticeable degree. The doubly-developed shape adds to a picture of an accumulation zone.

We Know the Future

We will point out here that we do know the future of this market: we performed this analysis over historical data. However, we want to assure you that everything we have described here is 100% in line with the way we would analyse any market on any day.

Getting Bid/Ask Information

We can refine our analysis. We took the time to run a relatively lengthy Bid/Ask BackFill on this chart: 28 sessions. Auction Dashboard™ will replace the TPO data with the Bid/Ask BackFill, and retain the prior sessions that we've already BackFilled. Notice that this chart is zoomed in compared to prior charts above: we are now looking at that last 28-session range.


And again we created composites, over three separate ranges. The Bid/Ask profile in the first composite is very interesting — we are viewing the expanded composites, and the Bid/Ask profiles are displaying Grand Total First Accepted Depth. We see that there is only a 51% positive market delta in the composite; yet clearly the offers were overwhelming the bids. It is clear that very many sellers were interested in offering this price range.

We see positive market deltas in each composite; yet the absorbers are heavily outweighing the buyers in each one. Clearly there is a lot of offer activity in this range.

Volume Filter

What may look odd is that we also have the filter on. We noted that the largest trades were around 2K, so we turned the filter up and looked for them. We can see the sellers stepping in — in the sparse red volume — at the interesting level. We can also see some "trading places" at the POC in the middle composite. We'll mark that price as well.

Moving In on the Time Frame

True Auction™ History

At this point, we have defined some very interesting levels. We have a reasonably well bound range — 70 points separate the 87 session value area high and low — with five very influential levels. We can use other tools to dig deeper: though it may seem we have already congested enough levels in here, what we cover here can be used on any chart at any time: you may not have such a clear picture already developed.

We refreshed our chart; and we ran the TPO BackFill again; but this time we ran a Bid/Ask BackFill over only five prior sessions — something that is faster to generate on an intraday chart before the session begins.


Above we're looking at the True Auction™ History display: Update Frequency, and Absorption. We turned the threshold up (to 75% here), and In both views we can see confluence with our price levels.

We also see a little more appearing above and below the mid level that we found with the trading places. We interpret this type of pattern as "boundary" activity outlining the whipsaw around that price. It is a pattern that can appear, when traders on one side are destined to "battle" with traders on the other side, eventually agreeing on the value price, or moving into value. It may also be described as "reactionary" behavior related to the large traders in the middle. In either case, the pattern is like a flip-flop around some center price; and then decision.

Confluent High Volume Prices

Another good way to find where traders concentrated activity.


Guess what? More confluence!

Again, you may use one, another, or several things to reveal important information. It's clear that even at this point we have an edge over traders without the tools.

Peering In

We are very big fans of "peering in". Many traders begin the day by watching the auction for a 30-minute period; and getting their bearings in order to join. You can obviously do the same. However, with AD you can do more. Zoom the bars to a wide view, and scroll back to begin following what has transacted. You should be able to get your bearings up to the current point in the market this way. You can easily reveal more valuable information about the long term view that you have, and what is happening now in reaction.

We are going to end this part of the methodology here; and point you to other pages in the User Guide that expand on using features in the short term view to reveal the methodology and signals. Please see the "Tips" on Reading Transitions in the Momentum Delta, A Walk Through the Short Term View, and also the specific pages on the bars and Auction Visualizer™ since they contain tips and strategies in addition to settings and features.

Important Perspective

What we will leave you with is: do not allow yourself to become too absorbed in the very short picture. It is easy to identify so many of those 166 successful trades in each bar, that you truly may in fact become "too eager". Remember that we are quite serious about the opportunities; and traders are in there operating on so many times frames, right down to traders simply working the inside bid and offer. If you are following, then keep your perspective, and let business transact if that is what must happen: never try to front-run something on your own without size to do so; and remember that your orders become live and visible in the market: do not make bold moves if you seem to be too "pioneering" and cannot actually hold up the supply or demand that you seem to be injecting. You will simply be out-auctioned!