PRAETIR / Concepts & indicators

Auction Market Theory in trading reviews

Auction Market Theory is a framework for describing price discovery as an ongoing auction. In a review, terms such as balance and acceptance help label observations consistently.

Make balance and acceptance specific

Here, balance means repeated trading within an identifiable range. Acceptance describes sustained trading in an area. A brief move outside the range and a longer relocation are different observations, even if both initially look like a breakout.

Define an observation rule

For a synthetic review, mark an initial range from 5,000 to 5,010. Price briefly trades up to 5,012 and returns. Record time outside the range and volume executed there. Touching 5,012 alone does not establish that trading has relocated.

Choose a measurement rule before reviewing outcomes, such as the time window and volume share to examine. These are your documented criteria, not universal thresholds dictated by the theory.

Read time, volume and depth separately

A volume profile shows executed volume by price; a time-based profile uses time observations. An order-flow heatmap describes displayed liquidity. These views can complement one another, but they do not measure the same quantity.

Apply descriptions to later cases

Preserve the original range and criteria. Check whether you use the same terms consistently in later sessions. Renaming every failed expectation afterward removes the method’s value for reviewing decisions.

Sources and methodology

Sources explain concepts or the respective provider’s product descriptions. Worked examples are original and synthetic. Verify current contract specifications before use.

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