All language subtitles for Auction Market Theory

Our guys welcome back so I'm

I'm going to go over today's daily market review and I wanted to talk a little bit more about auction market theory

Because I feel like the last video that I recorded was a little bit convoluted and I just wanted to

You know kind of put this

Topic into layman's terms something very simple for you guys to understand

This is pretty much the premise behind how every Market operates so what is an auction Market

Don't auction Market we need a buyer and a seller and between those buyers and sellers

Is it going to cause some type of imbalance so the market is always going to seek balance and it's always going to try and discover

What is premium and what is discount

So if I flip over to this this is probably

The simplest example that I have found

So where does auction Market Theory come into play so

In a market we're really only going to have three types of market conditions or

Or prices for specific Market

They're either going to be at a premium a discount or somewhere at fair value which is

In between a specific range

So when is markets going to consolidations and

We can find the narrative behind what these Market participants doing and who is operating in the market

Who's trapped and

You know who is I guess where the smart money is operating right so

In a consolidation typically markets are trading at fair value

So there is some type of balance between buyers and sellers and then we have some type of

Market event which will either Drive the market up or down

Which creates an imbalance

Write an imbalance of Supply or demand

But the Market's operate in a specific manner that

Play that books price

And it understands that there's going to be certain buyers at discount

Levels and sellers at premium levels and the market algorithm just drives to those levels to facilitate trade

So the discovery comes into play when it's searching for new buyers or sellers

At specific levels

All right so for every buyer there must be a seller

But the market is going to reprise to either a premium a discount or fair value

All right so we have this example

With the car market right so we have fair value

Some type of Market event that is driving it up driving the price up of this car but save this car

How far is bought in the past there might be an imbalance of Demand versus Supply which will drive

The market higher

Alright if we run out of willing buyers at a certain price

There's going to be more sellers that come into a market

Okay and if they have too much of

A specific asset at one price and not enough willing buyers the market has to reprice to fair value

Okay so let's hop over to the S&P and

Hopefully I can make this as simple as possible and kind of help you guys visualize you know on a

Fart

This whole theory in action

All right so if you've been following me I've been looking for higher prices in the S&P

And I had mentioned that last week when the market was trading up here right we could possibly

Balance to a discount before going higher

So now this week on Monday

I had you know message some some clothes people in my group that this looks interesting

So when we took out last Tuesday is high

I said this level is now interesting

Why was I interested in this level specifically

Well I'm going to try and get you to help visualize this so let's just say that this Market participant in here

Again his name is Chad

Right so and if Chad expects the market to go lower right

If he's expecting that the recession narrative behind what's driven by the media

That this Market is going to top and we're going to seek all-time lows

Narrative is

Driving his position in the marketplace so if he is taking a bet against the marketplace

He's going to set

A cell order in here

To short the market

And in order to protect his Capital he has to set a buy stop order and a buy limit order

At some point lower in price

All right so let's put in his short position here

So you just shorted here

Is protective stop is up here

And let's say his Target was

New yearly lows let's just say so this was the beginning of 2023 let's just say

Play that he wanted to short the market and he's expecting to that the market is going to trade the new yearly lows right

So we have his entry here

Centuries at this price

Let's say you answer that right around 4

4008

So he has to set a buy stop order

All right so if he's short he will buy his position back at a loss

And if it reaches Target it's a buy limit

Because he has to buy back for a profit

All right so when he answers this position he's creating two additional orders in the marketplace

Okay so these are Chad's when he enters it back here

This is what his position looks like

Entering a short he's setting is by stop protective stop and then a buy limit for his

Target

All right so when we fast forward to what where we are right now currently

What is this signaling up here

Alright if I'm if my premise is overall bullish on the S&P

What is this narrative

And why do we see a deep retracement and a huge rally today

Once the market trades up here

I assume that Chad is not the only one shorting it

Say there's nine other traders that shorter the market

And let's say there's only 20 participants in the market overall

All right so 10 of them are short

So they're by stop is here but let's say the market trades up there

There's less by orders let's say there's somebody up here

But not enough for the market

To facilitate up there because

It's already at a steep premium right let's say if it goes up there and now the order book is dried up

There's not enough buy orders up here to facilitate and there's not enough willing buyers for it to go up there

All right so

What's the market trades up there Chad and his nine other friends

Are willing to buy it

Add a loss

Right and we're expecting that

The market is already at a premium where nobody is willing to buy it above old highs

Well the market is just going to seek or rebalance

It's going to rebalance to a discount level in the market

All right so we had this swing from this low to this high

If we drew that out

Alright so

This was a premium all it did was rebalance to a discount before I was allowed to run higher to

To these stops

Okay and then

Same thing happened here we had a swing low to a swing High

The market will just trade to a discount offer lower prices and then send it higher

Okay so what is happening down here right

Chad took a short up here

When we get down into a discount who is buying the market

Okay so let's say that I'm going to step into the marketplace and I think that the S&P

Is going to go higher

Well if I'm going to take a bet

That the market is going to go higher I'm going to place a long

With my exit

Where Chad's stop is

Alright so I'm going to move this over it's just a tiny bit

If I'm buying it down here right

This is my entry

So I'm long on the market and in order for me to set a protective

Position I need to have a sell stop

And am I Target will be a sell limit

So how does this

How is this trade facilitated right I'm entering in the market

When it gets up to my sell limit

Who is buy stop is resting at that level

Chad's buy stop is resting above that high

So I can sell my position to Chad

He's taking the loss on the position and I'm

Taking a win

All right so this is the auction Market my order is being paired with someone else's order at

Premium level

Once the market trades up there

On this bar

Let me just go back

Skip forward one bar

Once the market trades up there

Betrayed is facilitated and now I'm out of the market

Alright so there might be somebody else that steps into the market

Where Chad took a loss on or I could switch and reverse my position

If I'm smart money I caught the long down here and I exited on Chad's by stop

Well now I can sell it and put a protective stop

Above This High because we purge the high

I am what am I going to look to Target

If this is the swing if this is the price swing the parent price swing

It needs to trade back down to equilibrium

So if we go over to this Market example

Let me have a low

You have a high and then somewhere inside of the range

They will create a fair value

Between

The low and the high

All right so we have a by imbalance and then a cell imbalance

We have a buy imbalance

Skipping forward

This is a by side imbalance they're replacing it to a specific discount level before

So this is the low the high and then we'll reprise it to a fair value

And if the market is predominantly bullish they're going to want to buy it at fair value before

The market trades up above

The last premium High

All right so let's dive in and take a look at

Dee's fair value gaps and inefficiencies

Right so I mentioned on

My last video or a couple videos ago that inside of these imbalances

To 50% level

All that and balance is another point of equilibrium I hope you have a parent price when we have the

What will the high and then somewhere in the middle is fair value

So when we find this this imbalance in the marketplace this is a buy side and Bal

Play Southside inefficiency

The highest candle and the lowest candle creates a gap in price

So ICT had mentioned this but if you think about a paint roller

Alright if you roll up the wall

Just one quick pass

It's not enough to coat the whole wall

Write as an analogy if it's just one quick pass you're going to have white spots whatever the drywall color is

Behind the wall

Alright so we have at times we have to come back and give it a second coat

So what is it going to price to it just pricing to a level of equilibrium between the

The imbalance

So if if I was looking at this trade and it was very similar to what I had seen last week

Alright we have this by side and balance

And we have to 50% range

When we when we get deep deep deep retracements in a bullish environment

That is where smart money is looking to position themselves

On the dip

I don't want to buy it up here because that's a low probability trade

Only only people that are on the losing side of the market are buying above all the highs right we want to

Five Below old Lowe's

Okay

So if we drop down into the 5 minutes today

I'm just looking for some reason to go long the market

So if if this is the daily level on a 5-minute time frame

So this premium high of this imbalance

Hello and then fair value in the middle

Right that is the equilibrium point of the of the range

So when I drop down into an intraday chart I can see these daily levels right we have the premium High the equ

Turn the living room Point end the low end of that imbalance

So what did this do what was the narrative here

Right around lunch time I had mentioned that

The market is

Down a whole lot on the day so when the market on the 930 Bell right the market was already down

A whole bunch the smart this whole candle looks extremely bearish so when the market

It really opens the Futures Market

You know the CME open

And the 9:30 equities bill

When the market is down

Into a discount area

What are the probabilities of a continuing lower

In abolish environment

We have targets higher up

What's 4200 possibly

The markets

Had an accumulation phase on markup a retracement a push higher

Right there's no there's no signs in the market that are currently showing us bearishness

So on a 5-minute time frame we're just looking to get in sync

And find a market structure shift

All right so this is the auction Market Theory someone is being flushed out of the market

Find me a Chad's cell stops possibly

I might be shorting it let's say if you come into the marketplace and you see that the market is down on the opening bell

I think it was one and a half percent Maybe

On the day

Who is going to continue selling it

Retail and

Other uninformed money is going to continue selling into the lunch hour

Ryan we have a small push lower from the 9:30 open

Where is the 9:30 open we push lower

And then right around lunch time

The time of day

We have a market structure shift

All right we had a swing failure

And then a push higher

By creating another imbalance in here

Buy side and balance

Before pushing higher

So whoever's positioning in here is going to just look to exit at some predetermined point where

There are

Buy stops resting

So if they're going to get long inside of here within a daily discount where are they going to Target

They're going to Target buy stops

We have

Buy stops above the marketplace that are now our next targets

Which is possibly our Target for tomorrow and then we have

To 50% range of this week right so this long week has a premium and discount

Volume level

Inside of it

And then eventually we have the old high back here

Okay so this whole narrative is based on buyers and sellers

Where are they returning to fair value right this is a fair value Gap

In price

And where are they going to reprise it to at a premium

So within this smaller time time frame you know there are

Additional

Range levels to play to

So we have this law and then this I

And they're looking to offload above the highs and if we go back to the to the

The auction market theory

Add fair value

Fair value in here a market event

Fair value with trading between a range

Market event so we have by side and balance sell sign and balance right by imbalance cell and

Balance

Fair value

And then it's allowed to reprise higher

Putting this into contacts right we're just always trying to figure out who the

Participants in the marketplace are what are they repricing to because this whole move today was

What's them repricing to discount

I have to just coming down here below equilibrium and sending it higher

I saw this set up last week was very similar

We had a run this is the by side imbalance

Do a discount

Do you have some level of discount in here so these are inside of here these are the imbalances that we need

I need to look for

And then I'll lower time frame there are possibly setups in here that are respecting those levels

So what am I looking for on the S&P we are still looking for higher prices and now that we have this

In place right we're expecting our next daily candle to form some type of Swing point

And so we could possibly have the candle like this one

Let's just say it opens up here

No some type of Wick in here

Can I can I get this right

Jesus Christ

We have the wick possibly down here

Where can I get that in the middle

It's kind of annoying

All right well I mean we'll have a possible swing point in the market so this will become our invalidation

Alright we're just looking for higher prices

Now I'm going to flip over into the cable

And

Can I give you guys the rundown on what I was looking for on the daily chart

So we have this sell side and balance

I was traded above it

And we engineered liquidity above the highs

So when it when the market first rated out there let's say chat was back here right

Let's say he's got a short bias on the market right when the market trades up here

Play Chad tells his friend or maybe you know somebody at the dinner table hey you should get short the market or short the pound

I think it's going to keep trading lower right so let's say he told his friend Lisa

And now she short the market

Right now they have their stop losses above both of those highs

So what does the market is going to do is just reprice it to a discount

Before they send it higher so if we measure this using a Fibonacci

This is all it's doing

Yesterday the market was extremely embarrassed but it's only doing that to return to a discount

What's your Narrative of the market is going to keep you on the right side you might have losses here and there but

You're a butt

The important thing is to create a bias generate a bias and stick to it

I have the markets trading down

What is a trading to

We have this by side imbalance in here

All right so the market is trading higher

It's just trading to a premium

Returning to a discount

And then we have a market structure shift

What does a short-term swing low

So the market is just returning to a discount and then we have even on a smaller time frame we have

This is Paul swing return to a discount and then hire

The direction is bullish on the pound until further notice we have

And then we possibly have

This inefficiency up to this candles low

The high back here which is May of last year

I said let's go over to the dollar and

Take a look at what I'm seeing right now so the daily I'm still targeting down here I think tomorrow

Tomorrow we possibly have a large expansion candle to get down there below is low at least and then down in here

So during New York this is what I was looking at

Remove this

Turn off the sessions

Alright so

The Euro and the pound are highly correlated with the US dollar the Euro more so than the pound but

What so are all the risk assets so when I came to the marketplace this morning this was the fair value you got that

So the narrative behind this is pretty much the same thing that we have a premium High

A discount low and then return to fair value

So just pretty much inverse this

Are we have a cell signing balance

Return to fair value

Before driving lower

So we barely taking Mondays low I'm expecting possibly

For the market to trade up into here

Tomorrow and then

On a daily basis try and Target the 101

All right so I hope you guys found this useful if you have any questions just leave them on the comment section or drop

Play message thanks bye