Auction Market Theory
Volume Profile Analysis glossary · Auction Theory & Market Profile (TPO)
Definition
The conceptual framework underlying Volume Profile analysis: markets continuously auction price up and down to discover fair value, leaving footprints (volume nodes) that reveal where value was established and where it was rejected.
Auction Market Theory in plain English
Auction Market Theory is the big-picture idea behind all this: a market is basically a never-ending auction where the price is raised and lowered constantly to discover a 'fair' price that both buyers and sellers can live with. As trades happen, they leave footprints — records of how much trading occurred at each price — and those footprints reveal where people agreed on value and where they flat-out rejected a price. It's like watching where a crowd lingers at a fair versus where they walk right past; the lingering spots tell you what everyone considered worth their time.
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