hard · Volume Profile Analysis auction-market-theory
During an overnight session with an illiquid order book, a currency pair spikes 40 pips above the prior day's value area high in under 90 seconds on a burst of algorithmic stop-running, then reverses fully within 3 minutes. Total volume during the spike is unusually low for a 40-pip move, consistent with a thin book rather than genuine two-sided participation.
Why should a trader be cautious about treating this overnight spike as equivalent in significance to a daytime-session excess tail formed during normal liquidity?
- No extra caution is needed; low volume in an illiquid book is actually stronger proof of genuine two-sided excess than a normal-liquidity tail.
- In a thin book, the stop-run-and-reverse can reflect mechanical order imbalance rather than a genuine rejection by real participants.
- It should be dismissed outright, since overnight spikes in illiquid books are never relevant to the next day's auction.
- The spike should count as more significant, since the larger 40-pip move automatically implies a stronger rejection regardless of liquidity.
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