Volume Profile: Auction Market Theory

1. The Core Philosophy

The market has two states:

1. Balance (Ranging): The market has found a fair price. Buyers and sellers agree. Volume builds up in a "bell curve."
2. Imbalance (Trending): The price is considered "unfair." The market moves aggressively to find a new area of value.

Your Goal: Identify when the market is moving from Balance to Imbalance.

2. Trading Within Value (Range Strategy)

If price opens *inside* yesterday's Value Area, the market is in balance.

• The Trade: If price touches Value Area High (VAH), look to Short back to the POC.
• The Trade: If price touches Value Area Low (VAL), look to Long back to the POC.
• The Rule: "In value, we fade." Do not look for breakouts here; you will get chopped.

3. Trading Out of Value (Trend Strategy)

If price opens or breaks *outside* the Value Area, we are in "Price Discovery" mode.

• The Setup: Price breaks above VAH and retests it from above.
• The Logic: Previous resistance (Unfair High) has become support. The market is seeking higher prices.
• The Target: The next High Volume Node (HVN) on the chart.

4. Low Volume Nodes (The Fast Lane)

An LVN is a gap in the profile where very little volume was traded.

• Physics: Price moves *fast* through LVNs because there is no liquidity to stop it. It's like an air pocket.
• Strategy: If price enters an LVN, expect a rapid expansion to the next HVN. These are your "impulse legs."

Conclusion: Context over Patterns

Candlestick patterns (like Dojis) mean nothing without context. A Doji at the Point of Control means "Agreement." A Doji at the Value Area High means "Rejection." Volume Profile gives you that context.