New Techniques  |  JUL 2002

Auction Market Theory And The Longer Time Frame by Donald Jones

Auction Market Theory And The Longer Time Frame by Donald Jones Last issue, I provided an overview of Auction Market Theory. Two important facts should be kept in mind as I discuss the next stage, applying the theory: First, markets are not correlated on a day-to-day basis, and second, markets are in a continuous cycle. The lack of correlation precludes finding market condition from yesterday’s market, but you still need to know the market condition to make trading decisions. You find out about market condition from the Overlay Demand Curve. MARKET CONDITION FROM OVERLAYS As traders, we speak casually about market condition. Is the market trending? Is the market unusually volatile? Has it crossed a resistance or support price? What path is the market expected to take? Trending implies a market that may be moving during a certain time frame. Support/ resistance points are historical and rarely tied to current market activity, although ultimately, current activity may provide the next set of support/resistance points. But this rarely helps make today’s decisions. Market condition plus a knowledge of the market cycle prepares you for whatever path the market takes.

by Donald L. Jones