Price is an auction.
Markets continuously search for prices where buyers and sellers are willing to conduct business. Price movement can therefore be viewed as an auction process. The market moves away from areas of agreement to search for new participation. If the new price attracts participation, the market can establish acceptance. If it fails to attract participation, price can be rejected and rotate toward previously accepted value.
Balance
Buyers and sellers are conducting business around a relatively established area. Price rotates rather than making sustained directional progress.
Imbalance
One side becomes sufficiently aggressive that price begins moving away from established balance.
Acceptance
The market demonstrates an ability to conduct business and remain at a new price area. Acceptance is more meaningful than simply touching or briefly trading through a level.
Rejection
The auction attempts to establish price somewhere and fails. Price moves into an area but cannot sustain business there and returns toward the prior auction.
The Auction Sequence
Buyers and sellers conduct business around an established area.
One side becomes aggressive enough to move price away from balance.
The market searches for a new area willing to conduct business.
The new area either holds business, or price returns to the prior auction.
Important: a breakout is not automatically acceptance. A wick is not automatically rejection. The trader needs evidence from price behavior, time, participation and flow.
THE MARKET IS ALWAYS ASKING A QUESTION: CAN BUSINESS BE DONE HERE?
Harmonia provides predefined structural areas where that question becomes particularly important.
Next: see how participants actually interact around these areas.
Continue to Order Flow →