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Lessons › Module 1: Auction Market Theory › Lesson 1.2

Lesson 1.2 · about 5 minutes

Price Advertises, Time Regulates, Volume Measures Success

ObjectiveAfter this lesson you can use price, time and volume to judge whether the market accepted a price.

Concept

Auction market theory uses three ideas. Price advertises: a move to a new price is an offer, inviting buyers or sellers to respond. Time regulates: an advertised price only matters if the market spends time there. A brief visit means few participants accepted it. Volume measures success: if a lot trades at a price, the advertisement worked; if little trades, it failed. On a TPO chart, more letters at a price means more time. A volume profile beside it shows how much traded at each price. Together they show which prices the market accepted and which it rejected.

TPO profile from 102 to 110 with the value area 103-107 shaded and POC at 105; a volume histogram beside it peaks at 105 and is tiny at 108-110. A D G H K A D G H K L B E H K L B C E F I J L B C E F I J C F I C C C volume at price 150 200 300 1,600 3,800 4,600 3,500 3,900 3,200 110 109 108 107 106 105 104 103 102 VAH 107 VAL 103 POC 105 · volume POC 105 C advertises 110: 1 TPO ABC (hypothetical): time (TPOs) vs. volume at price Hypothetical data. VA 103-107 = 27/35 TPOs (shaded)
ABC (hypothetical): time (TPOs) vs. volume at price. Hypothetical, synthetic data generated from code. TPO profile from 102 to 110 with the value area 103-107 shaded and POC at 105; a volume histogram beside it peaks at 105 and is tiny at 108-110.

Worked example

Hypothetical futures contract ABC trades 12 periods (A–L). In C, price advertises higher prices, rallying from 105 to 110. Only C ever trades at 108, 109 and 110 (one letter each), and those three rows hold just 650 of the session's 21,250 contracts (about 3.1%). The advertisement failed, and price spent the rest of the session between 102 and 107. The most letters are at 105 (7 TPOs, the POC), which is also the price with the most volume (4,600 contracts). The Value Area, 103–107, holds 27 of 35 TPOs and about 81.9% of the volume.

Key takeaway

A new price is only an offer. Time and volume tell you whether the market accepted it.

Check yourself

Pick an answer to see instantly why it is right or wrong.

Question 1 of 3

In auction terms, what does a move to a new price do?

Question 2 of 3

On the ABC chart, which description fits prices 108–110?

Question 3 of 3

Which pairing correctly matches each tool to what it measures?

Not financial advice. Educational content only, not financial advice. All tickers and prices are hypothetical, synthetic data. Market Profile is an organizing tool, not a trading system or a prediction. Trading involves substantial risk of loss.