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Lessons › Module 1: Auction Market Theory › Lesson 1.5

Lesson 1.5 · about 5 minutes

Initiative vs. Responsive Activity

ObjectiveAfter this lesson you can classify buying and selling as initiative or responsive using the prior day's Value Area.

Concept

Profile readers judge activity against the previous session's Value Area. Responsive activity reacts to prices that look unfair: buying below prior value (price looks cheap) or selling above it (price looks expensive). It tends to push price back toward value. Initiative activity acts even though price is already away from value: buying above prior value or selling below it. It suggests traders believe value is changing. Responsive activity fits balance, and strong initiative activity can be the start of imbalance. In this course, activity inside prior value counts as neither.

Today's TPO profile from 97 to 107 with yesterday's value area 100-104 drawn as a dashed box; letters below 100 are labelled responsive buying and letters above 104 initiative buying. A B C A B C D A C D A D E B B C D E E F E F G H F G H F G 107 106 105 104 103 102 101 100 99 98 97 prior VAH 104 prior VAL 100 responsive buying below prior value initiative buying above prior value XYZ (hypothetical): today vs. yesterday's Value Area (dashed) Hypothetical data · dashed box = prior day's Value Area
XYZ (hypothetical): today vs. yesterday's Value Area (dashed). Hypothetical, synthetic data generated from code. Today's TPO profile from 97 to 107 with yesterday's value area 100-104 drawn as a dashed box; letters below 100 are labelled responsive buying and letters above 104 initiative buying.

Worked example

Yesterday XYZ's Value Area was 100–104. Today, in period B, price falls to 97, 3 points below yesterday's VAL of 100. Buyers step in. C holds 98–101 and D trades back up to 100–103, inside prior value. That is responsive buying. Later, E pushes to 105, above yesterday's VAH of 104, and F, G and H keep trading between 104 and 107, with 4 letters at 105 and 3 at 106. Buyers are now paying above prior value: initiative buying.

Key takeaway

Buying below prior value is responsive and buying above it is initiative. For selling it's the reverse.

Check yourself

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

Question 1 of 3

Yesterday's Value Area was 100–104. A trader buys at 98. What kind of activity is this?

Question 2 of 3

Yesterday's Value Area was 100–104. Sellers push price down to 99 and keep selling there. How is this classified?

Question 3 of 3

Which observation is more consistent with the start of an imbalance?

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.