Box Colors
Auction Finder Color Coding Details
Last updated
Auction Finder Color Coding Details
Last updated
Auction Finder's algorithm incorporates several technical analysis tools when analyzing whether a supply/demand level is still acting as a support/resistance level. The main component is price action analysis, which involves analyzing how price behaves around the demand level.
Auction Finder is a technical indicator used in financial markets to identify supply and demand zones or auction areas on a price chart. When the indicator confirms a supply or demand zone, the box representing the zone will be filled with either all-green (for confirmed demand) or all-red (for confirmed supply) color.
However, there are cases where the supply or demand zone is absorbed, meaning that the market has absorbed all the available supply or demand in that zone. In these cases, the box representing the zone may appear green or red, but with no fill. This indicates that the zone was a significant area of interest in the past, but is no longer considered an active supply or demand zone.
Auction Finder's color-coding system can be helpful for traders and investors to identify potential buying or selling opportunities based on historical supply and demand levels. By identifying areas of confirmed or absorbed supply and demand, traders can anticipate potential areas of support or resistance in the future, which can aid in making more informed trading decisions.
For example, if a trader sees a confirmed demand zone with an all-green box fill color, they may expect buyers to be active in that area and anticipate a potential upward movement in price as demand absorbs available supply. Conversely, if a trader sees a confirmed supply zone with an all-red box, they may expect sellers to be active in that area and anticipate a potential downward movement in price as supply absorbs available demand.
If a trader sees a green box with no fill (absorbed supply) or a red box with no fill (absorbed demand), it may indicate a potential shift in market bias as the supply/demand has been absorbed, and price may move in the opposite direction. Overall, Auction Finder's color-coding is used to provide a visual representation of the supply and demand areas on a chart and to indicate the potential bias of the market based on the presence or absence of buying or selling pressure.
indicates a confirmed demand zone, creating strong areas of support
This happens when the algorithm detects that buyers are successfully pushing prices higher.
Demand areas (also known as demand zones) are price levels where buying interest is strong enough to absorb selling pressure and prevent the price from falling further. As the buying pressure increases, the price of the asset starts to move higher, creating an area of demand.
If buying pressure is sufficient, the price will likely bounce off the demand area and move higher. Traders often use demand areas as potential entry points for longs and exit points for shorts.
indicates a confirmed supply zone, creating strong areas of resistance
This happens when the algorithm detects that sellers are successfully pushing prices lower.
In financial markets, supply auctions are price levels where there is a significant concentration of selling pressure. As supply increases, demand may not be able to keep up, leading to a decrease in price.
These supply auctions can act as resistance levels for the price, as the excess supply prevents price from moving higher. If the supply auction is particularly strong, it may require a significant amount of buying pressure to break through and push the price higher.
This can cause a price reversal as buyers may not be able to generate enough demand to absorb the excess supply in the market. Traders should use supply auctions as a tool to identify potential areas of resistance, and adjust their trading strategies accordingly.
indicates an absorbed/expired supply zone, flipping strong resistance into strong support
This happens when the algorithm detects that sellers are no longer successfully pushing prices lower.
Supply auctions may not always act as resistance levels forever. There are a few natural reasons why supply auctions eventually expire.
When price retests a supply area multiple times, it means that buyers are continually absorbing the sell orders placed within that area. This can lead to a decrease in available supply within the area, which in turn makes it more likely for the area to be absorbed in the future.
Each time price revisits the supply area/auction and buyers continue to absorb the supply, it reinforces the strength of the demand and shows that buyers are willing to pay higher prices to get their hands on the asset. As the demand strengthens, it puts more pressure on the remaining sellers within the supply area to sell at lower prices in order to match the buyers' willingness to pay.
This, in turn, can lead to a depletion of the available supply, ultimately resulting in the expiration of the supply auction. Short sellers are often caught outside when overstaying their welcome in supply areas, which forces them to buy to avoid further losses, which effectively adds buying pressure in the market.
This increased buying pressure can cause a previous area of resistance to flip into an area of support. If this buying pressure is strong enough to break through a previous area of resistance, such as an expired supply auction, that area can become a new area of support.
This is one way that an expired supply auction can turn into an active demand auction. It's important to note that this is just one factor that can contribute to the formation of new support levels.
indicates an absorbed/expired demand zone, flipping strong support into strong resistance
This happens when the algorithm detects that buyers are no longer successfully pushing prices higher.
When sellers saturate demand auctions it means that there is an overwhelming amount of supply that is entering the market and meeting the existing demand. This can lead to an imbalance in the market, with more supply than demand, causing price to decrease.
If sellers continue to saturate the demand auction, it can make it more difficult for buyers to support prices at that level in the future, as sellers may have depleted the available demand. When sellers "saturate" a demand auction they essentially outnumber the buyers who were interested in buying at that level.
As the price falls below the demand zone, it can trigger further selling as traders who were holding long positions may decide to exit their positions to avoid further losses. This can cause a snowball effect and lead to a rapid decline in price.
This decrease in buying pressure can be caused by various factors, including a lack of new buyers entering the market or an increase in selling pressure from existing buyers who are looking to take profits or cut their losses. In other words, the area of interest that was once a demand auction has now become saturated with supply, and any attempts to push the price back above that area will face increased selling pressure from the same buyers who were previously supporting the price.
