Line Colors
Last updated
Last updated
Auction Finder's color coding follows similar conditions pattern when it comes to validation/invalidation. To understand this, traders can view the auction box as a support/resistance area.
The market is naturally curious and likes to test price conviction. With proper discretion, traders can use these tests to improve their position entries.
Auction Finder provides clear indications of confirmed supply and demand areas through the use of colored boxes, lines, and fill. When the box turns all-red or all-green, this is a strong signal of confirmation.
However, if there are only red/green lines without any color fill, this indicates an expired/failed supply or demand auction. Typically, a box with no fill means that supply has been absorbed or demand has been saturated.
While it may be profitable to open a long position after a retest of an absorbed supply zone, or open a short position after a retest of a saturated demand zone, novice traders may prefer to wait to trade confirmed supply/demand retests. In general, any green line within a supply or demand zone is more likely to act as support, while any red line is more likely to act as resistance.
The picture shows a demand zone that has been confirmed by the green color fill, indicating that buyers have taken control and the area is now acting as support. However, within this demand zone, there is a red line that has previously acted as resistance, indicating that there may be some selling present at that level.
As price approaches resistance, traders have the opportunity to potentially enter a short position, with the expectation that the resistance level will hold and price will reverse back down. In this case, price did indeed retest the red/resistance line and bounced off it briefly before ultimately breaking out through the resistance level and continuing to rise:
The picture shows a supply zone that has been confirmed by the red color fill, indicating that sellers have taken control and the area is now acting as resistance. However, within this supply zone, there is a green line that has previously acted as support, indicating that there may be some buyers present at that level.
As price approaches support, traders have the opportunity to potentially enter a long position, with the expectation that the support level will hold and price will reverse back up.
In the example shown below, price did indeed retest the green/support line and bounced off it briefly before ultimately breaking down through the support level and continuing to drop further. So while the green/support line did act as it should by providing a temporary bounce, a long position opened based on that support level would have been risky as the confirmed supply zone ultimately prevailed, pushing price lower:
This is why it's important to use caution and discretion when trading within confirmed supply/demand zones and to look for additional confirmation before entering a trade. Traders should exercise discretion when trading against a confirmed auction's expected behavior, such as a red/resistance line in a demand auction or a green/support line in a supply auction.
Less stressful, more reliable conditions exist, such as:
