Auction Market Theory & Invalidating Trades

Part II of Navigating The Wake of Choppy Selloffs

Auction Market Theory – Trading Principles

Before we hop into the core topic of this report, Finding Appropriate Exits and Accepting Losses, it is important to review Auction Market Theory (AMT), and the core principles that encompass it. In last week’s report, AMT principles were factors taken into account when looking at our example and entry criteria. It is important to be consistent with your methodology (consistency will be a common theme throughout this note). Therefore, AMT principles will factor into finding appropriate exits.

Simply put, AMT is a framework for observing and trading financial markets. It tries to define the market’s main purpose, and how market participants interact with each other, fulfilling that purpose.

A market achieves two mai