Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

Market Profile – Failed Auction

1 min read

Welcome to Market Profile Series. In the last tutorial we seen Market Profile Spike and Spike rules and this tutorial we will be discussing about What is Failed Auction and how to play it. Failed Auction is a Market Profile Pattern brought to the world by Ray Barros of Trading Sucess. Failed Auction provides trader a great oppurtunity to trade with dynamic mindset and constructing his/her trading rules accordingly

What is a Failed Auction?

Failed Auction is often a successful trading pattern in market profile. It occurs when the Initial Balance (first 60min high – low) is taken out and later within 30mins, price pullback happens followed by the price action towards the other side of the Initial Balance as shown below. Failure to hold the Initial Balance(IB) break zone for more than 30min is said to be failed auction. next days initial price reaction is likely in the opposite direction of the failed auction zone and later Failed auction Zone is expected to be revisited within 5 days (as per Ray Barros). Thus provides tremendous trading opportunity for traders to play this pattern towards the failed auction zone.
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Failed Auction Example from Nifty Futures October Contract
Failed Auction Zone Repaired

Above picture shows Nifty futures October Daily Profile Chart and you can notice the formation of Failed Auction where Letter ‘J’ done the Initial Balance (IB) breakout on the upper side followed by pullback within 30min back inside the initial range and then price moved towards the other side of the Initial Balance (IB). so the high of letter ‘J is considered as the fail auction repair zone. And the very next day is RBI policy announcement Nifty Futures Gapped down due to global sentiment there by creating a sentimental gap followed by retesting/revisiting/repairing the failed auction zone.

Nifty Futures – Failed Auction Zone Created at 8249

FA

Here is another example where a failed auction pattern is formed recently in Nifty futures October contact at 8249. and you can notice the formation of Failed Auction where Letter ‘C’ done the Initial Balance (IB) breakout on the upper side followed by pullback within 30min back inside the initial range and then price moved towards the other side of the Initial Balance (IB). Similar failed auction pattern is also observed on Bank Nifty as well with Failed auction zone @ 17799.

In the next tutorial we will be discussing about poor low and poor high profile structure

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

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10 Replies to “Market Profile – Failed Auction”

  1. Can today’s 9th October be considered as failed auction?as per the chart shown above..though there is just a single print of C Above IB and price retraced

  2. Hello Rajandran

    I appreciate the good work that you have been doing for last many years. Trading community is very thankful to you.
    I trade Nifty intraday using price action and few months back I made an observation that we get one of the extremes in the first hour of day and it holds true for around 70 to 80% of the time. I also made a video and published it, have a look here,
    http://charttechnicals.blogspot.in/2015/05/one-of-extremes-in-first-hour.html
    I felt at that time something was missing in that observation and today after reading your post I got my answer. I can very well now correlate with what you are saying, though you have used market profile and I use pure price action. I feel this concept/observation is worth exploring more and prove to be a full trading system of its own.
    Thanks a lot.
    UR Dave

  3. FA was shown in C in Top

    But we can see FA in F also in the bottom

    How to interpret FA when we have letters below and above initial balance A and B

  4. 1. IBH is taken out. 2. Close should be outside IBH or inside ? 3. Next 30 min bar is pulling back into IBH … Pl clarify point 2

  5. on 24th Jun 2020 NIfty chart scanner shows FAILED AUCTION Buy . but price closed out side of IB. Clerify

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