Auction Curves: How the Market Seeks Fair and Unfair Prices
Markets operate as auctions. That’s not a metaphor — it’s literally how price discovery works. Price moves until buyers and sellers agree on value, and the shape of that movement forms what’s called an auction curve. If you understand these curves, you understand why the market trends, ranges, pauses, and explodes.
What an Auction Curve Represents
An auction curve shows the market searching for:
- Fair prices — where both sides are active
- Unfair prices — where one side dominates
This ties directly into Volume Nodes and Market Context.
Fair Prices: Where the Auction Wants to Stay
Fair prices show up as balance areas. Here, the market rotates, builds volume, and repeatedly trades the same levels.
| Behavior | Meaning |
|---|---|
| Rotations | Both sides active |
| Thick profile | Acceptance |
| Slow pace | Value agreement |
These areas become HVNs (High Volume Nodes).
Unfair Prices: Where the Auction Wants to Leave
Unfair prices are where one side overwhelms the other. Price barely trades there before moving away.
| Behavior | Meaning |
|---|---|
| Fast movement | Aggression |
| Thin profile | Rejection |
| Breakouts | Price discovery |
These become LVNs (Low Volume Nodes).
The Classic Auction Curve
A clean auction curve follows a familiar sequence:
- Price leaves balance
- Moves into low-volume territory
- Finds an unfair price
- Reverses back toward value
- Or extends into new price discovery
This behavior is the backbone of Balance vs. Imbalance Zones.
Auction Curves in Trend Days
Trend days have elongated auction curves because price keeps discovering new areas of unfair value.
- Few rotations
- Multiple LVNs
- Fast continuation
Auction Curves in Range Days
Range days have repeated overlapping curves forming a dense block of fair value.
- Frequent reversals
- Stacked HVNs
- Slow progress
Identifying the Curve in Real Time
Here’s how to read the current state:
1. Are We Leaving Value?
Expect speed and thin volume as the auction tests unfair prices.
2. Are We Entering Low-Volume Air?
Moves often accelerate — the market has unfinished business.
3. Are We Returning to Value?
Price slows and starts rotating again.
How to Trade Auction Curves
1. Enter in LVNs Only When Momentum Supports It
LVNs can lead to explosive continuation or equally explosive reversals.
2. Take Profits Near HVNs
HVNs slow moves and cause chop — perfect scale-out zones.
3. Don’t Fight a Curve That’s Still Exploring
Price discovery isn’t done until momentum collapses.
The Bottom Line
Auction curves explain the market’s constant search for fair and unfair prices. When you understand the curve, you know whether price is exploring, balancing, reversing, or about to break — which means you finally stop being surprised by “random” behavior.