This article is only a personal trading study note and does not constitute investment advice. Trading involves risk. Make independent judgments and take responsibility for your own decisions.

Auction Market Theory, AMT, part 3: exploring price action around fair value ranges and related examples.

In the previous two articles, we studied the basic concepts of Auction Market Theory, or AMT. This article applies those concepts to real markets, analyzes five common price action patterns, and provides a cheat sheet at the end for easier saving and review.

When price is in a sideways ranging period, we can observe price movement within a fixed range. Usually, it does not move far away from the fair value range. This kind of price action can be seen as the accumulation of responsive behavior from each lower timeframe inside a higher timeframe. From another angle, when price is in Balance, we can expect it to range between the high and low of the fair value range, meaning value area high and value area low.

Inside a dark fair value range, yellow turning arrows move back and forth between the upper and lower boundaries, showing a balanced market ranging between VAH and VAL

Figure 1. Ranging model inside a fair value range

Candles on the right side of a market profile are wrapped inside a yellow range, with a yellow line connecting highs and lows to show price ranging within the fair value range

Figure 2. Range movement inside the fair value range https://www.tradingview.com/x/zis6dd6Q/

2. Response: Entering the Fair Value Range

When price enters a prior fair value range, it may touch the other side. During this process, price may first test the edge of the range before continuing toward the other side.

Yellow arrow enters the dark band from above, briefly retests the edge, then moves toward the other side, showing response after entering the fair value range

Figure 3. Model of entering a fair value range

Candles fall from above into the gray value area, first retest the upper edge, then follow the yellow line toward the other side, showing response after price enters the fair value range

Figure 4. After entering the fair value range, price retests the edge and then moves toward the other side https://www.tradingview.com/x/glMQ930Z/

3. Strong Momentum: Strong-Momentum Price Action Toward POC

If price enters the fair value range with strong momentum behavior, it is very likely to touch POC, point of control, meaning the dense area, and then produce a strong reaction before leaving the fair value range. In other words, this kind of behavior is less likely to create a simple edge retest followed by movement to the other side.

POC horizontal line marks the dense area in the middle of the dark value area; yellow arrow quickly touches it and rebounds sharply, showing strong momentum hitting the control point and leaving the range

Figure 5. Strong-momentum behavior model toward POC

After a sharp rise, price follows a yellow line down to the POC horizontal line and then rebounds strongly, showing strong momentum entering the fair value range, touching POC, and leaving

Figure 6. After price creates strong-momentum behavior, it touches POC and leaves the price range with strong momentum https://www.tradingview.com/x/lSNKGWSI/

4. Initiative: Price Action Leaving the Fair Value Range

After price goes through Accepted Auction behavior, as discussed in the middle article of Auction Market Theory, it leaves the fair value range. This usually comes with meaningful volume and may retest the original fair value range, creating a support/resistance flip.

Yellow path breaks below the lower edge of a dark range, pulls back to test the boundary, then continues down, showing initiative and flip behavior after leaving the fair value range

Figure 7. Model of leaving the fair value range

Candles break below the lower edge of the gray value area, follow the yellow line back to retest the original range, then continue in a bearish direction

Figure 8. After price leaves the fair value range, it retests https://www.tradingview.com/x/pfxdp4cl/

Price breaks below the range under a yellow horizontal line, makes one pullback, then continues lower to new lows, showing a resistance flip after leaving the fair value range

Figure 9. Price left the fair value range and retested https://www.tradingview.com/x/zeJLBc7M/

5. Accumulation: Price Action Accumulating at the Edge

When price accumulates at the edge of the fair value range, whether through time or volume, after enough time it may break through that edge.

Yellow arrow moves repeatedly in a small range along the lower edge of the dark range, then breaks downward, showing price accumulating at the edge before finally breaking out

Figure 10. Model of accumulation at the edge of a fair value range

Candles repeatedly build along a yellow horizontal boundary, then climb step by step and break above the range, showing upward initiative after edge accumulation completes

Figure 11. When price accumulates at the edge of a fair value range, it has a chance to break through https://www.tradingview.com/x/nnflixOI/

6. Summary

This article used Auction Market Theory, AMT, to analyze five price action patterns in real markets: range movement, response, strong momentum, initiative, and accumulation. By studying these patterns in more detail, traders can better understand market price action and build corresponding trading strategies that support daily trading plans.

To avoid taking up too much space with a long cheat sheet, a link is provided below for download and future use in live trading.

Example cheat sheet https://blog.p3nchan.com/auction-market-theory-price-action/

Auction Market Theory, Part 1: Exploring Order Liquidity and Fair Value Range Mechanics in Financial Markets https://da.studio/archives/12423

Auction Market Theory, Part 2: Exploring Order Flow Movement Patterns and Market Behavior https://da.studio/archives/12456

Note: This article is mainly based on TradingRiot. Search online if you want to read the original.

FAQ

Q: How can fair value ranges be used in real trading?

When price is inside a fair value range, the market tends to range. When it breaks out, a trend may begin. Traders can use this to decide whether to trade the range or follow the trend.

Q: How does this article relate to AMT parts 1 and 2?

Part 1 covers the basic principles, Part 2 covers order flow patterns, and this article applies the theory to real price action recognition and case analysis. The three pieces form a complete AMT learning path.