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Market Profile Auction Types Explained - Reading Market Intent on NSE

• By MarketProfileHQ Team
Market Profile Auction Types Explained - Reading Market Intent on NSE

Market Profile is built on auction market theory - the idea that markets constantly auction prices higher and lower to find equilibrium. Understanding auction types helps you identify what the market is trying to do and trade accordingly.

Auction Market Theory Fundamentals

Markets exist to facilitate trade. When buyers and sellers disagree on value, an auction takes place.

The Auction Process

Buyers dominate:

  • Price auctions higher
  • Seeking sellers willing to sell at higher prices
  • Continues until sellers emerge

Sellers dominate:

  • Price auctions lower
  • Seeking buyers willing to buy at lower prices
  • Continues until buyers emerge

Balance achieved:

  • Two-way trade develops
  • Value Area forms
  • Market finds equilibrium

Reading Auction Activity

The Market Profile visually shows auction results:

  • TPO extension: Auction in that direction
  • TPO building: Value forming
  • Single prints: Fast auction, no value
  • POC: Current fair value

Opening Auction Types

How the market opens sets the tone for the day. There are four primary opening types.

1. Open-Drive (OD)

The strongest directional open.

Characteristics:

  • Opens and immediately moves one direction
  • No initial rotation
  • Conviction from the start
  • Single prints from open

What it indicates:

  • Strong institutional direction
  • High confidence
  • Trend day likely
  • Don’t fade

Trading approach:

  • Trade with the direction
  • Enter on first pullback
  • Don’t wait for confirmation
  • Expect continuation

Visual signature:

  • A period prints and extends one way
  • B period continues same direction
  • No overlap with opening price
  • Single prints from open

2. Open-Test-Drive (OTD)

Directional but with initial test.

Characteristics:

  • Opens, tests one direction briefly
  • Then drives opposite direction
  • False move then real move
  • Common opening type

What it indicates:

  • Initial stop hunt
  • Institutional trap
  • Real direction revealed after test
  • Tradeable after confirmation

Trading approach:

  • Wait for test completion
  • Enter on drive direction
  • Use test extreme as stop
  • Good risk/reward

Visual signature:

  • A period tests one direction
  • B period reverses and drives
  • Clear directional bias after test
  • Test area becomes support/resistance

3. Open-Rejection-Reverse (ORR)

Failed auction leading to reversal.

Characteristics:

  • Opens with directional move
  • Gets rejected at level
  • Reverses aggressively
  • Often at previous VA boundaries

What it indicates:

  • Level defended by institutions
  • Opening move was wrong
  • Reversal direction is real
  • Strong move potential

Trading approach:

  • Trade reversal direction
  • Rejection point as stop reference
  • Target opposite extreme
  • High conviction setup

Visual signature:

  • Opening TPOs one direction
  • Clear rejection (excess forms)
  • Aggressive reversal
  • Profile builds away from rejection

4. Open-Auction (OA)

Balanced, indecisive open.

Characteristics:

  • Opens and rotates both ways
  • No clear direction initially
  • Building value near open
  • Waiting for catalyst

What it indicates:

  • Balance between buyers/sellers
  • Waiting for information
  • Range day possible
  • Direction unclear

Trading approach:

  • Wait for breakout
  • Trade IB extremes
  • Use patience
  • Let direction develop

Visual signature:

  • A and B periods overlap
  • TPOs building both directions
  • Value developing at open
  • No single prints

Intraday Auction Patterns

After the open, these patterns develop throughout the day.

Excess Highs and Lows

Clear auction rejection.

Excess High:

  • Auction higher rejected
  • Long tail at top of profile
  • Sellers emerged
  • Resistance confirmed

Excess Low:

  • Auction lower rejected
  • Long tail at bottom of profile
  • Buyers emerged
  • Support confirmed

Trading implications:

  • Excess areas are reliable levels
  • Don’t expect immediate retest
  • Reversal likely held
  • Use for targets and stops

Poor Highs and Lows

Weak auction termination.

Poor High:

  • Auction higher stopped without rejection
  • Flat top to profile
  • No excess/tail
  • Unfinished business

Poor Low:

  • Auction lower stopped without rejection
  • Flat bottom to profile
  • No excess/tail
  • Unfinished business

Trading implications:

  • Expect retest of poor levels
  • Lower confidence reversal
  • Often retested same day or next
  • Trade toward poor highs/lows

Ledges

Temporary auction pause.

Characteristics:

  • Multiple TPOs at same level
  • Horizontal accumulation
  • Auction paused, not reversed
  • Often breakout from ledge

What it indicates:

  • Building cause for move
  • Accumulation or distribution
  • Watch for breakout direction
  • Important level

Trading approach:

  • Trade breakout from ledge
  • Direction of break is key
  • Ledge becomes support/resistance

Day Types Based on Auction Activity

Normal Day

Balanced two-way auction.

Auction behavior:

  • Opens, establishes IB
  • Rotates within IB
  • Minor extensions
  • Value develops at open

Characteristics:

  • IB contains 85%+ of day’s range
  • Balanced TPO distribution
  • POC near center
  • Range-bound

Trading approach:

  • Fade IB extremes
  • Trade toward POC
  • Range strategies
  • Avoid breakout trades

Normal Variation Day

Moderate directional auction.

Auction behavior:

  • IB established
  • Breaks IB one direction
  • Extension 1-2x IB
  • Still shows rotation

Characteristics:

  • IB contains 50-85% of range
  • Directional bias evident
  • POC may shift
  • Trending with rotations

Trading approach:

  • Trade direction of break
  • Use IB as reference
  • Partial trend strategies
  • Watch for continuation

Trend Day

Strong one-way auction.

Auction behavior:

  • Opens with directional intent
  • Continuous auction one way
  • Little to no rotation
  • Single prints throughout

Characteristics:

  • IB contains <50% of range
  • Elongated profile
  • POC often at extreme
  • One-directional

Trading approach:

  • Trade with trend only
  • Don’t fade
  • Buy pullbacks (up trend)
  • Trail stops

Double Distribution Day

Two separate auctions.

Auction behavior:

  • First auction establishes value
  • Break to new level
  • Second auction at new value
  • Single prints between

Characteristics:

  • Two distinct value areas
  • Single prints connecting
  • Clear transition point
  • Balance-to-balance

Trading approach:

  • Trade the transition
  • Recognize early
  • Each distribution has own rules
  • Important structure

Auction Failure Patterns

When auctions fail, reversal signals form.

Failed Auction High

Characteristics:

  • Price auctions above resistance
  • Fails to hold
  • Returns below level
  • Often with high volume

What it indicates:

  • Buyers exhausted
  • Sellers defending level
  • Bearish reversal likely
  • Short opportunity

Failed Auction Low

Characteristics:

  • Price auctions below support
  • Fails to hold
  • Returns above level
  • Often with high volume

What it indicates:

  • Sellers exhausted
  • Buyers defending level
  • Bullish reversal likely
  • Long opportunity

Trading Failed Auctions

Entry:

  • Enter on return through level
  • Confirm with profile building away
  • Quick entry needed

Stop:

  • Beyond failure extreme
  • Typically tight stops work

Target:

  • Opposite boundary
  • POC of developing profile
  • Previous support/resistance

Applying Auction Theory to NSE Trading

NIFTY Auction Characteristics

Opening auctions (9:15 AM):

  • Pre-open affects first print
  • Global cues impact direction
  • Watch first 5-minute candle
  • IB sets day context

Typical patterns:

  • Normal days most common
  • Trend days on news/events
  • Clear auctions at round numbers
  • Institution-driven moves

BANKNIFTY Auction Characteristics

Opening auctions:

  • More volatile than NIFTY
  • Faster auctions
  • Wider ranges
  • Quicker reversals

Typical patterns:

  • More trend days
  • Sharper reversals
  • Options expiry affects auctions
  • Banking news sensitive

Identifying Auction Type Early

Within first 15 minutes:

  • Open-Drive: Clear by 9:30 AM
  • Open-Test-Drive: Test by 9:30, drive by 10:00
  • Open-Rejection-Reverse: Rejection by 9:45
  • Open-Auction: No direction by 10:00

By IB close (10:15 AM):

  • Day type becomes clearer
  • Normal vs trending evident
  • Trade plan can be set
  • Execution begins

Auction Analysis Tools

Essential Requirements

For proper auction analysis:

  • Real-time Market Profile
  • TPO charts with proper settings
  • Volume at price overlay
  • Previous day reference

Professional auction analysis on NSE requires tools configured for Indian market hours. Vtrender provides comprehensive Market Profile analysis showing real-time auction activity on NIFTY, BANKNIFTY, and other instruments.

Checklist for Auction Analysis

Before market:

  1. Previous day’s profile structure
  2. Key levels (VA, POC, excess points)
  3. Opening type expectations
  4. Potential auction targets

At open:

  1. Identify opening type
  2. Watch first 15-minute auction
  3. Note any gaps
  4. Reference previous levels

During IB:

  1. Measure IB range
  2. Watch auction behavior
  3. Identify early day type
  4. Plan trades

After IB:

  1. Confirm day type
  2. Execute plan
  3. Monitor auction development
  4. Adjust as needed

Common Auction Reading Mistakes

1. Forcing Day Type Identification

Problem: Deciding day type too early.

Solution: Wait until IB complete. Let profile tell you.

2. Ignoring Opening Type

Problem: Trading without noting how market opened.

Solution: Always identify opening type first - it sets context.

3. Fighting Trend Day Auctions

Problem: Fading one-way auctions.

Solution: Recognize trend day characteristics, trade with direction.

4. Missing Auction Failures

Problem: Not recognizing failed auctions.

Solution: Watch for price returning through levels it just broke.

Conclusion

Understanding auction types transforms your Market Profile trading. When you can read what the market is trying to do through its auction activity, you align yourself with institutional intent.

Key principles:

  1. Opens set the tone - identify opening type
  2. Auctions seek value - follow the process
  3. Day types emerge from auction behavior
  4. Failed auctions create opportunities
  5. Let the profile tell you what’s happening

Master auction market theory to trade NSE with greater confidence. Explore professional Market Profile tools at Vtrender for real-time auction analysis on Indian markets.

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