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The book Mind Over Markets by James Dalton, Eric Jones, and Robert Dalton is a
classic describing auction theory and the interpretation of the Market Profile. Below is a
very important idea from the text:
“Volume is the truest and most reliable indicator of the market’s ability to facilitate trade.
Even in a trending market, if volume is decreasing, then the likelihood that the trend will
continue much longer is in question. A market that is not facilitating trade will not
survive for long.
All markets seek to trade at price levels that maximize volume. If a market is not
facilitating trade at a given price level, it will move to a new level that will better
facilitate trade. Thus, if price movement is relatively static and volume continues to
decline, the chances are great that the market will break-out of that region in search of
new activity.” (p. 137).
In a trending market, higher or lower prices are facilitating trade. In a bracketing market,
price extremes fail to attract participants and do not facilitate trade. The idea of markets
seeking volume tells you that price movements will not end until a broad value consensus
is attained.