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The key auction reversal in essence is a trading strategy based on initiative turning into equal and opposite initiative. Brannigan breaks down this trading strategy using the market profile, footprint chart and candlestick technical chart.
The first thing to understand is that there are two types of price aciton: initiative and responsive. Initiative price action is when one side, either buyer or seller, takes the initiative to move prices further. This can be aggressive or slow, based on how the other participants react to prices being initiated.
The key auction reversal is therefore initiative in one direction quickly turning into equal and opposite initiative in the other direction. A common trading pattern displaying this is the v-reversal. The most important point in a successful key auction reversal is that volatility (range expansion) is met again with volatility.
Brannigan uses the market profile and footprint chart to drill into an example in the gold futures market on August 16th 2018. Once established, the bottom of the v-reversal becomes a key reference level, below which a stop can be placed for a swing trade.
For the day trading strategy, the next part is to determine where buyers and sellers begin matching each other and forming an area of absorption for the next leg higher.
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