The Pricing Duel That Follow Unfinished Auctions

It didn’t matter whether the insult was real or imagined. Someone was going to die.

May 30th, 1806. Then senator Andrew Jackson faced off against Charles Dickinson in a duel to defend his wife’s honor. Dickinson had referred to Jackson’s wife, Rachel as a bigamist. An insult for sure.

Now, standing 24 feet apart, pistols in hand, it was time to resolve this unfinished business.

So what’s this got to with trading?

Every day, buyers and sellers are met with the challenge of unfinished business that price needs to resolve. Regardless of whether they see it as a personal slight, the market will circle back and resolve the matter with a decisive duel.

Spotting these moments and anticipating the upcoming conflict will allow you to enter and profit.

A market duel you’ll want to watch for

The nasty business between Dickinson and Jackson started with a dispute over a horse race and escalated into an insult about Jackson’s wife. Both men fired and landed a shot. Dickinson died from his wound and Jackson would carry his lodged bullet close to his heart for the rest of his life.

Like settling a dispute with pistols, market auctions do not follow your conventionally accepted norms. They are settled essentially within the timeframe of a candle, with the results and any fallout captured within.

When a candle closes with either buyers or sellers left hanging, it’s considered unfinished business. Specifically, these are moments when buyers or sellers are left without corresponding parties available to pick up the other side of their trades.

While the buyers and sellers might move on, you can bet that price won’t forget. A candle that ends with unfinished business leaves a mark that will be revisited.

Spotting scorned trades that only price can resolve

Many of Jackson’s duels involved defending the honor of his wife Rachel. Widely considered to be a violent man, those who knew him could predict his reaction to a real or perceived slight.

Like Jackson’s fury, you can spot unfinished business within each candle easily. It simply takes form in the absence of zeros sitting on either the buy or sell side at the tip of a candle.

• Finished Auctions: There are zeros at both ends of the candle. In these instances, at the bottom – there were no more sellers and price went back up. At the top, there were no more buyers and price oscillated back down. In either event – business was squared away at the close of the candle.

• Unfinished Auctions: On either end of the candle (or both) there isn’t a zero. This is because all of the buyers – or sellers – weren’t fully satisfied. These traders have interest in this price level, and commitment to make a move – but are left twisting.

It’s these moments of unfinished business that price doesn’t easily forget. Like Jackson circling back to settle a score – you should mark them and plot your entry.

Getting ready to profit when price shows up to duel

It’s said that Jackson kept as many as 37 pistols ready for use in a duel at all times. Dickinson’s insult was all the excuse he needed to exercise his bloodthirsty trigger finger.

Once unfinished business has been spotted, load your trade knowing that the market will revisit that price level. Scorned buyers and sellers need to be vindicated, and when they are – you can enter and profit, as long as you’re ready.

See how this develops over a series of candles after unfinished business has been flagged. Thanks to Order Flow Sequence Tracking, these moments are marked and plotted. As the plot unfolds, you’ll see that price circles back and settles the score.

Take a look and see how unfinished business:

• Creates a zone with two groups of sellers left hanging… the perfect opportunity for a short when price revisits that level. Note that within two ticks this price level is revisited and rewarded.
• Revisits the matter quickly with back-to-back candles at the exact same price level.
• Sorts out the buyers left hanging with a strong swing up.

Making a long entry when price returned to the unfinished buyers would have turned out well. The zone created by sellers would have been equally appealing.

Either way, price circled back and settled the score – something you should watch for and use as an entry point.

Keeping your entry out of harm’s way

It’s worth noting that Dickinson was no slouch in his own right. An expert marksman and famous duelist, this was not someone to take lightly.

During periods of high volume and price fluctuation, it’s fair to ask if the spurned buyers or sellers will see their vindication. Order Flow Sequence Tracking gives you a means to size up the confrontation and make your entry without having to fire a shot.

As price returns to the previously unresolved level, you have the benefit of seeing momentum and positions taken by the big guns – institutional traders. Note that when price returned to the appointed level, volume increased and supportive buyers/sellers stepped in.

You can see this in the form of the highlighted red or blue numbers, signalling an imbalance that settles the score and leaves the fatal shot. Just as Jackson gave Dickinson the first shot, give price a chance to respond. Once support starts to step in you have the signal to make your entry.

With lagging indicators, you would be left waiting for one side or the other to stagger and fall to the ground (or not). Order Flow Sequence Tracking gives you the confirmation you need to determine who in the end is the winner.

Profiting while others use pop guns to duel with institutions

You could argue that surviving one duel involves as much luck as it does skill. Jackson fought an astonishing 103 duels before becoming president.

The institutional traders driving 90% of the volume have been to their share of duels before. And they won’t pace off 24 feet like gentlemen before firing their guns.

Taking these guys on with a lagging indicator that tells you nothing of an impending duel is like taking on Jackson with a pop gun. Because these signals are price-based, you’ll only know when something has happened after shots are fired. Only when you’re staggering back with bleeding losses will you be able to react.

Anticipate these impending moments by spotting incomplete auctions. This will position you to prepare and profit while others react and fail.

Simply keep an eye out for zeros sitting at the tips of candles. These buyers or sellers without corresponding counterparties have been left hanging, marking a point where price is likely to return. When you see more than one zero stacked, you have a zone with which there will likely be multiple future duels.

Monitor these price levels thanks to Order Flow Sequence Tracking and watch for price to return. When it does, aim your entry confidently knowing that price will respond in your favor.

Let others feel the sting of unfinished business while you profit.

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