Balanced and imbalanced auctions

The market is in essence a perpetual auction searching for the fair price. When you look at how volume is distributed across prices, you find two states: a balanced auction rotating around a fair value, and an imbalanced auction that abandons it and trends.

The balanced auction

In the balanced auction, volume accumulates around a middle level and diminishes as we move up and down, taking the shape of a symmetric bell. This middle region is called the value area, in which about 70% of the period’s trading takes place. Both sides are content, and price oscillates within it.