Many day traders will talk about unfinished auctions and how easy it is to spot them on a footprint chart. They will have strategies built around them. First lets take a deeper look on what they are and how most traders use them
What are Unfinished Auctions?
They are also known as “Unfinished Businesses”. They form part of the many order flow patterns. Order flow patterns can only be seen on a footprint chart. These auctions are fairly easy to identify. Many order flow software will have visual representation of all prices where unfinished auctions occur.
How Many Traders use Them
The majority will simply trade towards these unfinished auctions. In as much as this trading approach may be deemed acceptable, the trading results are questionable. Here is an example of a market where the auctions were never completed within the stipulated minutes, hours and days.
CHART – (6B 03-19) GBPUSD M15 31st Dec 2018
Here we see 43 contracts on the BID left pending (Cable). Market then races up. Normally they will tell you that when we have an uncleared auction, the market should revert back and complete the auction within say 30 mins – 1 hour.
As you can see that did not happen. The auction was completed 5 hrs later! Strategies built around this unfinished business pattern suffered a huge – 45 pip draw down
Be very careful building your strategy around unfinished auctions. Could work but not for long. If used alone, this order flow pattern needs a very robust risk management approach. If you are new to order flow, I strongly recommend that you learn the other 5 patterns first plus VSA [Volume Spread Analysis] in order to have a clear cut edge in your day trading. Key word is EDGE.
That is all for today. Happy 2019 to you all. Keep it GREEN!