A trader explains two rules for profitable trades: fair value must be rising, and you need a failed auction where price drops below fair value. When sellers accept lower prices, it creates a discount zone that buying programs exploit.
You're gonna understand the markets way better. I cannot explain how much this made me profitable. The first rule is that fair value must be rising. So we do not want just a break of structure. We want a shift in fair valuation. And the second thing is we're gonna wait for what we call a failed auction. We take the fair value area low, take the fair value area high, and this is where price is agreeing now is the fair value. Aggressive sellers are more active on top. Aggressive buyers are more active at the bottoms. Whenever we see this price dropping below, this means that sellers are willing to pay lower and lower and lower prices to get filled. We're getting into aggressive buyers' territory here. And so what you will often see at this situation is one of two things: either sellers, these aggressive sellers finding a wall of buyers that are absorbing this pressure because if they were willing to buy all the way here and keep paying worse prices, they don't care about getting filled at the best price. They care about execution. Then it's very likely that if we're here, they're gonna keep doing the same thing. In this buy program, everything below the current fair valuation is discount, and there's a high chance that this will happen.
