Auction

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The bid-ask process of the market is described as an auction. The purpose of an auction is to facilitate trade. The auction results in the formation of the value area which the buyers and the sellers agree as the fairest price for the day. As the auction moves away from the value area, buyers and sellers change their definition of value. If higher prices are agreed in the auction, value is supposed to move higher and consequently the market moves up. The market will auction as high as it needs to in order to find sellers or as low as it needs to in order to motivate buyers to see it as “relatively cheap”.

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