odlareg

Sending this in parts (unable to send entire text)

OK. I have been intensely focusing on this again (with a clear mind) for the past 48 hours and this is what I have been able to piece together. The basic thesis (perhaps a part of the “obvious”) is that day traders are too small to move the market and have virtually no impact on price. All talk about Technical Analysis (at least in the traditional sense, is nonsense and does not work – I do agree with this and have not traded long enough to go down this path). Moreover, what does move the market price of individual stocks is really twofold: First, there are the larger institutional players that need to place very large trades and this has an indirect influence on market prices.

(con't)

However, it’s really the market markers that will “hedge” their bets that directly cause the prices to move (as you would see on a chart). In other words, when there is a large order, the market makers will hedge their bets (presumably in the futures market) – once hedged, their activities will not affect them and prices are free to react in the cash market.Things that “tipped” me off were the reference to “correlation” and the discussion of looking at the “heat map” and finding the largest influencers in each major sector. I don’t know if the above is precisely right, but the premise appears to be that the futures and cash markets can be used to determine when/where major disconnects have occurred in the market. I can only speculate that somehow one of the markets leads the other.

(con't)

Now, here is where I am a bit shaky. I have looked at futures and cash prices (for a particular security) and I really can’t see where there are points of divergences and convergences (which I am guessing is where there are these apparent “levels” that we need to keep our eyes on, but perhaps I am missing something). I do not know how to draw the “boxes” that save our “sox”, and am very frustrated as I tried to find some of the price levels that were provided in one of the examples (ticker: ANF). I also do I know when and how to place low risk trades (I can again speculate that there are two in between levels, and presumably you look to place your stop at the one with the lowest distance, the profit target the one with the highest and because of the above, you are somewhat confident that you are in a low risk trade.)

(con't)

I’ve looked at a whole bunch of charts with stocks that fit the bill (ADV, ADR, and price) and in just looking at tons of charts, there does seem to be these spikes or “V’s” that occur that then seem to reverse (some rapidly) (I can only speculate if they are related to the above). I also notice, in some cases, that in the first couple hours there is a sideways “S” pattern – perhaps there is a way to trade this (but I hesitate before know more). I consider myself smart and well prepared and unless/until I really understand something, I do not want to jump in.
So, this is basically where I am now. I am ready to take it to the next level, and do hope you can and are willing to help. I intentionally did not want to post anything on any of the forums as I really don’t know if I am even close, but I did find benefit in going through this myself. However, I need to move this forward now.

Many Thanks.
Tom
TBkellerm@gmail.com