How does a spike in volume not move price?

[k p]

So here is the situation. Its the NQ... quiet time, nowhere close to a key level that I can see. Below is a 5 sec chart of the area in question.

In that one 5 sec bar, 600 contracts get traded, and the height of the bar is really no different than the other bars.

Often I see the spikes in volume around key levels once price breaks through, and lots of stops gets triggered, and price can often shoot up 3 or 4 points, hence about 12 - 16 levels before all the stops are filled.

But here, price hardly moves.. why? How can you have so much selling, and buying, without the price moving if this is a quiet time? I understand at the open, you got lots of traders betting on long and short, so if price doesn't move too much, its because you have an equal number of people betting on both sides. That makes sense to me. But this doesn't. Price went up from here, but how was all this buying met with so many who were eager to sell?

Any thoughts are welcome.

I know that often times, the algos create a situation where all bids are removed for a few seconds, causing price to drop, and the algos are waiting happily a few points below to snatch up the contracts at a cheaper price. I see this all the time, and this makes sense to me and is something to watch for. But once again here, the volume is huge, and price hardly moves, so I cant make sense of it.

 

[Maverick74]

There is an old saying in trading: size begets size. That means large buyers are attracted to large sellers and vice versa. There are economic reasons for this. Generally speaking low volume moves price much more then high volume. Again, there are reasons for this.

 

[k p]

There is an old saying in trading: size begets size. That means large buyers are attracted to large sellers and vice versa. There are economic reasons for this. Generally speaking low volume moves price much more then high volume. Again, there are reasons for this.

Its funny to think though that a large buyer would be available right when a large seller is, especially during a quiet time, that is the surprising part.

Generally speaking low volume moves price much more then high volume.

I actually think the opposite is true. I realize you often don't even need huge volume to move price.... the overnight action is a great example, but generally speaking, on quiet days, the indexes are usually stuck in a range and don't make trending moves. Of course there are exceptions though.

Here is an example, also from today. Cyan line is from a swing low earlier which was the LOD.

Here, its pretty evident that on the volume spike, as price crashed through the LOD, it took a few more levels to eventually fill all the market orders which I'm assuming were stops being run. So this makes sense to me, but the first one doesn't.

 

[Maverick74]

Large buyers shop their orders at trade desks all over the world. If someone wants to sell, they will hit it. Another old saying, you sell when you can not when you have to. Big buyers and sellers don't have the same luxury as Johnny one lot where they can get in and out whenever they want. They have to move when liquidity shows up.

 

[k p]

They have to move when liquidity shows up.

So the question though still remains is how was it that there was liquidity at that moment? Its not a very active area, nor at a key level I don't think where lots of trades happened before. So having to unload or load up on so many contracts would make one think that price would move. Its just like you said, large buyers don't have the same luxury. But in this case, buying over 600 contracts was done so in a very very tight range. You would think the guy who needed to sell 600 would have had major slippage, but he didn't cause somehow, there were enough buy orders to absorb it all.

 

[Maverick74]

So the question though still remains is how was it that there was liquidity at that moment? Its not a very active area, nor at a key level I don't think where lots of trades happened before. So having to unload or load up on so many contracts would make one think that price would move. Its just like you said, large buyers don't have the same luxury. But in this case, buying over 600 contracts was done so in a very very tight range. You would think the guy who needed to sell 600 would have had major slippage, but he didn't cause somehow, there were enough buy orders to absorb it all.

No you are not understanding. There is ZERO slippage. Both buyer and seller are getting a better price together then they would get separately. There are no key levels for these guys. Johnny one lot has key levels. Institutional traders move size and they move it when they can not when they have to.

 

[k p]

No you are not understanding. There is ZERO slippage. Both buyer and seller are getting a better price together then they would get separately. There are no key levels for these guys. Johnny one lot has key levels. Institutional traders move size and they move it when they can not when they have to.

Well you're totally right that I am not understanding. (bear with me a bit longer please)

I can see that there is zero slippage, hence my question. But how does the buyer know there is a seller there at his price for so many contracts? How does a seller know the same thing? If we all knew where big orders were waiting, wouldn't we all be rich?

Is it all just a matte of putting a limit order to sell at this price and if its taken.. great... if not... then no trade? Likewise, a buyer also puts in a limit order for huge volume and if he can pick up contracts then great, it not, who cares. You would think that one side is more desperate than the other so they couldn't just wait around to get a fill at their ideal price.

 

[Maverick74]

Well you're totally right that I am not understanding. (bear with me a bit longer please)

I can see that there is zero slippage, hence my question. But how does the buyer know there is a seller there at his price for so many contracts? How does a seller know the same thing? If we all knew where big orders were waiting, wouldn't we all be rich?

Is it all just a matte of putting a limit order to sell at this price and if its taken.. great... if not... then no trade? Likewise, a buyer also puts in a limit order for huge volume and if he can pick up contracts then great, it not, who cares. You would think that one side is more desperate than the other so they couldn't just wait around to get a fill at their ideal price.

They don't know, that is why they "shop" their order around.

"Hi Bill, this is Joey at Merril, I have 800k to sell in XYZ, you interested?"

"Hi Joey, possibly, where are you at?"

"I'm offering at even"

"Let me get back to you in a minute, I think I might have a client that will take half of it at even or better"

"Joey...filled....he lifted you for all 800k at even"

 

[k p]

They don't know, that is why they "shop" their order around.

"Hi Bill, this is Joey at Merril, I have 800k to sell in XYZ, you interested?"

"Hi Joey, possibly, where are you at?"

"I'm offering at even"

"Let me get back to you in a minute, I think I might have a client that will take half of it at even or better"

"Joey...filled....he lifted you for all 800k at even"

Well this I can finally understand. Now clearly since this is happened through the CME which is all electronic, would you then say that its just a matter of limit orders like I say? They put it out there at a limit price for 600 contracts and see who bites? I know in stocks they have an all or nothing order type, which I don't think they have for futures, but do you think its just a matter of putting out there and seeing who bites? There would be no slippage of course if its a limit order.

Also, I don't watch the DOM cause my data from IB isn't good enough, and I hear there is too much manipulation with pulled orders in milliseconds, but do you think this would be something that could be seen on the DOM or not?

 

[Maverick74]

Well this I can finally understand. Now clearly since this is happened through the CME which is all electronic, would you then say that its just a matter of limit orders like I say? They put it out there at a limit price for 600 contracts and see who bites? I know in stocks they have an all or nothing order type, which I don't think they have for futures, but do you think its just a matter of putting out there and seeing who bites? There would be no slippage of course if its a limit order.

Also, I don't watch the DOM cause my data from IB isn't good enough, and I hear there is too much manipulation with pulled orders in milliseconds, but do you think this would be something that could be seen on the DOM or not?

Yes, they have algo's that sniff out the size bids and offers. In the old days they called down to the pit and worked size orders through a floor broker.