How does a spike in volume not move price?
- Thread starter k p
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you have to be the whale if you want to understand the whale. i'm relatively new here, but this forum is a bunch of krill and barnacles asking what the whale is thinking and why they are doing what they are doing. spend a month pretending that you trade 10,000 lots and where you can get in and get out, and what kind of strategy is available with size. you will realize that you hit bids and offers when they are there, you are always scaling, and you decide when to pick the bottoms and tops. you can't just trade at 12pm because your dick itches. being a whale seems so difficult from afar since you can't just buy the offer whenever you want, but it is simply different. you are opportunistic at times, other times you are the beast in beast mode. you make your decisions about how much you will move the market. you will ask yourself - - are you looking to be invisible or make a statement? heck, those najarian barnacles try to make a living hitching a ride on the whale. its a little bit of a cop out for me, but at least they are trying to watch and understand day in and day out what the whales are doing. i think everyone agrees whale watching is an extremely useful exercise even if it isn't your primary strategy. this is why you will see options alerts on the news feeds about a big buyer who hit the bid or ask.
so my advice is to keep watching and asking. its a puzzle every day and the best advice i ever received as a young trader is "pay attention". (x 10). are the big guys trying to leg in without being noticed, are they flexing their muscles, and what does it all mean.
so my advice is to keep watching and asking. its a puzzle every day and the best advice i ever received as a young trader is "pay attention". (x 10). are the big guys trying to leg in without being noticed, are they flexing their muscles, and what does it all mean.
Honestly, your post isn't all that helpful. If I was trading 10,000 lot and could devise a strategy, then trading 5 lot would be just as good. I think no matter if I'm trading big or small, I still don't want to be trading in the wrong direction. Sure the big guy realizes that it will take time to accumulate and distribute, but because he has so much to trade, I think its even more important to get it right rather than wrong cause it won't be easy for him to get out when he needs to with such size.
Secondly, your advise about paying attention is pretty hollow. Its like saying ask god and wait for his reply. Your post has all this great imagery but really no substance to be honest. Everyone says study the markets, big deal.
Please keep in mind that the last 5s bar is relative. Delete the x-axis and the price movement could fit into any time frame. That one 5s bar in itself is not the whole story. It, along with its confirming volume, marks the end of the wave that started with the end of the corrective moves at 4459.5 and 4570.5 in your examples, and likewise at 4575 in SunTrader's
The broker has a client who wants to sell a number of shares that can't be done easily in the market. The broker contacts other clients saying he has an offer of x# of shares at x price. If he finds a buyer he uses the exchange's crossing system to execute the order at the agreed upon price, and doing so without effecting prices seen in the DOM. You may also see what looks like block trades near expiration of futures contracts which is really rollover volume.
Actually, block trades and rollover volume should not be shown on the charts, as they have no relation to the supply and demand that effects price movement. IB correctly filters such trades. But you may want to check if your brokers are doing so if they are buying the data feed from Reuters or BB, as they don't filter the data and such volume is plotted on the charts making proper analysis impossible. This I know to be true for Nikkei futures for both Reuters and BB. That mistaken practice may well be true for other contracts also. It took time, but I finally convinced Reuters that they were wrong in not filtering rollover data and they agreed to fix the problem. But it must have gone to the bottom of their priority list as it hasn't been fix yet.
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Whats interesting about your reply is that it is technically quite different from what the others are saying. Most seem to be suggesting that its simply either two firms agreeing to exchange a certain number of contracts during a slow period of time, or hunting any large orders that will fulfill their need to trade big at this exact same level.
But your post suggests that perhaps at this level, market orders were actually absorbed, meaning it wasn't something pre-arranged, and meaning that someone was willing to take everything they could get at this price. But here is where I have trouble with this. If someone is waiting to buy everything they can get at a certain level, but its a slow period of time, it wouldn't take much buying to force price up. Since its a slow time, there is only so much for sale, and then its bought. Then there is more for sale, and its bought too. Basically, absorption during a slow time I would assume would cause price price to actually rise cause only so much can be absorbed. Its like having a little sponge during a slow time. You can only absorb so much before you need to get another sponge. So price should move up when there is little volume but an eager buyer. Hmmm.. maybe I need to think about this some more.
The magic number is 9... but I'm not sure if a consistent number is all that foretelling. Just like Fibs, sometimes they work, but I think more often not that well. Once you start to have so many lines on a chart, you're bound to hit a few. The way I get my lines is from what has happened in the past, not because of some formula. But I'm eager to hear more if you're wanting to go into more detail.
If you really want to know what happened start using a decent Depth of Market and footprint chart. I find it impossible to see "why" this happened with just a chart and volume display. ONE of the possible reasons is absorption which would be my guess.
Consider this. You decide to get short on that bar and get filled. You then notice that the tape is all sells but price isn't moving. You then notice unusual limit size or an iceberg on the bid.:eek: You decide to scratch the trade getting out on the same bar. You just contributed 2 contracts (a sell & buy) towards the total. Point being people watching the orderflow are not going to wait to get out of a bad trade. That would explain the lack of a "stop run" on the following bars.
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kp,
I still see you're asking questions. Does that imply you still don't understand that its impossible for you to know the specific answer because there's so many possibilities to the WHY.
You can sit here and name 100 different possible scenarios...discuss each indepth but it will never tell you what specifically happened on your chart at that particular moment when does 600 contracts came through.
The only way you will know "what happen" specifically involving those 600 contracts is if you have a discussion with those specific traders or firms that was involved.
Sometimes a lot of contracts will move price and sometimes a lot of contracts will not move price...it really depends on those involved and the reasons (context) of their trades.
Another way to look at this...you seem to be stuck on trying to discover a "technical analysis reason" when the real reason may not have anything to do with technical analysis (re-read my example of a relative that is an institutional trader paying back a favor). Simply, its very common for price action to move or not move for reasons that has nothing to do with technical analysis.
For example, I remember the market reaction when there was a Bin Laden capture rumor while in a chat room. Within minutes I see posts by traders trying to determine the "technical reasons" why the Emini ES futures move +10 points in less than 1 minute...
Fib TA reason, S/R TA reason, Japanese Candlestick TA reason, Volume TA reason, Indicator TA reason...you name it.
Yet, those stuck on the "technical reason" didn't even know there was a Bin Laden capture rumor released in the market just one minute earlier when George Bush was president. Than when the rumor was verified as false...price action suddenly retraced and guess what...more technical reasons by traders being stated as the reason for the price retracement.
TA is good but if you're trying to use it do define everything...you will consistently miss the boat because its often that price moves or doesn't move due to reasons that has nothing to do with TA.
Develop a trading plan beyond just TA all by itself. If not, understand that price action does what it does due to reasons that has nothing to do with TA.
I still see you're asking questions. Does that imply you still don't understand that its impossible for you to know the specific answer because there's so many possibilities to the WHY.
You can sit here and name 100 different possible scenarios...discuss each indepth but it will never tell you what specifically happened on your chart at that particular moment when does 600 contracts came through.
The only way you will know "what happen" specifically involving those 600 contracts is if you have a discussion with those specific traders or firms that was involved.
Sometimes a lot of contracts will move price and sometimes a lot of contracts will not move price...it really depends on those involved and the reasons (context) of their trades.
Another way to look at this...you seem to be stuck on trying to discover a "technical analysis reason" when the real reason may not have anything to do with technical analysis (re-read my example of a relative that is an institutional trader paying back a favor). Simply, its very common for price action to move or not move for reasons that has nothing to do with technical analysis.
For example, I remember the market reaction when there was a Bin Laden capture rumor while in a chat room. Within minutes I see posts by traders trying to determine the "technical reasons" why the Emini ES futures move +10 points in less than 1 minute...
Fib TA reason, S/R TA reason, Japanese Candlestick TA reason, Volume TA reason, Indicator TA reason...you name it.
Yet, those stuck on the "technical reason" didn't even know there was a Bin Laden capture rumor released in the market just one minute earlier when George Bush was president. Than when the rumor was verified as false...price action suddenly retraced and guess what...more technical reasons by traders being stated as the reason for the price retracement.
TA is good but if you're trying to use it do define everything...you will consistently miss the boat because its often that price moves or doesn't move due to reasons that has nothing to do with TA.
Develop a trading plan beyond just TA all by itself. If not, understand that price action does what it does due to reasons that has nothing to do with TA.
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The spike in volume in the 15 second chart DID move price, it was exhaustive and climactic selling leading to a reversal. It's not uncommon to see this in NQ sometimes in correlation with ES, TF, and even ZB.
I've found those sort of volume spikes are more likely to lead to continuation on CL although not with any reliability to result in profitable exploitation of them.
I've found those sort of volume spikes are more likely to lead to continuation on CL although not with any reliability to result in profitable exploitation of them.