Quote from FuturesTrader71:
AMT and others have provided some of the other reasons. On a very basic level, the nature of the market is that the maximum profit comes from the highest number of participants being "wrong". In other words, one cannot make money if the majority is "correct". This is basic Mass Psychology of the markets. It is often forgotten that this is a negative sum game and someone has to pay out for another to profit and both participants have to pay the exchange and clearer. Hence, the size may be momentarily correct, but it is often a counter-indicator. It all depends on the prints, so the tape (T&S) is extremely important if you scalp.
For example, if I'm long 40 Dax and prints come in on the offer during a breakout, I'm immediately looking for size to come in on the bid (as other participants try to go long or cover shorts). As soon as size does show up on the bid, I'm ready to hit it as soon as prints on the offer shrink in volume (naturally, it depends on where S/R is and other factors). Ironically, when size shows up in my direction, I become extra sharp and suspicious ready to get out quickly. The ER2 trades the same way often times: It magically goes to size.
As smaller traders bend over backwards to determine what an S/R level is with accuracy, participants who are trading size only look at those areas as zones. Hence, if I need to get out/in, as AMT indicated, I need to look for a zone that affords me the best liquidity. Therefore, I go to where the size is. Basic supply and demand.
Additionally, like you said in your message, often times, size has stops behind it. If one wanted to get short NQ and one knows they are queued well and size is backing them up, they wil probably have their stop a tick or two above the size where it is a bit thinner. This often causes the "avalanche" effect that Lefty discusses above when that size gets taken.
Again, my perspective is that of a scalper, so I'm sure others will have a different views.
Happy holidays.
