Question about spikes...

MedianVelocity said:
The move itself doesn't really tell you anything that you can use to help make a good trading decision
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Being its the weekend I can afford a modicum of attitude

This sentence/ line of thinking is bullshit


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For the record; I rescinded my offer to break the chart / move down for FP

Call it gut instinct

RN
 
Redneck said:
Being its the weekend I can afford a modicum of attitude

This sentence/ line of thinking is bullshit


=================

For the record; I rescinded my offer to break the chart / move down for FP

Call it gut instinct

RN
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I was looking forward to your take RN, but I appreciate you saying that you rescind your offer.

Just so that I don't misinterpret anything, I am hoping that with you saying you're doing it for gut instinct reasons, I hope it wasn't anything that I said in my replies.

If I am reading between the lines properly, I assume that you do feel that there is lots of information contained within the spike down to help make a trading decision, and since I thought so too, it was why I posed the question.
 
k p said:
I am curious about what is going on behind a spike. I am not sure if this is a behavioral question since I am studying price action, or if this is a technical question.

My attached image shows a 30 second chart on the left, and a tick chart on the right. I am curious as to why price drops like this so quickly. I would imagine that there are buyers at every tick on the way down, at least it so appears on the DOM (not that I am really watching this, I just find it nice for order entry). Since trading is about supply and demand, when price doesn't go higher, it is because there are no more buyers willing to pay the higher price, and the price has to drop to a lower level where a buyer would want to buy. Why are so many levels skipped in an instant when it appears there are people waiting at every level?

In the image, it appears that price hit 3720.50, and then dropped 3 whole points in perhaps just a couple of ticks. I am not sure if that steep diagonal line on the way down in the tick chart is just the line going to the next tick 3 points away or if perhaps some trades were done on the way down. But I would still think that given the volume of NQ, there should be many more trades on the way down.. no?

Update: Just before posting this, I decided to increase the spacing on that tick chart and it does appear that the diagonal line down does stop at every tick on the way down (2nd attachment). So does this mean that when price hit the highest point, there just weren't any more buyers, and what buyers there were on the way down was not enough to keep the price from dropping 12 whole ticks in a matter of seconds? It turns out this initial drop of 3 points took 7 seconds.

Thanks for reading.
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It's simple. There was no liquidity in that area. Why is there no liquidity there? Now that is the question.
 
dbphoenix said:
Agreed. The "smart money" thing is pretty much a con that's been sold to beginners for at least a decade. "Big", yes. "Smart", not so much.

Incidentally, a tick chart should not be drawn as a line chart. Otherwise one is sort of missing the point. No pun intended.
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I'm trying to get my head right and understand what the danger of the concept of "smart money" is? Wyckoff spoke of the "composite operator" which to my mind seems like the same concept. Am I missing something?
 
green.green said:
I'm trying to get my head right and understand what the danger of the concept of "smart money" is? Wyckoff spoke of the "composite operator" which to my mind seems like the same concept. Am I missing something?
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There is no particular "danger" per se; it's just that there is no such thing. Wyckoff's "composite operator" is simply an amalgam of every market participant, from the kid posting out of his parent's basement to a Goldman Sachs star player. If there were such a thing as "smart" money, then it would not underperform as regularly as it does.

"Big" money is something else. Yes, if one has enough money one can move a stock. This is what the Accumulation/Distribution cycle is all about. And if one understands Auction Market Theory, it's not difficult to follow this money and trade alongside, or at least tag along at a close distance. That's what led, for example, to my anticipating these levels in the ES and the NQ months ago. But the idea that all the big firms get together on some sort of conference call and plot out their strategies together is ludicrous.
 
dbphoenix said:
But the idea that all the big firms get together on some sort of conference call and plot out their strategies together is ludicrous.
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Agreed. I'm not a VSA guy and don't how they use the SM term but I clearly should use big instead.

Thanks as always.
 
green.green said:
Agreed. I'm not a VSA guy and don't how they use the SM term but I clearly should use big instead.
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Actually it's a rather long story, stretching back through VSA to Tom Williams and his "Undeclared Secrets" to the SMI course he took which came from Robert Evans with additional influences from Richard Ney.

But this is of interest only to market history geeks. Thinking of the money as "big" is sufficient. And being careful not to fight it.
 
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