Trends in random data
- Thread starter Ciatronic
- Start date
What, don't want to bring attention to yourself by pushing the "complain" button or are you too stupid? A majority of us here already know that answer.
Remember this was your first post here:
Pizzaboy
Registered: Nov 2010
Posts: 13
11-21-10 10:54 AM
You never change Surf. You love to dish it out but can't ever take your own heat you create for yourself.
The problem in this argument is the difference between actual buyers and sellers and POTENTIAL buyers and sellers. In a sense they are both right.
For any item to change hands for money there has to be BOTH a buyer and a seller, but the number does not necessarily have to be equal. If I had 1000 shares of XYZ I could sell those to 1 person so it would be equal or I could sell 100 shares each to 10 people so the number of buyers and sellers would not be equal. They key is that the supply and the demand would have been equal at that point.
However when the POTENTIAL buyers (people wanting to buy at a given price) outnumber the POTENTIAL sellers (people wanting to sell at a given price), there is more demand than supply and the price will go up. When there are more POTENTIAL sellers than POTENTIAL buyers then price will go down.
Why is that true? Imagine if you sold widgets and were the only seller but you had 100,000 widgets for sale. You started out wanting to sell them for $20 each but you only managed to sell 200 of them at that price because no one else wanted to buy at that price? You would have to lower your price to sell more right? Supply exceeded demand so price had to drop. Conversely if you were going to sell the widgets for $20 each and discovered that 500,000 people wanted them at $20 but many would be willing to pay more to make sure they got their share of the limited supply you would take as much as you could get thus raising the price.
I like to think of price movement as periods of time where either more buyers or more sellers exhibit a sense of urgency. Perhaps they are gobbling up all available supply using market orders, or perhaps they are putting out too many limit orders. Sometimes their sense of urgency is great enough that they don't want to take the time to disguise their actions. 
Interesting points, thanks. However, wouldn't this throw out the basic premise of T A or even behavioral finance into the trash? It's not the herd that moves the market, it's the herd of capital. This herd of capital can be controlled by one person therefore negating the premise that TA is the reflection of the crowd of investors/traders. If it isn't the crowd that moves markets, but rather the density of money in play at any
One time, how could TA possibly indicate or predict the whims of the one or few humans controlling the most capital at any given time. In addition, dense money players come and go into markets at random times thus by default render TA moot. It's a bankrupt theory. TA is descriptive and served no other purpose
What am I missing?
One time, how could TA possibly indicate or predict the whims of the one or few humans controlling the most capital at any given time. In addition, dense money players come and go into markets at random times thus by default render TA moot. It's a bankrupt theory. TA is descriptive and served no other purpose
What am I missing?
You are partially correct. Yes it not the number of potential buyers or sellers that move the market but the quantity of shares that is attempted to be bought or sold at a given level that causes the moves. It does not matter if the entire supply at a given level is from 1 institution or 1 million people each selling 100 shares each.
As I have already said earlier in this thread:
Quite honestly a lot of the time I feel that the market is often a battle between FA traders and TA traders and which ever one feels the strongest wins that battle. I will get some charts together to look at. We will take a look at INTEL (INTC) and what happened right after an awesome earnings report.
Ok After Market close on April 13th 2010 Intel (INTC) reported blowout earnings:
http://money.cnn.com/2010/04/13/technology/Intel_earnings/
What do you think this did to the stock? Of course it gaped up the next two days on the Fundamentals and by all accounts should have launched the stock into the stratosphere. But the gaps up took the stock price right into a dual layer of excess supply.
<img src="http://www.fantasydaytraders.com/eqpics/intc-3mo-gap.jpg">
Now take a look at a 2yr chart to see where where these supply levels were revealed at:
<img src="http://www.fantasydaytraders.com/eqpics/intc-2yr-gap.jpg">
So Fundamentals at the time for Intel were great and should have pushed the prices up BUT with all of the TA followers sitting out there waiting to short or sell to cover at these levels of supply who do you think won?
<img src="http://www.fantasydaytraders.com/eqpics/intc-3mo-postgap.jpg">
There are of course examples of the opposite where fundamentals were good enough to push through a supply level and allow the stocks to reach new highs or the fundamentals are bad enough to allow it to punch through to new lows....ENRON anyone?
The bottom line is, the market is 100% pure supply and demand but what causes the supply and demand to appear and disappear can be controlled and even reasonably predicted by a variety of factors. If you can't figure out these factors and how to use them then you will never make a living trading.
PS: If my charts are not showing up let me know. I may have to upload them somewhere else.
http://money.cnn.com/2010/04/13/technology/Intel_earnings/
What do you think this did to the stock? Of course it gaped up the next two days on the Fundamentals and by all accounts should have launched the stock into the stratosphere. But the gaps up took the stock price right into a dual layer of excess supply.
<img src="http://www.fantasydaytraders.com/eqpics/intc-3mo-gap.jpg">
Now take a look at a 2yr chart to see where where these supply levels were revealed at:
<img src="http://www.fantasydaytraders.com/eqpics/intc-2yr-gap.jpg">
So Fundamentals at the time for Intel were great and should have pushed the prices up BUT with all of the TA followers sitting out there waiting to short or sell to cover at these levels of supply who do you think won?
<img src="http://www.fantasydaytraders.com/eqpics/intc-3mo-postgap.jpg">
There are of course examples of the opposite where fundamentals were good enough to push through a supply level and allow the stocks to reach new highs or the fundamentals are bad enough to allow it to punch through to new lows....ENRON anyone?
The bottom line is, the market is 100% pure supply and demand but what causes the supply and demand to appear and disappear can be controlled and even reasonably predicted by a variety of factors. If you can't figure out these factors and how to use them then you will never make a living trading.
PS: If my charts are not showing up let me know. I may have to upload them somewhere else.
Thank you for the link trendo. Gucci, there is no variable amiss and as to what it was meant to proof [sic], I think that's clear from a reading of all the posts in that series. Nothing more nor less than 1) many of the patterns we see in market data could be generated from a random process and 2) there are some non-random elements of market data.
Understanding both of these points will put a trader a little closer to solving the market puzzle.
Adam
(Gucci, I assume you are referring to volume. I have done extensive work on patterns in volume, but that was not the focus of this series of posts. The omission of volume does not compromise the exercise in any way.)
Understanding both of these points will put a trader a little closer to solving the market puzzle.
Adam
(Gucci, I assume you are referring to volume. I have done extensive work on patterns in volume, but that was not the focus of this series of posts. The omission of volume does not compromise the exercise in any way.)