HI Guys, I have always had this thought process problem, here it goes, and I have heard the term accumulation / distribution in reference to range periods, never mind the time Frame.
I wanted to know when price is ranging, what is exactly happening?
I have read that when this is occurring, there is no surplus of demand or supply, so the market is at an equilibrium sort of speaking. My understanding with this is that it means no high demand and no high supply to tip the scale in any direction.
1.Now I have also read that when price is ranging, that orders are being aggregated, meaning supply and demand are being absorbed ( for every buyer a seller), maybe this is the same thing as I stated above but I donít know in which context to look at it from, hoping someone can help me to understand this?
2.When price moves from its range, that move up or down from its range, this means that there is high supply or demand that has to be met?
3.Now when that happens is it market orders that move the price or is that standing limit orders, reason for this question is that, if a market order is responsible for the move, from the range period, then why would one look to place a limit order when price comes back to the initial level where price left, if it was not limit orders that caused the initial move, it was market orders?
4. Now I am asking this question from a purely range period stand point, because if I can understand why this happens , then I will know why some levels work and some donít, at least Iím hoping it brings a higher understanding.
Now another confusion of mine when there is congestion, (range period) I have heard that this is a period of inactivity, is it inactivity or a period of orders coming into the market and when all orders are finished being aggregated, (Hence the term accumulation/ Distribution) the surplus of demand or supply is left, which drives price higher or lower, or the other scenario, no surplus od demand or supply and price ranges or stops moving all together, for the moment?
5.So in saying all of that what justifies placing an order to go short or long at a level where price moved sideways when it was not a surplus of demand or supply just sitting there and it was a market order that drove it to another price point? You donít know what was the reason for the price move in the first place?
6. I am trying to understand how order flow works and maybe I am not looking at it in the right context, I have yet to find anyone to answer these doubts and questions with straight forward answers. Can someone point me to the right answers? I have a hard time getting my head around the whole order flow concept, I understand it, but I donít know if I fully understand it!
Now, second I read that market orders move price, so is it market orderís that consume standing orders and that in turn moves the market along with the high supply/ demand that is placed at different price points? Just looking for some clarification