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Order Flow - Finding cluster of stops on chart

  • #321
  • Jan 22, 2011 1:46pm Jan 22, 2011 1:46pm
Quoting CindyXXXX
I think it was just a rushed example - Apple actually have the monopoly on I phones and so have price influencing powers but are still to a degree restrained by supply and demand forces... Obviously if they sell it for $5000 a pop they aren't going to do themselves any favors
Of course, the elasticity curve applies to Apple too. Since the iPods are not a perfectly inelastic product, obviously sold quantities will decline with each price level. Apple is very sophisticated about it's pricing strategy. For further details see http://www.msnbc.msn.com/id/38980367..._businessweek/

Quoting FXSurfer
The larger market forces will most always be on the fringes though waiting for deviation though, right? I guess I'm missing
One thing that you are missing is the 2% of volume which is non-speculative - for example US corporations selling stuff in Europe and needing to convert the euros to dollars. They want to trade at efficient prices.

It's a small volume. But it's one way volume - they will take delivery of the currency, thus they won't need to close the positions in the future like speculators do.

Then again, if anybody would knew which is an efficient price and which is not, they could just start speculating it.
  • #322
  • Jan 22, 2011 1:55pm Jan 22, 2011 1:55pm
Quoting Adal
Then again, if anybody would knew which is an efficient price and which is not, they could just start speculating it.
You hit it on the nail here in my opinion.

Is there really such a thing as the true value of something? The value of securities is non-causal, meaning they depend on what will happen in the future, and as such are non-physical systems. Since there is always a future in which the price of the security is different, its present value is NEVER the current price.

So, when there is a price area where the orders are getting matched efficiently, an "equilibrium point" as some have called it, it is not because the security is at its true value, it is because half of the people transacting at that equilibrium point are wrong.

So many thoughts coming to my head as I write those words... Anyhow, just my two cents.
“Nothing great in the world has ever been accomplished without passion.”
  • #323
  • Jan 22, 2011 2:03pm Jan 22, 2011 2:03pm
OK, so in hindsight my ipod example was pretty shitty.

The point I was trying to make was that at the equilibrium value transaction volume will be much lower then it would be at a divergence from that value. This happens because the utility of a security is directly tied to the expectation of price change. There is no benefit from buying a properly priced security.

I wanted to make this point because on a number of occasions it has been said that volume is high when a market is ranging. This is not true. At the edges of the range, volume will be high, but while price remains within the confines, it will be substantially reduced.
  • #324
  • Jan 22, 2011 2:03pm Jan 22, 2011 2:03pm
Quoting Adal
the 2% of volume which is non-speculative
Yeah, the 800 lb. gorilla, or should I say "swan"?
  • #325
  • Jan 22, 2011 2:05pm Jan 22, 2011 2:05pm
Quoting Deevz
You hit it on the nail here in my opinion.

Is there really such a thing as the true value of something? The value...
Its not about TRUE VALUE its about PERCEIVED VALUE - Stock prices don't rise becasue the companies necessarily performed well - It rises becasue the consensus believe it is worth buying
Time hides Nothing
  • #326
  • Jan 22, 2011 2:05pm Jan 22, 2011 2:05pm
Quoting FXSurfer
Yeah, the 800 lb. gorilla, or should I say "swan"?
Well, sometimes even a butterfly can cause a hurricane :-p
  • #327
  • Jan 22, 2011 2:18pm Jan 22, 2011 2:18pm
Still working the same questions?

http://img806.imageshack.us/img806/1483/adid.png
  • #328
  • Jan 22, 2011 2:18pm Jan 22, 2011 2:18pm
Quoting CindyXXXX
Its not about TRUE VALUE its about PERCEIVED VALUE - Stock prices don't rise becasue the companies necessarily performed well - It rises becasue the consensus believe it is worth buying
Exactly. Finding the "true value" is what fundamentalists are trying to do. Finding the perceived value is the function of the market itself.
  • #329
  • Jan 22, 2011 2:26pm Jan 22, 2011 2:26pm
Quoting Deevz
Since there is always a future in which the price of the security is different, its present value is NEVER the current price.
While I agree with your post in principle, this sentence is flawed.

True value is the discounted present value of all known and knowable information about a securities worth. If you buy into the EMH, the current price should ALWAYS match true value.

In practice it rarely does, but not for the reason this sentence implies.
  • #330
  • Jan 22, 2011 2:42pm Jan 22, 2011 2:42pm
Quoting UnnamedPlayr
Still working the same questions?
"Finding a vacuum is very hard, it apperas and only under extrem conditions or after news events."
Not true. The Vacuum occurs after EVERY price change, but in most instances it is created and closed so quickly that it can't be detected with the naked eye.

News events and the like create excessive price change. Because the price change is large, so is the vacuum that it creates. Subsequently, it is more noticable.
  • #331
  • Jan 22, 2011 2:47pm Jan 22, 2011 2:47pm
Quoting Darkstar
Not true. The Vacuum occurs after EVERY price change, but in most instances it is created and closed so quickly that it can't be detected with the naked eye.

News events and the like create excessive price change. Because the price change is large, so is the vacuum that it creates. Subsequently, it is more noticable.
Yes, price has a very high tendency to come back a long way after a big move during news.

By the way, I too sent you a request on your website not long ago. Don't mind the non-sense about rhinos and stuff, I had to write something .
“Nothing great in the world has ever been accomplished without passion.”
  • #332
  • Jan 22, 2011 2:48pm Jan 22, 2011 2:48pm
I don't coun't a price shift as a vacuum.
It is a time based process.
Either there is liquidity or not.
  • #333
  • Jan 22, 2011 2:53pm Jan 22, 2011 2:53pm
Quoting UnnamedPlayr
I don't coun't a price shift as a vacuum.
It is a time based process.
Either there is liquidity or not.
There doesn't have to be a lack of market liquidity for the price to shift. I think the point here is, if the shift is not leaving some liquidity in its trail, no matter how many people are pushing for the shift, it takes only one order in the opposite direction force the market back to where it started before the shift.
“Nothing great in the world has ever been accomplished without passion.”
  • #334
  • Jan 22, 2011 3:11pm Jan 22, 2011 3:11pm
That is your opinion.

For me a true vacuum is still the fact when at the same price level no seller and no buyer had been executed.

Otherwise it's a normal liquidity lack (either one side).
  • #335
  • Jan 22, 2011 4:02pm Jan 22, 2011 4:02pm
Quoting UnnamedPlayr
That is your opinion.

For me a true vacuum is still the fact when at the same price level no seller and no buyer had been executed.

Otherwise it's a normal liquidity lack (either one side).
There are no absolutes. When scientists make a vacuum, its quality depends on the density of matter that is left inside it. There is no such thing as a "perfect" vacuum, but under a certain density, depending on your standards, you can qualify it as one.
“Nothing great in the world has ever been accomplished without passion.”
  • #336
  • Jan 22, 2011 4:14pm Jan 22, 2011 4:14pm
Quoting Deevz
There doesn't have to be a lack of market liquidity for the price to shift.
I thought that was precisely what made price move?

If each buy order can find a sell at X price, why would it move? Wouldn't it be against exchange rules for it to do so?
  • #337
  • Jan 22, 2011 4:24pm Jan 22, 2011 4:24pm
Quoting Vorbis
I thought that was precisely what made price move?

If each buy order can find a sell at X price, why would it move? Wouldn't it be against exchange rules for it to do so?
Depends on your reference value for measuring liquidity. If there is more liquidity at a given price than there is demand, then the price wont get through it, you're right on that. I simply meant that there can be a lot of liquidity available but so much demand for that liquidity that the price will still shift.

I don't know if such a situation can occur in a realistic scenario tho... If there are a lot of liquidity seekers, the liquidity should usually withdraw itself, unless it's liquidity provided by uninformed traders.

Not sure why we are talking about this tho, it feels like running in circles. Sorry if I started it XD.
“Nothing great in the world has ever been accomplished without passion.”
  • #338
  • Jan 22, 2011 4:45pm Jan 22, 2011 4:45pm
Quoting CindyXXXX
I think a good addition to this thread would be a diagram of the Forex Market Structure (3 tier) - combined with a diagram about open market operations.

Anyone wanna have a crack?

BTW: Scotty I've been thinking about a similar idea to what you described... Inevitably id like to create a "market map" which also constitutes the order process.



Thanks Louie I've seen a bit of Sam Sideons stuff and actually I just watched his video on how prices move but I have always had my suspicions about this guy... He talks a good game...
Just my real world observation of the vacuum. Now this doesn't happen everytime so don't bet the farm on it but the way I see it is this is one way to play the vacuum. Many times after it happens price jumps away from it and then briefly comes back to it before shooting out. Like the false break out first but kind of showing the intended direction. Many times you can put a limit order in the vacuum area and get a low risk high reward trade. Sam shows this in his training. I know he could put his lessons down to 5 minutes and one could get the point. Anyway I point out this doesn't happen everytime but if you observe it you will see the weird simularities. So in my mind this area does act as a true Support and Resistance.
  • #339
  • Jan 22, 2011 4:47pm Jan 22, 2011 4:47pm
Quoting Deevz
I don't know if such a situation can occur in a realistic scenario tho... If there are a lot of liquidity seekers, the liquidity should usually withdraw itself, unless it's liquidity provided by uninformed traders.

Not sure why we are talking about this tho, it feels like running in circles. Sorry if I started it XD.
I think that it can and does occur all of the time - normal operating procedure.
Liquidity provided by uninformed traders gets chewed up before they (re)move it? Sure. All of the time. You know, I think that I've been among those liquidity providers on more than one occasion.

Your discussion is on topic IMO. Running in circles a bit but, no problem.
  • #340
  • Edited 7:43pm Jan 22, 2011 7:30pm | Edited 7:43pm
true value is probably present value of what market price-in already about all known information. As trader we focus on what is not price-in to find divergence from that value. Hope i am wrong ... much unlearn process following darkstar post here
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