Disliked{quote} So does that mean, that abrupt hectic buying/selling together with sharp retracements means weak hands and abrupt buying/selling without sharp retracements (last friday) means major TF players? I'm a bit confused now, how to determine whether the sharp move was done by weak hands or major TF players.Ignored
About major timeframes (institutions, investors, big funds, etc.):
when a price action starts at an exact precise reference it is generally a weaker move. This comes from the fact that major timeframes do not use exact references to operate. They do not even know these references nor they could care less about them.
And this behavior derives from 2 aspects:
- the big size of their positions.
- the low risk attitude of their position entry levels.
A big size to place requires time and liquidity. An investor for instance do not place a position on the spot, in one single trance. He put some, then wait, then put some again, then wait and so on up to the completion of its order. The consequence of this behavior, consequently, cannot be a sharp move and after that nothing more than a strict narrow balance. Nor an investor will place his position during a period of low liquidity, because obviously the size of its position requires a different condition.
The location of a big size entry will not be at an extreme generally, because these zones are very risky for definition. An investor generally go into a position at mid levels where the risk is clearly minor. And also the mid price offer more time to develop the order in more than one single trance as said.
Furthermore a manager of an institution that receives the order to place a huge position does not want to be an hero. Because if he will be the first to act (and fails) he has everything to lose and nothing to gain. If instead he will act in the middle, among the others, even he will fail his behavior will be considered in the average of other operators like him.
Let me explain it: this comes from the particular way an istitutional manager is generally paid: not considering its net gain but considering its profit/loss compared with the profit/loss of all the other managers of the same category. So if a manager loses money but he will lose less then other managers in his category, he will profit anyway. So why has he to risk more then others in such an environment?
All what i've written comes from the experiences of people running institutional desks as J Dalton, and it regards the bigger timeframes involved in a market.
Then are shorter timeframes like "small" funds, and so on.
They are not institutions but they could have huge amounts of money like 1 or more billions. Their behavior is different because thay could place their size in one single spot. They generally act at the extremes against the lowest timeframes when they find them in troubles with inventories too shot or too long.
So they know the references used by the shortest of the timeframes and they use those references exatly in the opposite way the weakest timerames use to do: when they see a move based upon a big sequence of these references in a row, they know they can act against this move without encounter any meaningfull resistence: this behavior could produce those sharp fast movements retracing a grinding, slow trend in one particular direction.
Or, on other occasions, it can produce those sharp retracements af other sharp movements in the opposite direction when for instance weak timeframes pile on at the end of a move, as leggards: this is an other good opportunity to act because even in this situation there will be a very little resistance to their counter action.
All what I've written here is only a very rough introduction to the matter and it has not any claim of being an exhaustive description of it.
Best L.
