You dont have to be very clever to figure this out. Its basic supply and demand. Demand appears strong, based on your exp, so supply gets eaten away by market buy orders. When supply is depleted from a level and demand is still there, price moves up. Remember limit orders are passive buyers/sellers while market orders are aggressive buyers/sellers.
For stocks you can might learn something from a chart that included the volume by price detailed. At bottoms you might see bids on the chart but asked may be absent and at tops, just the opposite may be true.
The old adage "There are no sellers at the top, and no buyers at the bottom" is pretty true, both intraday and long term. A big seller will sell 5,000 shares at a time (for example) but when he sees 200 shares bid for, he'll likely stop for a while so not to run the stock way down in price (thus "no buyers at the bottom") making the stock rebound a bit. Same thing at the top, all the sellers go away, so the buyer will back off. This is counter-intuitive to most, but tape readers have been aware of this since the very beginning. FWIW, Don
Its is all about herd mentality. People run away from large bids and asks. I have used this to my advantage, by placing large positions on the orderbook, to test the strength/weakness of the market. Institutions do it as well -- place a large bid, let the market go higher, then hammer it down.
I enjoy reading your posts. I think you must be intraday scalpers. Only scalpers of order books really care about bid and ask size. This is good, however I do not think anyone can make big money "reading the tape" and reacting accordingly. It is certainly a good business for brokers and they naturally like people trade like that. I also think a little money can be made and it is hard to loose a lot trading that way. I may be wrong because I have been a position trader all along but let us take an example stock like AAPL that had a nice rally. I would be very curious to see an audited statement of an intraday trader who beat a passive buy an hold strategy since June of this year. If one bought 1000 shares of AAPL at $100 in June and kept it he is making around 60K. I really do not know, but could an intraday scalper of the order book have won more than that trading 1000 shares or more at a time? How much commission he would have to pay? Alex