Add in the fact of the "chart illusion" and the OP's question is key to why most just don't get how the market really works.
are you referring to the statement "there are always sellers"? They don't sell. They wait for buyers to show up. The sellers have a reserve price/quantity that hasn't been met.
@Maverick74 Hey, just wanted to let you know I thought your posts here were really good. It's refreshing to see an occasional dose of realism presented amidst the chatter here, about a broader perspective of the market, who participates in it, and the reasons why. I've enjoyed a lot of your posts recently. So thanks for taking some time to venture out from ACD and share. Have a good year end!
+1 also to Maverick What most retail traders don't get is not trying to decipher every market twitch and turn and who did what to who. Increasing one's market knowledge is fine. Knowing all is elusive to the best of traders, which is why they don't try to.
Institutional traders actually communicate with others at another firm for various reasons. To sit there and try to figure out why someone did what he/she/algo did isn't productive. I was in the office with a relative (institutional trader) and he gets this message in their private secure chat with other employees. He's asked by another trader to purchase 500 contracts of the Eurex DAX futures simply because they owe the another firm a "favor" when that firm helped them out of a sticky situation a few days earlier. Essentially, that other firm needed to unload 500 contracts and was cashing in a favor. Just like that, the trade occurs in several blocks between two firms with no slippage at an agreed price...one firm doing another a favor during a quiet time in the market...a larger buyer available for a large seller. Its situations like such that makes volume analysis difficult at times because of the context behind the scenes. That's just one reason out of hundreds about why a large trade like you show on your chart can occur. Guess what, it had nothing to do with an algorithm for those that blame everything on algos if they didn't understand what just happened. Note: Some institutional firms now monitor these private secure messages being used between traders. In fact, Bloomberg had multiple articles about institutional traders from different firms communicating with each other on the Bloomberg private chat servers without permission of their firms. That type of communication is disliked because some traders use private chats for the purpose of manipulating prices...a big problem in the forex markets...smaller problem in futures and stocks. I'm not saying the above situation occurred in that price action you saw on your chart but it could have and there's hundreds of other reasons why the price action did what you saw during the so called quiet time in the market. Emini NQ futures is not an illiquid trading instrument. If someone doesn't have the internal network to move 600 contracts in one or a few block trades at a time period when its quiet (low volume/low liquidity)...it'll still get eaten with a little slippage because there's always someone(s) out there that will think something is going on and will take that size or someone out there that needs it for accumulation. In contrast, if you were talking about a trading instrument that's not liquid. Yeah, that'll be a problem to move size and the seller most likely know such and will break up that trade into several smaller blocks. Now you ask why someone would go Long in a downtrend or Short in an uptrend... Is that a serious question ? Its simple...traders (pros and retail) think its going to turn around for any particular reason out of thousands of reasons and one reason could be simple...someone doing someone else a favor via my example about about my relative. Also, depending upon whom they are and who is paying attention at that moment in time...they may or may not be in control in the up move from a downtrend. Yet, I strongly believe that when large blocks of trades move through the markets...they attract attention from pros and retail. You need to remember something...institutional traders or algos at institutions (most firms have traders and algos) have access to resources that us retail traders do not have access to. Further, the fact that you're trying to analyze volume and price action on a 5 second chart versus someone that could be taking a position today via reasons involving an a key market event (another reason for a block trade) that's going to occur minutes from now, hour from now, days from now is pointless to try to understand if a swing might happen. The fact that you're trading via the 5 second chart, those you should be concerned with are algos because you're basically a scalper at their mercy...they will have their way with you. Note: Institutional traders lose too. Thus, you may have saw an institutional trader make a bad trade decision (going Long in a down trend) and hold on to that position for a loss. Simply, you're retail...we will never know the reason of a specific block trade out of thousands of possibilities unless we're sitting there side by side with the trader doing the block trade or we have access to the algo code of the firm.
Huh? You state " but there are not always buyers". Every trade requires a buyer and a seller. So im at a loss to what u mean. Now i know why TA has such a hold on folks here. There's a major disconnect from market reality. Nothing wrong with this. We are all here to learn more. surf
go on Redfin and there are houses for sales and prices. for each house for sale there is a "seller" and a reserve price. this is not hard.
I have to say, as a new online trader, that is a lot of new information you don't really get watching tutorials. Will definitely keep following this post.
k p, plenty of algos utilize "key" levels unrelated to trend lines, horizontal support/resistance (previous swing highs/lows or range extremes) and previous day's close, high or low. You may think price stopped and found a lot of buyers or sellers at a totally random level, when in fact it's a price level that served as "confirmation" of strength or weakness at some time in the past. That means the level is likely to be defended if price revisits that level. I call these key levels "defense zones" because a battle may be waged there. These levels serve as extremely low risk entries because unlike the key levels everyone and their grandmother is watching, when these defense zones fail, you rarely get slippage. These levels are especially powerful in stock index futures.