interpreting block trades

Discussion in 'Trading' started by roger2, Aug 24, 2001.

  1. ktm



    I'm still trailing stops on both MOVI and INTU. INTU at 37.50 today with a limit sell at 35.01 and MOVI at 27.50 with a limit sell at 21.01.

    I think INTU will move with the market, so we've been helped by this drubbing the past few days. I do worry it will pop up on little volume when the market turns...I will tighten the stop tomorrow. I believe MOVI will do the opposite. If you look at Friday's MOVI chart, it sold off hard when the market was rallying. I have a belief that larger traders sell off the scam stocks when the quaility companies start to improve. I'm thinking MOVI will further deteriorate when the market rallies.

    I could be very wrong about both of I trail a stop. It's nice to short something near the top for a change. I usually short about .17 from the bottom.

    Let me know if the blocks tell any stories.
    #21     Aug 30, 2001
  2. neo_hr



    I have a couple of questions about the "Tale of the tape" as I am learning to "listen" to it.
    OK, I know that all the prices in the world are driven by Supply/Demand. So lets say for the simplicity that we have 5 buyers and 5 sellers for IBM and thet the spread is 99 x 100.

    1) Now, if someone told you just this, where would you suppose current price is? Some equilibrium point, but I never could understand does that mean the price is 99 (guess not or all the biders would get their shares) or 100 or some inbetween value?
    2) K, lets assume the price is 99.5 So, neither biders nor sellers want to give up this .5 WHAT DOES HAVE TO HAPPEN IN ORDER FOR THE PRICE TO MOVE? Bid/ask should go up, one of the bidders has to whack the offer, more bidders (how many) whack an offer, none of the above.
    3) How and when does it all translate into chart? For ex. I have been watching ToS and 2.5 min chart on a low vol, slow stock (ANDW) so I can take time to decipher things - and have seen trades flying of in green (bid I guess?) and the price just stood there or actually went down?? Isnt it supposed to go up when that happens?

    I never could understand this "two sided thing" I mean, every buyer has a seller etc... I even tried drawing a simple sup/dem graph and tried moving it arround but things still remain unclear. Any kind of help much appreciated!


    P.S. Green prints mean "exhaustion" of inside bid right? The next bid is lower so the price should go down right? Why do we then buy when we see a lot of green ones firing away?
    #22     Oct 30, 2001
  3. coops


    Roger 2 - better books

    I recommend R Tharp's "Trade your way to financial freedom" and Elder's "Trading for a living a living". Both are very good on the mental/psychology side of things (this is not the holy grail (hah) of the perfect entry and how to interpret block trades, but maybe these aren't so important to your actual bottom line....), and i would say Tharp is also very useful re Money management and Elder for sorting out where and what each TA indicator is useful/intended for.

    I originally read and appreciated Farrell's books. He's particularly keen on NYSE as I am at present, and goes to extreme lengths in explaining the bid/ask scenario. This is very, very useful and , YES , basic, but after reading some reviews at Amazon (after buying and reading) It's amazing how many still miss the point (even though it's simple and repeated, and repeated and ... etc etc!). Note his original book was about scalping NYSE pre decimal days, but I still think it's a good place to start since few go into such laborious detail about what is after all the absoulute basics (bid/ask market and limit orders and spreads and how specialist 's operate versus the NASDAQ "market makers" - quotes intentionally ironic).

    Anyway, good luck , keep reading and learning, and trade 100 share blocks to test instead of paper trading til you know what your style is. trade for real with 100 shares because you'll practise order entry/exit for real, with your genuine at risk money. Also you can practise blowing your stops with 100 shares...!!! yup, you'll do it, i did it, anyone out there never ignore your stops????.... and it's better to do it now at minimal financial risk before you get into larger size trading and think you're god.....


    #23     Oct 30, 2001
  4. ktm


    IMO, it IS about supply and demand. The problem with today's level II is that you do not know how much supply there is. The demand can be seen by the prints.

    I have seen INCA (Instinet - mostly institutional trades) sit on the inside bid/ask alone for weeks at a time showing 1000 shares. Sometimes he will take a million shares or more before moving off. Many times this isn't so obvious but the point is about the supply. Even though there's demand, until it outstrips supply, the price won't move. You never know when that's going to happen because you rarely know when a buyer/seller is truly finished.

    There are many other factors as well. Human motivation, greed, panic, fear and other emotions rule the markets. If INCA is selling for a hedge fund, he may have a deadline to sell 1M shares...say 5 days. If after 3 days, he hasn't managed to unload much, he's going to have to start being more proactive, that means driving the price down as far as necessary to unload the shares or playing games to get rid of them somehow...maybe buying some to create the illusion of a rally. The MM cannot lose the customer's business by blowing the deadline, but he needs as high a price as possible.

    My best advice is to watch the tape and the prints. Find out who is controlling the action and what their interests are...then try to profit from what you see.
    #24     Oct 30, 2001