Price forming

Discussion in 'Order Execution' started by tradebanzai, Mar 26, 2006.

  1. Can anyone explain to me how it happens that the down volume is bigger than the volume up, but the price moves up? And vice versa.
    Just trying to understand how is the price being formed.

    Thanks in advance
  2. cnms2


    Post an example!
  3. Get Quotetracker (its free) and run some different charts and on your indicators select pressure bars. It can be quite educational to watch. Pressure bars measure the percentage of volume going off at the ask versus volume going off at the bid. You will see many bars where the close is higher than the open while negative volume is greater and vice versa. This happens on all time frames. Why? If a lot of people suddenly feel the market is going up and pull their asks price will shoot up on low volume and vice versa. You could have a price running down all day and some news or number comes out in the afternoon and price spikes up on much less volume than it took to go down. Lots of ways for it to happen.
  4. Thanks for reply

    re: Easyrider
    I guess you're right about the price changing.
    The other reason I think could be there're a lot of inventories on some level and lots of buyers, hence we have big volume up, but some time later the buyers disappear, but there're still inventories for sale (not too much), hence small volume down, but the price gose down. Does it make any sence?
    Does anyone know any resource cocerning how exchanges function in this aspect (I mean what are the rules of setting prices)? It would be of a great help I guess.
  5. Heres a snapshot of some action this afternoon. The pressure bars on the bottom show up volume (green) and down volume (red). Compare that to the price bars and you can see that volume and price are not always in synch.

    <img src="">

    (link is same as above)
  6. tomcole


    Its not uncommon to see large orders get executed and the market immediately goes against them. Try looking at OBV v MF v Volume

    Usually in a day or so the OBV overwhelms the price unless new buyers/sellers show up.

    Think of it this way, if you were selling a zillion lots of something, wouldnt you then gun the market the other way when you're done so the mkt doesnt collapse on your move? Plus lots of newbies think they can take on what they perceive to be a big player when the dealer is simply executing an order and doesnt care what happens when hes done.