There maybe other similar reasons like Arbs. opportunities etc. but, no this happens some of the times and that is when such big demands exist and other times when the price is not attracted to size is because there is no accumulation or distribution at works and the price is free lancing looking for retail demand.
Hi Pr0, It isn't because of a 'wall' in the Ask or in the Bid that will 'attract' demand by itself. It is (for what I see) because of the total cumulative volume. Sometimes you can see one 'Wall' at Bid for instance but the highest CV is at the Ask side. Unless you are near the LTL or RTL, try to watch the Cumulative Volume at Bid and Ask in a up or in a down trend (doesn't matter the timeframe), and you will see to where the market tends to go Regards,
Thanks for comments, all. It appears I have a thing or two mixed up, but I think I have been straightened out (both here and PMs).
This is an interesting thread which describes the counterintuitive phenomenon you often see in the DOM (price going toward the largest cumulative volume). It is used just for a couple ticks scalp. Unfortunately even in that thread, there's not a definitive answer (why the heck does it happen?) www.elitetrader.com/vb/showthread.php?s=&threadid=68098&highlight=acv
Again, it's a pool of liquidity, people with high demands(big pic.) will visit it and draw from it. Where do you go with a demand to draw millons of galons of water, to a lake way out there or the smallest but nearest river?
Another concept is that you have a ton of naked puts and it seems a bottom is approaching and need to hedge your trades, again you'd draw from the liquidity a few ticks up, since you beleive the market is going to rally. Another is, that some short term traders expect a rally and hae have purchased low and already got into the FIFO in anticipation of a short rally.............there can be many viable scenarios. So it's a profit taking FIFO line up and the people who have bought it low are correct more often than not. You must be one heck of an expert trader to buy low! So they know and we are seeing their footprint on the DOM.
In other words there are 2 or many different levels of DEMAND and we should not be looking just at the immediate demand which is contrary to a longer term demand. Hence at the end of the day, the demand and supply are working just fine only it needs to be inspected at a slightly higher resolution. I hope I have answered the mystery.......
I hadn't posted a chart in a while and thought I'd post what I did today just for fun. Mostly done in real time, with a short break (don't recall exaclty when). Still not perfect, but way better than before.