where are the huge sell orders from?

Discussion in 'Trading' started by emk662, Mar 24, 2001.

  1. emk662


    I have a question regarding when market is down. As you know you cannot short sell in an down tick. So, where are the huge sell order from in these days when the stock price is plummeting? People are dumping their stocks at such low prices?

  2. You can't short on a downtick but you can exit a long position on a downtick
    Big orders are usually from Mutual funds and Insurance Companies.

  3. Eastboy


    When the market tanks, it doesn't necessarily mean people or instituitions are selling away their stocks.

    You have to take a look at the volume of trades being done for the given stock and if the volume is significantly or substantially lower than previous months, then that is one of the indicators that the stock price is being driven down due to lack of buyers rather than mass selling. That is, no one is bidding for the stock so the asking price just drops accordingly. This happens with a corresponding low volume of trades.

    In this decidedly bear market we are in currently, everyone is just sitting on their hands and not buying a tanking stock.

  4. emk662


    So, when you active trader guys sell short, do you find any difficulty to do when the market is heading south? I have some bad experience that I cannot get order filled until a much lower price. The broker always says "because of down ticker".
  5. tntneo

    tntneo Moderator

    the trick is to short in strength, not obvious weakness : it is too late. If you still want to try, use a limit order with the minimum price you want to get. Otherwise you are filled when everyone else is buying back (!) and at a much too low price as well !

    This is specially true in the case Eastboy mentioned : stock tanking by lack of buyers not by selling pressure.
  6. In otc, you can short on the offer all the time. In the nyse, you can sell only market (a trick is to buy 100 shares to uptick it, and then empty your position and get short, though you usually need 2 accounts for this, but it isn't necessary on anything even semiliquid)Besides, by the time the market is tanking you should already be short and covering into the drop. That way, when the selling slows, you can be averaging into your long and sell that and then get short again into the bounce strength. If your position is longer term, a few ticks won't matter in getting short anyway.
    As for the large sell orders. Lately, with the exception of biotech where a fund blew up, there haven't been any major large individual sellers in most names. There just haven't been any buyers, so you really have to hammer a stock down to find a bid.
  7. emk662


    So, the tick is the bid price or the last executed price?

  8. Eastboy


    If I'm not wrong its the last executed price. I think the official definition of an up/down tick is at the NASD website.

    I just wish they revised the uptick rule. It really gets in the way of shorting a stock. Sometimes there would be an uptick BUT you've got to be fast with your order entry.

    Anyone knows any Realtick broker that can get around this uptick rule? When I used ETrade before, I didnt have to worry about the uptick rule. I just had to short when I liked to.
  9. tntneo

    tntneo Moderator

    The short sale rule for NASD [from nasdaqtrader.com]

    NASD Rule 3350 ("Short Sale Rule") requires that no member execute a short sale in a Nasdaq National Market® security for a customer or proprietary account at or below the current best bid when the current best bid is below the preceding best bid in the security (down bid).

    Under the rule, a "legal" short sale may be executed when there is a down bid either at 1/16 above the bid or the offer price (depending on the prevailing inside spread).
    Under the new rule, for Nasdaq National Market securities trading in decimals pursuant to the Decimals Implementation Plan for Equity and Options Markets, a "legal" short sale in such securities during a down bid will have to be executed at least $0.01 above the current bid.