Question regarding volume - price`

#1
Hi
1. I have seen people saying that when you are buying large quantities(let us say 20000 shares), you should put the disclosed quantity as 100. The reason they give is nobody would come to know if a single person is buying so much
Is the reason true? please give advantages behind doing this. Why would I not let others know I want to buy 20000 shares

2. When professional operators/smart money are buying or selling in the market they do so in huge volumes. We say that whenever there is a volume spike, its usually created by these opearators. Does that means they dont use the disclosed quantity?

Also, can someone tell me some real indian stocks which have actually undergone a complete VSA cycle of accumulation, , markup, distribution, mark down giving the time periods so that I can study them?

PS: I know there is a thread about VSA but did not want my question to be lost in that thread so created a new question for this one
 
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Placebo

Well-Known Member
#2
Hi Superprogrammer. I think we all agree that trading is a zero sum game and no real creation of wealth takes places. Its only transfer of wealth.

Professional Money is not necessarily smart money however it is big money with extremely deep pockets. And there is a possibility that professional money competes with each other to gain financial supremacy. Would you like to give away your strategy to your competitor by disclosing a purchase of 20000 shares and expect supply to come in just before breakout ?

And stock markets work in a really funny way. If you look at the definition of LAW OF DEMAND it basically states that price and demand are inversely proportional. If price goes up then demand must go down. This holds true for Professional Money however for retail traders when price goes up demand goes up. So once you have purchased 20000 shares discretely then there is a possibility that other financial institutions will spot the strength and purchase as well. A Breakout will attract retail traders and once supply is taken care of then price will surge. The same is the case when selling takes place.

Cheers
 

bunny

Well-Known Member
#3
If you put a market order to buy huge quantities, the price will be marked up to fill your order. This happens with small market orders too. However, the difference between last trade price and average price at which trade was executed will be comparably huge for large orders.

Also, there are two different market prices - there is one for buying and another for selling - and both are not same.
 

SwingKing

Well-Known Member
#4
Hi
1. I have seen people saying that when you are buying large quantities(let us say 20000 shares), you should put the disclosed quantity as 100. The reason they give is nobody would come to know if a single person is buying so much
Is the reason true? please give advantages behind doing this. Why would I not let others know I want to buy 20000 shares

2. When professional operators/smart money are buying or selling in the market they do so in huge volumes. We say that whenever there is a volume spike, its usually created by these opearators. Does that means they dont use the disclosed quantity?

Also, can someone tell me some real indian stocks which have actually undergone a complete VSA cycle of accumulation, , markup, distribution, mark down giving the time periods so that I can study them?

PS: I know there is a thread about VSA but did not want my question to be lost in that thread so created a new question for this one
1. Your point is absolutely valid. Let me explain this to you. In market, there are many participants. And amongst them are traders known as "Front runners". This name is derived from what these traders specialize in doing. They typically "Front Run" your orders when they see that you are willing to buy in bulk. Their objective is to enter before your order gets executed in order to benefit from your order which will usually pick up the prices. Thus they sell when your order takes the prices high and profit from it. These people are extremely professional and have great art in reading order books and other valuable information in the same context. Hence, by not disclosing your order quantity you protect your self from these traders (front runners).

2. Volume spikes are extremely deceptive. These can be caused by a number of factors; technical breakouts, frenzied buying etc. It is a phase when one see's stocks on huge volumes and gets lured to cash in! Au Contraire. There are numerous cases where after volume spikes lead to reversals. So when you talk about volume spikes and disclosed quantities, I feel these two things don't gel well. Volume spikes can also result by Millions of people buying in small quantities or by handful of investors buying in bulk. Hence, you can never really say whether they are disclosing their orders or not and also you really need to analyze order book well to see what is actually happening. Professionally I know very handful of people who have the art to do so.

P.S. If you want in depth information on the subjects you have addressed, then I'd recommend you to read "Trading and Exchanges" book by Larry Harris.
 

bunny

Well-Known Member
#5
1. Your point is absolutely valid. Let me explain this to you. In market, there are many participants. And amongst them are traders known as "Front runners". This name is derived from what these traders specialize in doing. They typically "Front Run" your orders when they see that you are willing to buy in bulk. Their objective is to enter before your order gets executed in order to benefit from your order which will usually pick up the prices. Thus they sell when your order takes the prices high and profit from it. These people are extremely professional and have great art in reading order books and other valuable information in the same context. Hence, by not disclosing your order quantity you protect your self from these traders (front runners).
Front-runners are usually scalpers. The profit per trade is extremely small and their dealing costs are very low, thus allowing them to have a small net profit.

2. Volume spikes are extremely deceptive. These can be caused by a number of factors; technical breakouts, frenzied buying etc. It is a phase when one see's stocks on huge volumes and gets lured to cash in! Au Contraire. There are numerous cases where after volume spikes lead to reversals. So when you talk about volume spikes and disclosed quantities, I feel these two things don't gel well. Volume spikes can also result by Millions of people buying in small quantities or by handful of investors buying in bulk. Hence, you can never really say whether they are disclosing their orders or not and also you really need to analyze order book well to see what is actually happening. Professionally I know very handful of people who have the art to do so.
Volume is the truth, though not many people know how to read volume. A volume spike is a very professional action by smart money who have deep pockets, and high-volume actions usually have a very strong motive.

Volume represents little other than professional activity.
 

bunny

Well-Known Member
#6
Also, its pointless to analyze the order book. I am referring to the best 5 bid/ask. That because many orders are canceled abruptly. Secondly, the difference between the numbers is not so huge. That makes it pointless. If they want to give the order book, let them give the whole, only the best 5 has no meaning of its own.

Instead of analyzing the orderbook, it is slightly better to analyze the "last traded quantity" in relation to price.
 

SwingKing

Well-Known Member
#7
Also, its pointless to analyze the order book. I am referring to the best 5 bid/ask. That because many orders are canceled abruptly. Secondly, the difference between the numbers is not so huge. That makes it pointless. If they want to give the order book, let them give the whole, only the best 5 has no meaning of its own.

Instead of analyzing the orderbook, it is slightly better to analyze the "last traded quantity" in relation to price.
Dear, the order book that you see and the order book that institutional guys see is a lot different. For some reasons, I cannot comment on this further. And don't think analyzing order book is pointless. Institutional traders will seriously disagree :)
 

bunny

Well-Known Member
#8
When professional operators/smart money are buying or selling in the market they do so in huge volumes. We say that whenever there is a volume spike, its usually created by these opearators. Does that means they dont use the disclosed quantity?
They may or not use it. Even if they use, they will use it very wisely. On some occasions, they will purposely not hide a big quantity.

When we are talking about professional buying or selling, there are atleast two scenarios possible.
  1. Accumulation or distribution
  2. Pushing through supply or resistance

Buying or selling to accumulate or distribute is slightly different from pushing through S/R.

When they are accumulating, they will keep the price low by continuously buying and selling the shares.

Example trades executed by a professional who is accumulating:
Code:
Bought 1000 @ 40.10
Bought 700 @ 40.15
Sold 200 @ 40.10
Sold 150 @ 40.05
Bought 600 @ 40.10
Sold 50 @ 40.00
Sold 100 @ 39.95
Bought 2000 @ 39.95
Sold 400 @ 39.85
Sold 250 @ 39.80
Bought 550 @ 39.85
Bought 800 @ 39.80
Sold 100 @ 39.75
...and so on
Observe in the above example that 'Bought' quantity is much more than 'Sold' quantity. This is called "markdown". To buy more shares at lower prices, they will choose to fill orders selectively.

The buying or selling of professionals is very secretive. Their dealers have very strict code of conduct.

Also, can someone tell me some real indian stocks which have actually undergone a complete VSA cycle of accumulation, , markup, distribution, mark down giving the time periods so that I can study them?
Almost all stocks, except rigged stocks. Rigged stocks are are pump and dump ones which is better known as "operatorwala stock".
 

bunny

Well-Known Member
#9
Dear, the order book that you see and the order book that institutional guys see is a lot different. For some reasons, I cannot comment on this further. And don't think analyzing order book is pointless. Institutional traders will seriously disagree :)
I have clearly told which order book I am referring to. Its the one of the retail trader.
 

bunny

Well-Known Member
#10
Also, disclosed quantity does not affect volume. Disclosed quantity is affected only in the order book.

@ Raunak,

Can you please tell me if the tape is same as the tick-by-tick streaming volume that we see on our trading softwares?
 

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