doubt regarding price movement

Hi experts,

I have a small doubt regarding price movement when excess volumes are bought.

For example in intraday there is a scrip of value 100 rupees and it has went to 102 and i feel the price has increased and if i short at 102 with 10000 or 20000 shares will the price fall suddenly and how volume effects the pricehere

How much of impact such big orders will have on price depends on the scirp and its liquidity.
With 10,000 shares at 102 rs. we are talking about an order size of 10lac. So if scrip has good liquidity with daily trading value running into 500/600 Crores.. then 10lac is nothing and it may not move the price much and still fill your order.
But if it is low liquidity stock, with daily volume of 50 lac then probably your order may not get filled completely.

Generally it is better to use Limit order for such orders on illiquid counters..
Hope this helps.
Happy trading

Vasu

In addition to what AW10 has mentioned, for a small trader I would be cautious to trade such volumes (10000/20000) if I have a small capital. You don't know why the price has moved. Suppose there is a genuine reason and there is demand for the scrip, then the mkt might absorb all your selling and move up. It it moves up another 2/- then calculate your loss. Don't short a scrip just because it has gone up more than what YOU think it should go up and don't go long because it has fallen more than what YOU think it should fall in a day.

More often than not, it is more likely that a scrip which has gone up will go up further and a scrip that has fallen will fall further. Playing contrarian needs a lot of experience and deep pockets.

Always be prepared for the mkt to do worse to you in a situation

well said TT - "Playing contrarian needs a lot of experience and deep pockets."

Thank u very much for ur suggestion

Hi Vasu,

Even if your large order puts down the price by say 50 paise, the drop may be momentary. After a few ticks, it may trade again at 102, thus giving you a M2M loss of few thousands instantly.

hi.

this method of trading was used by some jobbers before the advent of electronic exchanges (in the open outcry system) especially in the local stock exchanges , normally in low liquidity local counters. although it was a very risky way to trade, but more often than not, the jobber was able to collect the sold shares at a cheaper price as the communication in those days was very slow. after the advent of nse ,initially a few jobbers tried this with some digree of success, but as the liquidity increased and the channels of communication became faster, the risk involved grew manifold and this particular method of jobbing became useless.

regards

Anurag

As I understand, Now-a-day, the role of such jobbing is shifted to sophisticated algo trading system of hedgefunds / fii/ fund managers (called as Program Trading).
And computers keep scanning for market inefficiencies/ price arbitrage and flood the system with orders in mili-seconds.

Frequent observation of steep price move is one of the example of that.
Many such market makers in US mkt lost their edge since computers of Goldman, Lehman, citi started controlling the volume on NYSE.

I guess, it is matter of time before it shows the significant effect in our market.

Happy trading

When you sit back and think you realize that 90% of traders are losing money because 90% are playing contrarian. Playing contrarian just means playing against the trend. The 10% who are making money are doing so because they are NOT playing contrarian. They are playing with the trend. Trend here again depends on your TF.

I am yet to come across a book that says How to make money playing against the trend.