Market Behavior
I am a new but active trader, both with day trades and swing trades daily. In developing my trading skills, I have noticed a recurring pattern and am interested in what the behavior is behind it.
This week, I had a good trade with Nabors Industries (NBR.) I went in , short, Thursday afternoon when it was testing resistance at the $19.15 level. There was tremendous buying pressure throughout the last part of Thursday, with a clear sell-off late in the day. I held off taking profits, given the sell-off pressure, to take my exit Friday morning. The wait was well worth it, with the stock falling in early trading to below $18.00. I took my profit and did not look back.
My question for the group is this - I have noticed this type of price pattern with some regularity - very strong buying one day, with very strong selling the next. What is the basis of this behavior?
As a novice, I am assuming, a large fund or arbitrage has approval to buy a lot of stock in a particular range and does so on a particular day. Within this buying there are a lot of shorts riding the upward pressure. Then the next day the shorts are taking their profits - as I did. However, the sell-off the following day is at a much larger volume than I would expect. Is there something else going on in this pattern? I have made several successful trades following this pattern, but I would feel more comfortable if I understood the reasons for such price swings over two days - often without any news releases tied to the swings. Any suggestions are appreciated.
David L
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Personally, I've become satisfied with the answer:
ReplyDeletewho knows.
The market moves, and there are an infinite amount of reasons for its movements. That's why I'm a technical analysis trader. I react to market behavior, and I don't care why it does. I just know that it sometimes moves in patterned ways, and I profit off those patterns. I don't care why. But I wish you the best of luck if you do!
dear david,
ReplyDeleteI myself don't care what market did and not fear of it. There is so many reasons to find out why market did it and not worth to find out. Just always be available in the market at any opportunities, flow with the market and responsible for all possible outcomes.
Nice Trading.
Rudi
I thank Mike and Rudi for taking time to share their perspective and suggest I stay alert to the possibilities and trade them, but not get hung up with the deeper issues that may not have an answer.
ReplyDeleteUnfortunately, I am made to wonder about the "workings" of things, so I will pursue this. I think understanding such things will help me as a trader, so for now I will research this further. Thanks again guys, and good luck to you. I look forward to watching your trades. David L
I was once wondering the same thing when I started trading! I was trading- for me- a big 10,000 share position worth $400K at the time...I went short at the close and saw HUGE blocks being traded many 100,000 share blocks and I wondered- who am I? and who are those buyers or sellers? Somebody was buying and somebody was selling and I was just pissing a measely 10K shares at a time...Turns out I made money on the short and eventually the stock cratered. I think only the market makers and SEC can track who is on each side of a trade and this information in not attainable...
ReplyDelete