"1) a weak market plays it strong for the first hour or so , This is due to massive sell orders which floods the market so the market must go up by definition ,,( institutional Sell orders are often not at the market price and are way above the market hence the initial few hours strength in the market )"
Grey1, Can you please elaborate. Does this mean that brokers accept sell orders from institutional clients at above market price and then manipulate market price so that they can sell at the higher price?
Rob
Hi
They are not manipulating . Years ago there was a debate about MMs manipulation but I always saw that at the way business was conducted not only in the stock market but also in any auction market.
Any way , let me explain ,,,Now a days most business is conducted through special program trades called VWAP Engine,. The task of a VWAP Engine is to distribute the large order with little impact on stock price without other traders noticing the Trade activity .
If Futures have been in a down trend prior to stock market open the sell orders queue up to exit previous open positions. Different Mms use different VWAP engines to trigger their order . Due to the large size, VWAP engines must
push the price up so they can fragment and distribute the large order on the way down ,,,. therefore market seems spiking up and looking very strong .. Remember futures have been weak all night ,, All Asian market are weak but suddenly US stock market is strong .. How can that be true ,, Well it is not,, market is weak but acting as strong to fill the large sell orders,,
OK lets get into the MIND of a DAY TRADER. Day traders are human ,, They tend to believe what they see,, This is the nature of human being ,, He looks at his 1 min chart and watches the price action trying to make head and tail of the market direction , and with the first sign of couple spikes up he makes up his mind as market to be strong , He goes long and as soon as the VWAP engines filled their orders the market sells off and the day trader is crashed.
Now you can see where i come from when i say weak market plays it strong,,
lesson 1 . Donot even think you can judge the market direction by looking at price action on 1 min chart. You cannot do that , Newbies do .
Lesson 2 it is not always easy to find the markek direction soon enough to capitalise on the move
Lesson 3 if you are just guessing then you are gambling . It might pays off and it might not.
I TOO often have difficulty for very long time to gauge the market direction ,,, SO we are all in the same boat . ( this some times is due to huge NEWS around the market or too many contradicting analysis thrown at traders on CNBC or other medias _
Grey1
