searching for holy-grail.. is this theory true?

[timsk]

Tim, the obvious question you need to ask first is - What is support? Isn't this an area where demand has ALREADY overwhelmed supply enough to turn the market? To say that traders are buying at support implies that they are anticipating it will happen again.

Hi n_t,
I think that pretty much sums up the way most (but not all) traders use S&R levels. That said, they can anticipate S&R occurring at new price levels not touched previously - a major round number being an obvious example.

Regarding a definition, my guess would be that most traders would define support along the lines of a price level or area (identified by whatever means, previously touched or not) at which buying pressure equals or exceeds selling pressure. Vice versa for resistance.
Tim.

 

[new_trader]

So far as I am concerned, I'm just guessing all the time. The more my guess is informed and born from past experience the more I tip the odds in my favour, but I wouldn't presume to pretend I'm doing anything more than speculating, anticipating, assuming, guessing - call it what you will.

I am not arguing with you about that Jon. But you imply that everyone in the market is guessing. That all the buyers are guessing that market will go up and all the sellers are guessing the market will go down. And if there are more sellers than buyers the market will actually go down meaning that the majority guessed right. Does that really make sense to you?

 

[Shakone]

Thank you for those insightful and original thoughts.

How do you apply your "economics 101 supply and demand" theory to the markets? I'm interested. I've mentioned already how you trade based on speculation and liquidity consumption being the keys.

I don't need to put forward any new and original points, because nothing original is needed for this topic, price movement is the same as it always has been, and even if I did, you'd dismiss them because you know best. Besides other people can present it more clearly than I can which is why I like to use quotes.

Wyckoff, Schabacker, Neill, Livermore, Magee, Marcus, Kovner and Schwartz.

Luckily we have you on here to put all these in their place and point out that what they're saying has got fook all to do with price movement. Why do you even have Neill in your sig if he knows nothing? Comic value?

I don't mind that you have a different take on it, it's good and makes discussions and I might learn something or think in a different way, I'm sure there are plenty of traders who think like you or have a different take on it. But to say what you said shows great naivety or huge ego.

What you've written about Liquidity comsumption is all included in supply and demand, a subset of it if you will. You don't have to agree with that, you can define supply and demand theory how you wish to suit your argument, just as you define TA to be all price or chart related things that don't work so that you can then say TA doesn't work. You'd rather present your ideas (which are old as the hills) as if they were new by using different terminology or car parks and holes in ceilings and floors. It's a very successful tactic.

 

[barjon]

I am not arguing with you about that Jon. But you imply that everyone in the market is guessing. That all the buyers are guessing that market will go up and all the sellers are guessing the market will go down. And if there are more sellers than buyers the market will actually go down meaning that the majority guessed right. Does that really make sense to you?

speculate - Buy or sell commodities etc in expectation of a rise or fall in their market value.

In the absence of a crystal ball that "expectation" is a guess - well informed or otherwise. Thus, all speculators are guessing. For other participants who are not speculators they have no interest what happens to price after they have bought/sold since gaining from a movement in price is not their objective. Thus, guessing doesn't enter in to it.

Even speculators such as fund managers may have "non-speculative" objectives at the time. Money pouring into their fund means they must buy to meet their cash proportion requirements whether they like it or not. And vice versa when money is flooding out of their fund.

As toastie pointed out earlier there are never more buyers than sellers for transactions done. There may be more who WANT to buy than are prepared to sell - whether because of an increase in prospective buyers or a decrease in prospective sellers - and thus there is more latent demand.

Talking buyers and sellers makes it sound like people whereas it's about number of contracts/shares on the buy and sell side.

 

[new_trader]

speculate - Buy or sell commodities etc in expectation of a rise or fall in their market value.

In the absence of a crystal ball that "expectation" is a guess - well informed or otherwise. Thus, all speculators are guessing. For other participants who are not speculators they have no interest what happens to price after they have bought/sold since gaining from a movement in price is not their objective. Thus, guessing doesn't enter in to it.

Even speculators such as fund managers may have "non-speculative" objectives at the time. Money pouring into their fund means they must buy to meet their cash proportion requirements whether they like it or not. And vice versa when money is flooding out of their fund.

As toastie pointed out earlier there are never more buyers than sellers for transactions done. There may be more who WANT to buy than are prepared to sell - whether because of an increase in prospective buyers or a decrease in prospective sellers - and thus there is more latent demand.

Talking buyers and sellers makes it sound like people whereas it's about number of contracts/shares on the buy and sell side.

This is what is known as a straw man argument.

How this became an argument about the definition of "speculation" is beyond me. I said it is better to think in terms of supply and demand rather than buyers and sellers because the idea that for every buyer there is a seller is wrong, without question, dead wrong. This isn't even theory, it is an observable fact.

 

[barjon]

This is what is known as a straw man argument.

How this became an argument about the definition of "speculation" is beyond me. I said it is better to think in terms of supply and demand rather than buyers and sellers because the idea that for every buyer there is a seller is wrong, without question, dead wrong. This isn't even theory, it is an observable fact.

Nice try. No, a straw man argument would be "This speculator has guessed, therefore all speculators are guessers".

For every 100,000 shares bought, 100,000 must be sold to make the transaction. You're right to the degree that it might be one person (buyer) buying the 100,000 from 100 people (sellers) selling 1,000 shares each. Which is why I said earlier that we were really talking about contracts/shares and not people as titling it "buyers/sellers" might imply.

 

[new_trader]

Which is why I said we were really talking about contracts/shares and not people as titling it "buyers/sellers" might imply.

Oh, I see, now you ARE saying it's better to think in terms of supply and demand rather than buyers and sellers?

 

[barjon]

Oh, I see, now you ARE saying it's better to think in terms of supply and demand rather than buyers and sellers?

No, in general trading parlance people understand what's being talked about by the term - I just added the rider earlier on to make sure in case you were thinking of it differently.

It doesn't matter what you call it so long as you yourself know what you mean by whatever terminology you use:

supply=demand
buyers=sellers
shares bought=shares sold
etc

There's never an imbalance in the transactions processed - only amongst those waiting in the wings. Or the number of contracts/shares waiting in the wings if you prefer. Or the supply/demand waiting in the wings if you'd prefer that.

 

[new_trader]

No, in general trading parlance people understand what's being talked about by the term - I just added the rider earlier on to make sure in case you were thinking of it differently.

It doesn't matter what you call it so long as you yourself know what you mean by whatever terminology you use:

supply=demand
buyers=sellers
shares bought=shares sold
etc

There's never an imbalance in the transactions processed - only amongst those waiting in the wings. Or the number of contracts/shares waiting in the wings if you prefer. Or the supply/demand waiting in the wings if you'd prefer that.

Supply and demand is different to buyers and sellers, you explained that in your previous post. Now, don't write something as silly as buyers = sellers...OK? I'm starting to think you are senile.

 

[barjon]

Supply and demand is different to buyers and sellers, you explained that in your previous post. Now, don't write something as silly as buyers = sellers...OK? I'm starting to think you are senile.

By your personal definition, maybe. Good job real traders understand.

 

[Shakone]

No, in general trading parlance people understand what's being talked about by the term - I just added the rider earlier on to make sure in case you were thinking of it differently.

It doesn't matter what you call it so long as you yourself know what you mean by whatever terminology you use:

supply=demand
buyers=sellers
shares bought=shares sold
etc

There's never an imbalance in the transactions processed - only amongst those waiting in the wings. Or the number of contracts/shares waiting in the wings if you prefer. Or the supply/demand waiting in the wings if you'd prefer that.

I don't understand this post. I think you understand what you're saying, just not saying it very well. In the market for every buy there was a sell, since that's the nature of a transaction. However, that's not the same as saying the number of buyers is the same as the number of sellers, nor is it the same as saying the supply is equal to the demand. These are all distinct things, aren't they?

 

[new_trader]

By your personal definition, maybe. Good job real traders understand.

Anything but concede, right? You said: "You're right to the degree that it might be one person (buyer) buying the 100,000 from 100 people (sellers) selling 1,000 shares each."

So, in your example: There are more sellers than buyers right? 100 sellers is more than 1 buyer isn't it? But, 100,000 shares changed hands, so Demand = Supply didn't it?

I wonder how will you spin this...

 

[new_trader]

I don't understand this post. I think you understand what you're saying, just not saying it very well. In the market for every buy there was a sell, since that's the nature of a transaction. However, that's not the same as saying the number of buyers is the same as the number of sellers, nor is it the same as saying the supply is equal to the demand. These are all distinct things, aren't they?

Good thing you get it...I thought I was in the Twilight Zone.

 

[barjon]

I don't understand this post. I think you understand what you're saying, just not saying it very well. In the market for every buy there was a sell, since that's the nature of a transaction. However, that's not the same as saying the number of buyers is the same as the number of sellers, nor is it the same as saying the supply is equal to the demand. These are all distinct things, aren't they?

Blimey, Shaky, don't you start.

When the conversation started way back (not NT and me) equal buyers and sellers was just the term used - in this thread and generally elsewhere - to describe the equal buy and sell side in any transaction.

Obviously from the example I quoted you might have one person buying a lot of shares from many different people. Mind you, you could argue the that in buying 100,000 shares his influence was 100 times greater than than that of each person selling 1,000 each.

 

[Shakone]

Blimey, Shaky, don't you start.

When the conversation started way back (not NT and me) equal buyers and sellers was just the term used - in this thread and generally elsewhere - to describe the equal buy and sell side in any transaction.

Obviously from the example I quoted you might have one person buying a lot of shares from many different people. Mind you, you could argue the that in buying 100,000 shares his influence was 100 times greater than than that of each person selling 1,000 each.

Oh, you mean things like this

So there's always 50% buyers and 50% sellers.

yeah I wonder who brought that gem into the convo.

 

[barjon]

Anything but concede, right? You said: "You're right to the degree that it might be one person (buyer) buying the 100,000 from 100 people (sellers) selling 1,000 shares each."

So, in your example: There are more sellers than buyers right? 100 sellers is more than 1 buyer isn't it? But, 100,000 shares changed hands, so Demand = Supply didn't it?

I wonder how will you spin this...

I'm not spinning it at all, NT - just go back in this thread and others and trading literature to see how the term was being used. Perhaps you should ask all those who used the term what they meant by it.

 

[barjon]

I don't understand this post. I think you understand what you're saying, just not saying it very well. In the market for every buy there was a sell, since that's the nature of a transaction. However, that's not the same as saying the number of buyers is the same as the number of sellers, nor is it the same as saying the supply is equal to the demand. These are all distinct things, aren't they?

Shaky

We were, at the time, talking about each transaction, and the one=another was relating to each individual transaction. Thus, for that transaction demand was met by equal supply. The point was that you could call it whatever you liked according to your own personal definition of each term so long as you understood the basic = nature of the transaction.

 

[new_trader]

I'm not spinning it at all, NT - just go back in this thread and others and trading literature to see how the term was being used. Perhaps you should ask all those who used the term what they meant by it.

There is no need Jon. I gave my advice, that it is better to think in terms of supply and demand rather than buyers and sellers because it avoids all the confusion about the 'number' of buyers and sellers i.e. Physical people. I gave the answer in direct response to someone who said "More sellers than buyers equals down move and more buyers than sellers equals up move"

Now, you can't disagree that what you wrote about 100 sellers matched with 1 buyer contradicts the notion of "more sellers than buyers equals down move", can you?

Go back and read from that post on and you will have no choice but to agree with me, but I know you wont.

 

[Liquid validity]

I don't understand this post. I think you understand what you're saying, just not saying it very well. In the market for every buy there was a sell, since that's the nature of a transaction. However, that's not the same as saying the number of buyers is the same as the number of sellers, nor is it the same as saying the supply is equal to the demand. These are all distinct things, aren't they?

Agree, good example is market makers absorbing market bids,
then having to offload themselves so they are still net up by the spread,
or thereabouts.

No way is that the same number of buyers and sellers on each side.
Each transaction needs a counter party yes,
which is not the same thing as equal number of participants per side though.

 

[barjon]

There is no need Jon. I gave my advice, that it is better to think in terms of supply and demand rather than buyers and sellers because it avoids all the confusion about the 'number' of buyers and sellers i.e. Physical people. I gave the answer in direct response to someone who said "More sellers than buyers equals down move and more buyers than sellers equals up move"

Now, you can't disagree that what you wrote about 100 sellers matched with 1 buyer contradicts the notion of "more sellers than buyers equals down move", can you?

Go back and read from that post on and you will have no choice but to agree with me, but I know you wont.

No, of course I can't disagree with that NT and I agree with you 100%. But, this started when you came into the discussion advising people in strident terms not to think in terms of buyers/sellers. Prior to that point the term was being used to describe the = nature of a transaction, not the physical number of people buying and selling.

It is often used in that way and you might be amused to know that I made points similar to yours to toastie when he was using the term in some other thread. That was with some tongue in cheek because he knew what he was saying and so did I.