Weak buyers and weak sellers, how do we identify them and why.

[malaguti]

It fizzled out because those that are potentially able to shed some light on the matter seem to prefer to give very vague hints and play games instead of offering some genuine help and putting meat on the bone.

It's the same at elitetrader, and probably everywhere else.

One of the most frustrating threads I stumbled across was this one:
http://www.trade2win.com/boards/home-trader/72058-trading-without-charts.html

In particular, the posts of jonh1 who starts posting a few pages in I believe.
He gives the impression of genuinely knowing something that no other poster does, and to be honest, he seems quite convincing (which makes it even more frustrating!)
But the thread ended with everyone just guessing as to what he was referring.
We're not all rockets scientists, but some of us have been struggling and trying out hardest for years to crack the market and we need more than riddles.

(not directed at you, but it's a recurring theme around trading forums, and i'm never sure whether people are playing a cruel game or they're just torn as to who and how much info to give away)

Its not a cruel game. If somebody really has found a winning strategy, and its taken them I'd say some years to develop this, do you really think they would just tell you and hundreds browsing this site over time what it is. You put years into developing something and then let somebody else ride it without a second thought? I dont think so.
it might be a game, it may just be smugness, but I for one had to put in a lot of time and effort to get something half decent going for me. I will help somebody as
much as I can, but there's a limit when somebody says, tell me what you've done because I dont want to do the hard work.

 

[cablemonster]

It fizzled out because those that are potentially able to shed some light on the matter seem to prefer to give very vague hints and play games instead of offering some genuine help and putting meat on the bone.

(not directed at you, but it's a recurring theme around trading forums, and i'm never sure whether people are playing a cruel game or they're just torn as to who and how much info to give away)

Hi Scholfield

don't worry the thread hasn't fizzled out (yet). Thank you for mentioning the thread above I read 'Jonh1''s posts and they were insightful and helpful to me. I think in some cases people are playing a cruel game but in many other cases they are indulging in of 2 common traits:

(i) the natural need to help other people
(ii) the natural need to stroke one's ego

I think also you may be guilty of expecting a bit too much from what is an anonymous public internet forum. I have said this before but if the majority of traders lose the last things you would want to do is try to learn from the majority in a forum style format. The analogy I have used before is going to jail to learn about how to be a model citizen.

Of course someone who appears to have all the answers but will not reveal their 'secret sauce' in public maybe a deluded losing trader but those people who have been around the block can fairly easily work out who is talking BS fairly quickly.

anyway this thread is not finished (yet).:whistling

 

[cablemonster]

Thought so;

You can never learn anything on da web

To confirm, volume has nothing to do with strong or weak. If anyone would like to understand why, or prove/deny this theory, then this could be debated.


BTW the market is all about the strong vs the weak, and I am surprised that this thread has fizzled out the way it has.

Well maybe its not too surprising:whistling

So let us continue the discussion on the concept of weak buyers and sellers. Let’s say we are watching a futures contract, price has been moving up for the last 5 mins. As an example let's say 1000 contracts traded in the last 5 minutes.

DT's point about 'what constitutes a buyer' is a good one. If someone has already bought then are they really a 'seller'. is a buyer someone who is willing to buy? it's all a bit complex init.

For me I am going to define a buyer as 'someone who has bought', that's just the way I am going to think about it, but DT's point is a good one.

So these 'buyers' are people who bought 1000 contracts in the last 5 minutes. Some of the contracts will have been bought with market orders into other peoples passive offers and others will have been bought at the bid with other people hitting them with sell market orders.

So how do we identify that these buyers are weak? And is this useful????

Can we look for the amount of buyers at market compared to passive? Can we look at the amount of volume needed to clear out a level.

WSW87 seemed to be saying if the buying on the way up was ‘fake’ then this is of interest because there might not be much conviction in the move i.e. price could correct in short order.

All very interesting…...

 

[Shakone]

It fizzled out because those that are potentially able to shed some light on the matter seem to prefer to give very vague hints and play games instead of offering some genuine help and putting meat on the bone.

It's the same at elitetrader, and probably everywhere else.

One of the most frustrating threads I stumbled across was this one:
http://www.trade2win.com/boards/home-trader/72058-trading-without-charts.html

In particular, the posts of jonh1 who starts posting a few pages in I believe.
He gives the impression of genuinely knowing something that no other poster does, and to be honest, he seems quite convincing (which makes it even more frustrating!)
But the thread ended with everyone just guessing as to what he was referring.
We're not all rockets scientists, but some of us have been struggling and trying out hardest for years to crack the market and we need more than riddles.

(not directed at you, but it's a recurring theme around trading forums, and i'm never sure whether people are playing a cruel game or they're just torn as to who and how much info to give away)

Anyone that sounds mystical but can't back it up, doesn't have anything. There are a lot of people like this. Those that really know can speak to you clearly and explain to you on a basic level or an advanced level and don't need to hide. But they probably won't give specifics, for reasons stated.

The simple facts are that successful traders have found ways to jump on early for trades that are going to go a particular way for various reasons and they protect their backside. That's all! They don't have anything more than this despite how omniscient some will want to pretend. They may find this by TA, or by the DOM, by some magnificent understanding of other traders or fundamentals or whatever. It doesn't matter. They will jump on the move early, they will manage it to run the winners and cut the losses, and exit before others see what's going wrong. As in all walks of life, some are better than others.

A lot of people, myself included, came to the game looking for simple solutions. 'oooh a pin bar, entry at top, stop at bottom, great'. It's bollox. Unless you have the context of what's going on, you'll always be wondering why it worked that time but not another. How can you get context? Well as an example...Look at EURUSD yesterday. there were people shorting that all day. People shorting it at 12900, 13000, 13100, shorting TA levels in the middle, cos it couldn't go higher or would probably mean revert etc. THere's a guy who sold at 12760 who is (was!) sure that it would test the low and he could get out for a profit. Think about those people. Where would they exit, where would they have a panic attack and exit for huge loss, where do they want price to go, or not go. It's people, not bars. The guy who shorted t 12760 may not be relevant, but it's the fram of mind you want...thiking about other triaders, hat they want...don't want....are trying to accomplish etc.

 

[DionysusToast]

It fizzled out because those that are potentially able to shed some light on the matter seem to prefer to give very vague hints and play games instead of offering some genuine help and putting meat on the bone.

There's meat in this thread - but it sounds like you want it on a plate.

Trading is not 'color by numbers' it is very nuanced. No-one can give you 1-2-3-enter here instructions for trading because they don't exist.

 

[DionysusToast]

So let us continue the discussion on the concept of weak buyers and sellers. Let’s say we are watching a futures contract, price has been moving up for the last 5 mins. As an example let's say 1000 contracts traded in the last 5 minutes.

DT's point about 'what constitutes a buyer' is a good one. If someone has already bought then are they really a 'seller'. is a buyer someone who is willing to buy? it's all a bit complex init.

For me I am going to define a buyer as 'someone who has bought', that's just the way I am going to think about it, but DT's point is a good one.

So these 'buyers' are people who bought 1000 contracts in the last 5 minutes. Some of the contracts will have been bought with market orders into other peoples passive offers and others will have been bought at the bid with other people hitting them with sell market orders.

So how do we identify that these buyers are weak? And is this useful????

Can we look for the amount of buyers at market compared to passive? Can we look at the amount of volume needed to clear out a level.

WSW87 seemed to be saying if the buying on the way up was ‘fake’ then this is of interest because there might not be much conviction in the move i.e. price could correct in short order.

All very interesting…...

A buyer is potentially weak at the point of entry.

Let's say ES has put in a 4 point straight move. now it's at 1650. Then 3000 people buy into 1650.25, 4000 buy into 1650.50, 8000 buy into 1650.75. To simplify it, let's presume they are all new, outright long positions.

Now the market comes off 4 ticks. Those 15,000 longs are all now offside after a decent move up. They know full well they got in late and there will be some point very close below at which they will puke and their selling will help the move down.

These buyers are weak because they turn into sellers quite quickly, without much move against.

 

[piggybridges]

Thank you for mentioning the thread above I read 'Jonh1''s posts and they were insightful and helpful to me.

Yes. I read that thread quite a while ago aswell.
In fact, there's been a few threads on various trading forums discussing the posts of john1 to see if they can solve his posts. He obviously struck a chord with people.
Neither thread was able to move forward and work out any specifics on whatever it was he was referring too. He appeared not to use charts, or indeed anything else any trader suggested!

 

[barjon]

..............A buyer is potentially weak at the point of entry.............

Toastie,

Is that entirely true? I mentioned how I thought this thing worked so far as equities are concerned http://www.trade2win.com/boards/dis...ow-do-we-identify-them-why-2.html#post2159106 and I wonder if you get much the same on ES.

Would it be right that if some of the heavyweights are about to embark on heavy equity buy programs for institutional clients to the degree that would move the market, are they not likely to buy ES first in anticipation of the waves they are likely to create? Or would that be illegal?

Assuming it's ok, they would be strong hands because they are not going to be shaken out of their positions in the same way that a straight ES trader might be.

 

[kimo'sabby]

Thought so;

You can never learn anything on da web

To confirm, volume has nothing to do with strong or weak. If anyone would like to understand why, or prove/deny this theory, then this could be debated.


BTW the market is all about the strong vs the weak, and I am surprised that this thread has fizzled out the way it has.

Well maybe its not too surprising:whistling

Presumably, you trade a futures contract each day, or at least most days?

 

[cablemonster]

Toastie,

Is that entirely true? I mentioned how I thought this thing worked so far as equities are concerned http://www.trade2win.com/boards/dis...ow-do-we-identify-them-why-2.html#post2159106 and I wonder if you get much the same on ES.

Would it be right that if some of the heavyweights are about to embark on heavy equity buy programs for institutional clients to the degree that would move the market, are they not likely to buy ES first in anticipation of the waves they are likely to create? Or would that be illegal?

Assuming it's ok, they would be strong hands because they are not going to be shaken out of their positions in the same way that a straight ES trader might be.

A buyer is potentially weak at the point of entry.

Let's say ES has put in a 4 point straight move. now it's at 1650. Then 3000 people buy into 1650.25, 4000 buy into 1650.50, 8000 buy into 1650.75. To simplify it, let's presume they are all new, outright long positions.

Now the market comes off 4 ticks. Those 15,000 longs are all now offside after a decent move up. They know full well they got in late and there will be some point very close below at which they will puke and their selling will help the move down.

These buyers are weak because they turn into sellers quite quickly, without much move against.

Good points DT. This makes sense and a strategy could be made. This is like the old volume climax reversal. So we look for a volume that is increasing on a move up to a key level and then for evidence that the stops are starting to come out. I guess this is quite nuanced.

 

[wallstreetwarrior87]

Presumably, you trade a futures contract each day, or at least most days?

Yes correct, anywhere between 9 to 12 futures markets, I clear through Rosenthal Collins and Dorman. But this does not help to realise that volume has nothing to do with weak/strong.


Sometimes volume may coincide with the state of the buyers and sellers, as will indicators and lots of other add-ons.

Remember for every buyer their must be a seller. So without being able to identify the parties involved, volume will tell us nothing other than activity levels.

 

[wallstreetwarrior87]

Good points DT. This makes sense and a strategy could be made. This is like the old volume climax reversal. So we look for a volume that is increasing on a move up to a key level and then for evidence that the stops are starting to come out. I guess this is quite nuanced.

Exactly!

But as I just posted above, someone is buying and someone is selling. So in your example if we understand the lowdown, we can estimate to a high degree that the upmove on buyers will be weak, but the sellers are strong. But direction is up and volume is high.

Like DT has said, people want answers on a plate, this aint gonna happen, get real, it takes years to work the various dynamics out, and no one is going to state on a forum that this is how you can tell a "move is fake" etc. Not many people know, and we can prove this by the levels of volume in play when these moves are happening.

What does not help, are comments that are just in passing, with no real example of what they mean.

So Cablemonster has just logically come up with a scenario, and can work through it from the beginning.

Good example.

Not wanting to put anyone off, but consider this;

For every 5 min trader, there is a 15 min trader, an hourly trader, a 4 hourly trader and a daily trader, so go figure that one out

No one said it was easy (well apart from the snakey oiled salesman).

 

[wallstreetwarrior87]

So how do we identify that these buyers are weak? And is this useful????

Can we look for the amount of buyers at market compared to passive? Can we look at the amount of volume needed to clear out a level.

WSW87 seemed to be saying if the buying on the way up was ‘fake’ then this is of interest because there might not be much conviction in the move i.e. price could correct in short order.

All very interesting…...

Not only was the upmove fake, it then facilitated weak sellers, to enable strong buyers to dominate (as they are doing at the moment).

But once again, look at the volume levels, on its own it tells nothing about who/what is strong or weak.

Ok, you know my stance on stand alone volume now lol

 

[scholfield]

cumulative delta volume instead?
edit: scrap that. I remember 'john1' disregarded that, along with any other indicator and charts in general.
Must be something none of us have heard of at a guess...

 

[wallstreetwarrior87]

cumulative delta volume instead?
edit: scrap that. I remember 'john1' disregarded that, along with any other indicator and charts in general.
Must be something none of us have heard of at a guess...

No its there, you are trying to look too hard.

But looking without knowing what you are looking for will not help either.

Sorry I dont mean to be aloof, but there is no given right for anyone to be given information. Help yes, nudge yes, but no answers on a piece of paper.

First, define what you want to find out, then devise your plan regarding how you will investigate this, then decide what you will do with this new information.

So to help;

If you dont have volume or derived indicators what do you have?

 

[DionysusToast]

cumulative delta volume instead?
edit: scrap that. I remember 'john1' disregarded that, along with any other indicator and charts in general.
Must be something none of us have heard of at a guess...

Cumulative Delta will help on certain markets but not in terms of weak/strong people who they get shaken out.

Where CD helps on thicker futures markets is that it helps you see if there is participation in a counter-trend move. So in an uptrend, when price moves down, if CD doesn't then the move down is probably a pullback. The thing is, this is telling you that the countertrend move is being driven more aby temporary imbalance than weak sellers IMO.

 

[cablemonster]

Not only was the upmove fake, it then facilitated weak sellers, to enable strong buyers to dominate (as they are doing at the moment).

But once again, look at the volume levels, on its own it tells nothing about who/what is strong or weak.

Ok, you know my stance on stand alone volume now lol

Hi WSW87

Is the reason that you are stating that volume on it's own means nothing is because it is relative volume metrics that matter. For example there could be a tonne of buying at market and an equal tonne of selling at market, price could stay in a small range as they wrestle for control. This would be a situation where there is a lot of volume but tells us nothing other than that aggressive buyer and sellers are going head to head.

So the market could be moving up due to strong sellers and/or weak buyers plus there could be some supply imbalance thrown in.

I sent you an email from your profile page by the way, you dont accept pm's tut tut.

 

[kimo'sabby]

Yes correct, anywhere between 9 to 12 futures markets, I clear through Rosenthal Collins and Dorman. But this does not help to realise that volume has nothing to do with weak/strong.


Sometimes volume may coincide with the state of the buyers and sellers, as will indicators and lots of other add-ons.

Remember for every buyer their must be a seller. So without being able to identify the parties involved, volume will tell us nothing other than activity levels.

Do you use volume in anyway, shape or form?

 

[numbertea]

Quote:
"
Originally Posted by wallstreetwarrior87 View Post

Yes correct, anywhere between 9 to 12 futures markets, I clear through Rosenthal Collins and Dorman. But this does not help to realise that volume has nothing to do with weak/strong.
"

I disagree a little here. I use the up versus down bar volume in conjunction with bid and ask to form my basic trend analyzing trade finder. Weak buyers and sellers are pickable on the bid ask cumulative percentage chart. I only use the first price level closest to the current price.

Here is a depiction of weak buying. Notice that the buy pressure (cumulative bid ask percentage) during the up bar is almost down to 30% which is my chart bottom level. I was already selling before then because of a different pattern but it is a total fake out if you don't take bid ask levels into consideration. <The rose and blue bar chart is the buy sell pressure I speak of.> The fake out bar closed at 2pm...The announcement.

Cheers

 

[wallstreetwarrior87]

Do you use volume in anyway, shape or form?

Hi, yes I do, but only to confirm what I already suspect. In reality it is not needed, but this would mean I would have to pass on a few more trades than I would normally take, because I wouldn't be able to see stopping volume.

If someone would be willing just to draw on paint an example, of say weak buying with volume, we could then see if it is actually the volume that tells us that the buying was weak, that would be great.

To add, there is nothing wrong with using volume as an addition. But using volume on its own to detect weak/strong will not get us very far. In other words there is more to it than that, as i'm sure everyone appreciates.