motorway,
That was a superb post. Can you elaborate or confirm if I'm on target with my interpretation?
The higher prices resulting from demand creates supply by attracting sellers...vice versa for supply generating demand.
In between the lower prices which occur due to supply encourages further selling and a rise in prices due to demand encourages further buying?
ASX.G
I think this is where an accurate understanding of how the character of price and volume action can reveal the creation , sustaining and termination of trends .
We have to keep in mind that volume traded is not the same as liquidity.
Liquidity defined as the impact of any one transaction on the subsequent transactions. That there is a different liquidity for sell orders and buy orders at any particular time and that the context that the action in the moment is occurring in is crucial..
Up trends, downtrends , sideways ( different from nothing )... All in their way crystallize and generate a following
The liquidity for buy and sell orders is very different in a downtrend than an uptrend...
Large volume can bring about a large movement in price
or it can simply generate demand or supply
What really cause large price movements is changes in liquidity
liquidity imbalances.....
Price moves in waves of buying and selling.
When a following is generated... It is then that a liquidity imbalance is crystallized....
We can look at different time frames
daily weekly monthly
We can look at different magnitudes of moves
But really waves transcend defined time and defined magnitudes.
Accumulation/Distribution ... Think about it buying generating selling , selling generating buying.. waves swinging up and down , bounded , meeting edges
How do We get waves ? Anywhere ?... Ocean ?.... Wind provides energy..
A skipping rope ? Someone has to be holding the rope.
All sideways need not be Accum or Dist it can be just nothing, random movements.
No wind blowing on the water... No one holding the end of the rope...
No waves....
What stands opposite random disorder and meaningless movements ?
Order.... what creates order ? energy ... what is energy ? Here it is information..
Some sort of information is the energy that creates meaningful waves
When someone is holding the rope they can manipulate it ,make it move..
In a range buying generates selling and selling generates buying
When there is some sort of information , energy .When someone picks up that rope..
Movements then take on some sort of order..
We get waves.
A nothing range becomes accumulation or distribution
Positions are taken and waves of activity that will gather a following are being generated.
How ? By change of ownership and crystallizing of sentiment...
Liquidity imbalance is built up... Buying starts to generate more buying. A range also build contigency ( All those who will buy or sell when price does move) Accumulation gives way to markup. Then Ease of movement
No longer need volume to produce markup... Inventory just gets a new price ticket.
Waves of buying and selling then unfold very differently
higher highs higher lows
selling waves have little ( in comparison ) following
But new information is always flowing like the wind
At some stage prices reach an overbought , top heavy state...
Waves have overreached like waves that rush too far up the shore
With energy spent.. It just flows back ..
We with mkts though have
two waves , selling and buying.
Waves can just rollover and subside like on the beach or they can violently meet with the other side.
In every trend there are ranges
and in ranges there are trends
look at all time frames , all magnitudes...
ranges build trends which then terminate back into ranges
buying generates selling----> until a liquidity imbalance
prices jump out of the range gathering a following
buying generates buying
Sellers place limit orders above the depth
A series of higher highs and higher lows
waves of buying and selling a clear following.
liquidity imbalance is finite
markup over... Range.. Buying generaties selling .selling generates buying.
Only way you can have a range.. Information energy creates order
Range again involves change of ownership crystalizing of sentiment..
( Information can also be of various kinds . Some real knowledge to just someone watching the price action )
Look at different magnitudes
Look at different time frames
Look for the trends and ranges on different time frames
Look for the character of bars and waves ( a series of bars only make up one bar on a larger time frame )
Look for where the liquidty imbalances are being created...
Look for serious information driven accumulation and distribution.
The most important change of ownership is
between weak and strong hands
different chracteristics at bottom and top of waves
Strong hands are forward looking
weak hands are backward loooking
one is early and on time ,buying or selling for the next move
the other is always late buying or selling the past move.
If you see a range or a trend in any time frame
look at the context from the perspective of the other time frames...
Range or trend... both are made up of waves of buying and selling, demand and supply , that build and gather a following..
Volume will tend to define where the followings start and end..
motorway