Knowing Buying From Selling
While it's true, Richard, that one cannot say for certain the status of an individual trade, we don't make our trading decisions based on an individual trade; we make them on, shall we say, "a preponderance of evidence."
You say that you sell at the ask 90% of the time. Why not 100%? Answer: because you cannot always get someone to meet your price. When many trades are printing at the bid, it is strong evidence that sellers at the ask are not finding enough takers at their price, so they are hitting the bids.
Yes, one cannot say for sure that a particular print at the bid was not a buy, but one can make a very good bet -- and that's what we do. When we see a stream of prints at the bid, we know that it represents selling pressure, even though we cannot vouch that every single print is a sell.
If you are trading in a very slow market, only a few trades per hour (god forbid), then you have less basis for determining what is selling and what is buying.
I think there may still be a question, though, about determining the meaning of single large blocks. Does a large block printing below the bid mean the same thing as a large block *at* the bid? Traders often say that a large block below the bid is a bullish sign. If someone can explain that to me, I would be grateful.
ig |
