Monday, March 11, 2013

Who Is Controlling Price?

MetaStock SPRS Series - Week 109 - TechniTrader® Stock Discussion for MetaStock Users - Who Is Controlling Price? - March 11, 2013
By: Martha Stokes C.M.T.

Understanding why price is behaving the way it is at any point in a trading week is dependent upon seeing the broader scope of the market beyond the limited view of retail trading. Who has been controlling price lately? It has been retail traders, small lots, and HFTs. Recognizing their footprints is the first step, knowing how they trade habitually is the second step, and combining volume and quantity analysis with price analysis as confirmation is the third step. Once you have this information, trading becomes significantly easier, simpler, and faster. What many retail traders do not realize is that the largest lot traders and investors do not move price. When price is moving speculatively, the largest price action is often HFTs or retail, and NOT Dark Pools as many assume. As a retail trader, being able to first determine who is in control of price is a huge help because it defines quickly how price is likely to behave, what volume patterns you are likely to see, and how long the run or rally will sustain.

We are in a range bound market regardless of what news reports claim about the Dow. The Dow is a mere 30 stocks, which the giant buy side funds hold as charter stocks, and the giant sell side holds as trust fund stocks to create trading instruments to sell to small funds, retail, and the general market participants. The Dow moves on the retail side buying or selling. So those stocks seldom will move with huge gains like the underlying stocks will when news gets out that Dark Pools have accumulated. Quiet accumulation is often misused or misunderstood. It does track large lots, but there are numerous patterns within TTQA. It is not just that red bars indicates large lots distributing and green bars indicate large lots accumulating. TTQA is a sophisticated, highly sensitive indicator and it is a relational indicator to Volume and to Price. You have to use all 3 together to interpret and analyze what TTQA is saying to you, and it is always telling you more than Price and Volume alone. But it is a professional indicator and sublimely capable of revealing far more than most retail traders realize.

The professional side of the market makes great profits and most professionals are highly successful. Otherwise, they are gone quickly. The retail side has a dismal success rate. Part of the reason for this is because retail traders prefer to use what every other retail trader is using. They prefer to run with the retail crowd and use retail indicators that do not expose who is in control of price. So more often than not, they are trading against the large lots rather than with them. The ratio of pros to retail is 80/20. You need to be with the 80% and stop trading with the 20%.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
MetaStock Partner
©2013 Decisions Unlimited, Inc.

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