Stock Market Chart and Price Jargon Revealed | Bizcovering
Tree Shakes – if you hold shares in a company and the price starts to drift downwards, you need to check two things. Firstly check the date and make sure it is not ex-dividend day – your share price will drop by the same amount as the dividend, and this is fine.
Secondly, scour the news for reasons why the sp might be dropping. If you can’t find any good reason, then the chances are that you are witnessing a “tree shake”. When a market maker is trying to fill a large institutional buy order, sometimes they may not have enough shares. They start to gradually drop the share price in order to “scare” people into thinking the company has a problem.
Weak holders will sell up, and the market maker continues to drop the price until enough weak holders have relinquished their shares. The market maker then fulfils its large order and returns the share price to where it started. Be eagle-eyed for all news relating to companies you hold shares in, and you’ll be better able to spot tree shakes and not get caught out.
Read more: Stock Market Chart and Price Jargon Revealed | Bizcovering
Tree Shakes – if you hold shares in a company and the price starts to drift downwards, you need to check two things. Firstly check the date and make sure it is not ex-dividend day – your share price will drop by the same amount as the dividend, and this is fine.
Secondly, scour the news for reasons why the sp might be dropping. If you can’t find any good reason, then the chances are that you are witnessing a “tree shake”. When a market maker is trying to fill a large institutional buy order, sometimes they may not have enough shares. They start to gradually drop the share price in order to “scare” people into thinking the company has a problem.
Weak holders will sell up, and the market maker continues to drop the price until enough weak holders have relinquished their shares. The market maker then fulfils its large order and returns the share price to where it started. Be eagle-eyed for all news relating to companies you hold shares in, and you’ll be better able to spot tree shakes and not get caught out.
Read more: Stock Market Chart and Price Jargon Revealed | Bizcovering
Masquerade
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ah the old tree shake.
You don't know until after. People see share price drop a lot in one day, they instantly say "oh it's a tree shake! Don't sell your shares" and even use it as an opportunity to top up. Sometimes no bad news to justify the price move comes out and shares move back up. Sometimes the price drops a lot before results/statements and then rocket up on good news. But other times people say it's a tree shake when in fact someone knows a lot more and a few days later the little investors find they've been shafted by some bad news and the tree shake was a legit move.
The tree shake is easier to perform on stocks which trade in lower volumes as they can be manipulated easier ie. AIM.
You don't know until after. People see share price drop a lot in one day, they instantly say "oh it's a tree shake! Don't sell your shares" and even use it as an opportunity to top up. Sometimes no bad news to justify the price move comes out and shares move back up. Sometimes the price drops a lot before results/statements and then rocket up on good news. But other times people say it's a tree shake when in fact someone knows a lot more and a few days later the little investors find they've been shafted by some bad news and the tree shake was a legit move.
The tree shake is easier to perform on stocks which trade in lower volumes as they can be manipulated easier ie. AIM.
mike.
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You can't spot them in advance, its when market makers have a client for a large number of shares at a certain price, they artificially drop the share price right down hitting stops and knocking traders/investors out of the market freeing up possibly thousands of shares, these are then quickly bought up at the reduced price and then the share price quickly recovers to what it was, usually within minutes. Inside knowledge would be the only forecast.
Thanks Mike,
A question what are the signs while this is happening? I assume it will be hard to buy and easy to sell.
Is there any way to obtain the volume of shares to buy and sell during this time. As this could indicate if hugely far off the NMS a shake?
A question what are the signs while this is happening? I assume it will be hard to buy and easy to sell.
Is there any way to obtain the volume of shares to buy and sell during this time. As this could indicate if hugely far off the NMS a shake?
mike.
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Level 2 would show you the orders being placed, but it happens so fast and very rarely that you would never get in, on a chart you would see a large sell candle followed by a large buy candle, then followed up with an excuse that it was a fat finger trade to justify such an erratic move
Thanks for your responses I guess what I am looking for is a system that will ideally tell me if there is overhang on a stock
e.g. sometimes huge quantities above the NMS can be bought/sold. This can sometimes give a good indication of a stock overhang, e.g. if you can buy 200,000 shares but only sell up to 2,000 online, there's a good reason to believe that the price won't be going up anytime soon (unless a big trade takes the available shares). If somebody sells 1,000 shares, the bid price may then move down.
e.g. sometimes huge quantities above the NMS can be bought/sold. This can sometimes give a good indication of a stock overhang, e.g. if you can buy 200,000 shares but only sell up to 2,000 online, there's a good reason to believe that the price won't be going up anytime soon (unless a big trade takes the available shares). If somebody sells 1,000 shares, the bid price may then move down.
