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

[lurkerlurker]

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.

What about the buyers who go long at 1400, 1450, 1500, 1550, and fail to notice when the market runs out of steam. They turn into sellers 12-18 months later, at 1000, 900, 800, 700. Are they really any stronger than the weak buyers who turn into sellers 6 ticks lower?

Is there more to strong and weak hands than timeline and capitalisation? Out of those 15,000 longs, at least some of them will represent positions which won't be dumped 6, 60, or 600 ticks lower. So a few questions here:
-what makes a weak buyer
-how to determine when buying is weak
-how to determine what timeline the buying represents (determines when this buying becomes selling)

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.

Somebody should do this. WSW has made a few posts inviting comment, a chart example, and usually one was not provided. We could all learn masses from just one example of how to show weak buying. Since purchases = sales, why are we describing as "buying" rather than "selling" or "buying and selling" or more generally "transactions"? Referring to one side of the auction supposes we know who is doing what and there is a reason for focusing on this group. How to know that?

I'd post an example to get things moving, but I can't. Why? Well the first rule is I'm not allowed to talk about it...

 

[cablemonster]

so I have been thinking about this thread further. The furthest I have got is identifying the characteristics of strong buying and then deducing from this what weak buying is.

My own view is that weak buying could be used to describe a period when price moved up however it moved up in such a way as to give us clues that is could come down very quickly, WSW called this 'fake' buying. Over any given time period the amount of buyers always equals the amount of sellers (it's an auction) so the amount of buying is irrelevant as pointed out by WSW.

To me strong buying is buying which occurs at market at sequentially higher prices and which consistently outweighs the market selling that is occurring at around that time. Therefore I deduce that weak buying is the opposite of strong buying and is characterised by the buying at market being more sporadic in nature and having more signs of market selling outweighing market buying as a whole in comparison to strong buying. So the weak buying can be facilitated by traders less willing to provide offers and more willing to provide bids.

It's all a bit confusing isn't it.

 

[kimo'sabby]

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.

Like i've said before, 3k for a proper lesson. Otherwise, you'll have to go on disbelieving and hoping for a paint job. Your loss, buddy.

 

[robster970]

Only just seen this thread. Just goes to show, when the weather is good I certainly am not going to stay in the house unless I have to. You'll be pleased to hear that my golf has not improved. See inline:

I have heard a few traders say sell into weak buyers or buy into weak sellers. So how do we identify weak buyers/sellers what should we look for?

By looking to see if anybody actually wants to trade at the price you are interested in. If a move is faltering at a certain level it can only be for 1 of 2 reasons:

1. Market orders are drying up for the offered liquidity - it is a sh1t price and it will reverse - this is to some extent 'weakness'
2. Limit orders have absorbed all the market orders - it is great value for strong hands who are filling their boots.

I certainly dont have the answers I am very interested in a discussion.

I suppose we need to define weak buyers/sellers. Are these traders people who will puke out of a position easily if price goes sgainst them? Or are they weak in that they are in for a quick buck then out.

Neither - it is strategy dependent, risk tolerance dependent and size dependent. Weak is relative term, not absolute. I trade a small account with relatively tight stops but how I trade (ostensibly parasitic) relies upon watching what those with money and more fluid risk mgmt are doing which is primarily searching for cheap liquidity.

Now lets assume we have identified a key level where we will consider a short. The reason for the level is not relevant to this discussion.

The level is important because strategies will vary dependent on whether the level offers cheap liquidity or because it is a sh1t price. Also knowing what kind of participants will trade around these levels is important but this informs your trading strategy and raison d'etre for making moolah.

So are these traders saying they would prefer to short at the level if weak buyers took the price up to the level as opposed to strong buyers.

Can we see it on a chart alone? If we see a steady gradual approach is that more indicative of strong buying? What if it moves sharply into the level is that an indication of weak buyers?

Yes you can see it on chart. Seeing volume supports the view too and confirms false +ve' s or at least provides additional context

Market profile charts - could these show weak/strong buyers or just areas where the market has traded less/more.

Potato, potato. Different view, same thing. I use it but I also use DOM and charts. They offer different, correlated views with differing granularities of information.

Volume tools - such as marketdelta and DTs product. These could tell us how many buy market orders hit into the ask on the way up to the level.

For me personally if I am going to short a level I prefer to see price move up sharply rather than meet the level more steadily but my research is by no means complete.

Anyone care to throw in some ideas?

 

[robster970]

@kimo - in answer to the rep - it's both for me too

Too many years of abuse...

night night sweatheart.

 

[kimo'sabby]

@kimo - in answer to the rep - it's both for me too

Too many years of abuse...

night night sweatheart.

I'm under your bed, wiv me tablets...

 

[cablemonster]

I have been working on this whole weak buyers strong buyers thing. One situation where there are weak buyers is when there are traders who are short and in a losing trade. They are in a weak position and could puke at any time. I also realised why a lot of my entries werent great. I was buying with too many other buyers far better to buy in the anticipation that others will buy at a higher price. Vice versa for shorting.

 

[Triggerfish]

So why does weak buyers and sellers exist?.....and why are they weak in the first place?

 

[cablemonster]

So why does weak buyers and sellers exist?.....and why are they weak in the first place?

I covered that in the post above.

 

[wallstreetwarrior87]

So why does weak buyers and sellers exist?.....and why are they weak in the first place?

Cos they don't know when to hold and when to fold

(just like Cablemonster described)

 

[cablemonster]

Cos they don't know when to hold and when to fold

(just like Cablemonster described)

WSW you are not accepting pm's again lol, don't blame you. Anyways in that message you sent prev about 'the way getting cleared for strong buyers to dominate', i totally get that now, took a while for that penny to drop.

I think DT raised the point that are buyers really sellers. I did find it helpful to think of buyers as sellers as they obv have to sell to get out, vice versa with sellers.

:whistling

 

[numbertea]

I think DT raised the point that are buyers really sellers. I did find it helpful to think of buyers as sellers as they obv have to sell to get out, vice versa with sellers.

:whistling

I use cumulative bid, ask comparisons. I feel that with cumulative volume and number of trade events in that time period, I get a good indication of how future price will be affected. The immediate ratios of buyers to sellers show me weak vs strong bars in relation to each other. I consider weak bars as the weak buyers or sellers. I can't quantify a single weak buyer or seller.

How do you quantify a specific weak seller or buyer, or do you mean a majority or participants within a specific time frame?

Cheers

 

[cablemonster]

I use cumulative bid, ask comparisons. I feel that with cumulative volume and number of trade events in that time period, I get a good indication of how future price will be affected. The immediate ratios of buyers to sellers show me weak vs strong bars in relation to each other. I consider weak bars as the weak buyers or sellers. I can't quantify a single weak buyer or seller.

How do you quantify a specific weak seller or buyer, or do you mean a majority or participants within a specific time frame?

Cheers

Well you can quantify but not identify a specific weak seller or buyer by looking at the tape. On the whole though we are talking about groups of participants unless you are watching large prints.

 

[wallstreetwarrior87]

WSW you are not accepting pm's again lol, don't blame you. Anyways in that message you sent prev about 'the way getting cleared for strong buyers to dominate', i totally get that now, took a while for that penny to drop.

I think DT raised the point that are buyers really sellers. I did find it helpful to think of buyers as sellers as they obv have to sell to get out, vice versa with sellers.

:whistling

Im glad you did, and it opens up many cans of worms lol.

You don't need any PMs, you are well on track I can tell!

Good trading to you

Yes, DT makes many good points, worth listening to IMHO.

 

[cablemonster]

Im glad you did, and it opens up many cans of worms lol.

You don't need any PMs, you are well on track I can tell!

Good trading to you

Yes, DT makes many good points, worth listening to IMHO.

yeah DTs alright for a dirty vendor.

 

[FX punt]

I have heard a few traders say sell into weak buyers or buy into weak sellers. So how do we identify weak buyers/sellers what should we look for?

I certainly dont have the answers I am very interested in a discussion.

I suppose we need to define weak buyers/sellers. Are these traders people who will puke out of a position easily if price goes sgainst them? Or are they weak in that they are in for a quick buck then out.

Now lets assume we have identified a key level where we will consider a short. The reason for the level is not relevant to this discussion.

So are these traders saying they would prefer to short at the level if weak buyers took the price up to the level as opposed to strong buyers.

Can we see it on a chart alone? If we see a steady gradual approach is that more indicative of strong buying? What if it moves sharply into the level is that an indication of weak buyers?

Market profile charts - could these show weak/strong buyers or just areas where the market has traded less/more.

Volume tools - such as marketdelta and DTs product. These could tell us how many buy market orders hit into the ask on the way up to the level.

For me personally if I am going to short a level I prefer to see price move up sharply rather than meet the level more steadily but my research is by no means complete.

Anyone care to throw in some ideas?

Rather than selling against weak buyers have
you considered buying with strong buyers ?

 

[Purple Brain]

Good to see this topic refreshed as it's on my list of "Things I am Interested in and really Don't Understand".

Strong hands, weak hands, weak sellers/buyers, strong sellers/buyers.

I assume the definition is based on what they have, what they want and what they will do in any given scenario and from what I have read is apparently discernible from the volume transacted and price development.

It seems to be a skill bordering on the occult, even when it comes to simply defining the terms themselves. Strong hands for a complete novice like me is anyone with all the money - institutions: funds, banks, large hedgies. Weak hands - retail. Obviously woefully short of the mark, but I'd appreciate understanding more specifically what each category actually is. Are they always in one camp or another never to change or would a strong hand sitting on a pile of stock which they accumulated at an average far below the current price and which starts to tank suddenly be classed as a weak hand? And if they start to sell are they classed as a weak seller or a strong seller - or is that itself determined by the rate at which they sell?

Even in the FX market which has no definitively useful volume data, those same categories presumably exist.

I've heard it said that the larger players (strong hands) control the longer term while the weak hands thrash around in the sub-daily noise, but when I look at charts from 15 minute to monthly - I see the same patterns. The only thing that's different is the amount of time and the number of pips from peak to trough.

I was recently directed to posts by a Mr. Marcus and those which remain seem to indicate an astute awareness of these issues, but apparently many of his posts were removed. A pity as I suspect this was precisely the sort of person we could do with to sort such issues out. Is there anyone else who has posted on this topic that I should be checking out?

 

[lurkerlurker]

Spotting this is not easy and takes a lot of time, a lot of questions, a lot of experience, and a lot of eye strain

WSW explained two trades for this condition - the buy ahead of the breakout and the reversal short. An example from today:

So back to the thread title. Weak buyers/sellers, how do we identify them and why?
The why is so one can understand why the market moves (knowledge), and optionally to have the potential to trade successfully (application of knowledge).

Yet the path for many or most is attempting application before knowledge is satisfactory. Knowledge can be an end in itself, and application of the knowledge is a separate task with additional requirements.

If a post from July is giving insight into a market condition occurring in October, it suggests that a recurring predictable structure exists. This is a trading site: how many members would like to learn about this?

As WSW suggests, it requires asking some questions. The whole premise of this trade was that the buyers were weak buyers and therefore the breakout was fake. How can we know this in advance?

 

[BeginnerJoe]

I have heard a few traders say sell into weak buyers or buy into weak sellers. So how do we identify weak buyers/sellers what should we look for?

You can look for it within yourself. Weak buyer and weak sellers are those who use 20 pip stops, or 50 pip stops, or even 100 pip stops. The minute they enter the market, they are knocked out. Does this sound familiar ? For people who use 5000 pips stops, not only do they have the capital capacity, they also have big balls. This is why they are strong and you don't want to be selling or buying into them because they can turn around and bite your limbs off.

 

[Liquid validity]

For people who use 5000 pips stops, not only do they have the capital capacity, they also have big balls.

Sounds like spanish stops by another name