), the figures suggest the opposite.Just to clarify things - I firmly believe that an understading of volume activity at key points is of paramount importance. This led me to investigate what was going on at this particular volume spike, and I was a little confused at how the basic law of 'supply and demand' seemed to be turned on it's head (as I understand it). Anyway, I am sorry if this should have been put in the 'First Steps' forum, but I am definitely a fan of technical analysis over anything else.
From small acorns... ;-)
From small acorns... ;-)
Rhody Trader
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This is where traded price can get deceptive. If you look at the actual activity you'll notice that the offer never changed, and that the bid fluctuated only slightly. All the trading took place within a nearly fixed bid-offer spread. In essense, the market never moved. The only reason that it looked like it moved up was because the last order was a buy at the offer. Had it been a sell at the bid, it would have looked like a down day.
Rhody Trader
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james6848 said:
You're absolutely right about that. It's an interesting example, one that demonstrates a flaw in just looking at traded prices.
In the case of highly liquidy, actively traded instruments (lots of trades, not just lots of volume), it's not a big deal. In thinner markets, however, it's very important. Options are notorious for having the last traded price being way out of line with where the market actually is for just that reason.
