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

[cablemonster]

speaking of...eurjpy just took a 75 pip nose dive.

draghi init. I am not trading today just observing given that the lack of US participation will mess with flows into cable. cable smashed today so far.

 

[wackypete2]

draghi init. I am not trading today just observing given that the lack of US participation will mess with flows into cable. cable smashed today so far.

Same here. Dumb @sses we are, eh?

Peter

 

[wallstreetwarrior87]

To me it has nothing to do with what/who these traders are, so there will be times when an institution is indeed a weak player.

It comes down to knowing what makes the move in the first place, then you can try to understand if the buying or selling is fake.

For example: in gold, is the current direction (up from the lows at 1185ish) controlled buy strong or weak buying (taking into account any liquidation that has occurred)?

If it is by weak buyers, then the move is fake, as the buyers do not understand why this upmove is happening, let alone how far it can/will go, thus cant go on forever, but maybe a few more sessions. There for, direction alone has nothing to do with strong or weak.

Interesting topic.

 

[cablemonster]

To me it has nothing to do with what/who these traders are, so there will be times when an institution is indeed a weak player.

It comes down to knowing what makes the move in the first place, then you can try to understand if the buying or selling is fake.

For example: in gold, is the current direction (up from the lows at 1185ish) controlled buy strong or weak buying (taking into account any liquidation that has occurred)?

If it is by weak buyers, then the move is fake, as the buyers do not understand why this upmove is happening, let alone how far it can/will go, thus cant go on forever, but maybe a few more sessions. There for, direction alone has nothing to do with strong or weak.

Interesting topic.

nice insight WS. so a weak buyer would be someone who was happy to buy and watch price to rise but has no long term conviction to stay in the trade, hence they may bail and take profit at any moment.

 

[wallstreetwarrior87]

nice insight WS. so a weak buyer would be someone who was happy to buy and watch price to rise but has no long term conviction to stay in the trade, hence they may bail and take profit at any moment.

If they can bail and take profit then I would say that is a bonus. The profile I have of these players is that they tend to let any profits slide, as they will never be able to take a trade for what it actually is (as they don't really have any understanding of what the most likely reason is for the movement).

There is nothing wrong with trading a breakout for example, but if there is no real chance of price moving beyond this point, the weak traders will get rolled and will miss the trade they should be in (reversal). High level traders (mostly individual private folk who can utilise the relevant levels of liquidity and don't have any restrictions) will buy into the break and reverse short as they grasp beforehand what is happening, or likely to happen (nothing is 100%).

So going into a break (say upside for this purpose) the weak buyers see an uptrend in progress, but this is all fake, and a ploy to feed the appetite of the STRONG sellers.

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

Even then we can be double crossed/ duped, and get it wrong, but there is a stop to take care of that.

 

[Hakuna Matata]

I agree and I think your definition is a neat one. I mentioned size because when this idea is discussed sometimes the way people talk you'd think the "weak" traders are novices, under-capitalised and whatever. They don't account for much in the market, so it isn't them.

In my view, at any given moment the "weak" hands could be anyone. They could be Goldman Sachs, they could be the most successful HFT firm around. They could also be the same people who were strong moments before.

By the way, am I in the right place? I thought I was at T2W, but there seems to be some trading discussion going on. WTF?

i'll fix that

she's beautiful.

 

[The Leopard]

i'll fix that

she's beautiful.

Banging chassis too.

 

[The Leopard]

This whole thread will probably get deleted now.

 

[cablemonster]

on a more serious note I would be interested in a sensible discussion on how fit the 4 womens semi finalists are at wimbledon this year. flipkens is already out but I would be interested in peoples opinions on scores out of 10 for each of them. I will start off:

Lisicki 7 not liking the german
Bartoli 6
Flipkins 6 not liking the short hair too much
Radwanska 5

tbh I am a little dissapointed with the talent this year.

 

[Hakuna Matata]

not much to any of em.

 

[DionysusToast]

Some good stuff in here.

I'm not sure if weak buyers and weak sellers exist. Few buyers and few sellers could participate in a move for sure.

I think Hakuna Matata made an important point about people that would like to buy as opposed to those that have to buy.

I think that the concept of "weak hands" and "strong hands" is more valid than weak/strong buyers.

What is a buyer anyway? Someone that's about to buy or someone that's already made a buy? The way I see it, someone that has already made a buy is now a seller, not a buyer.

If you are at a high after a 7 point move up on the ES and then it moves down 6 ticks.

- The longs from below are (in my opinion) strong hands. The move is not huge and it would be normal for there to be more in it. They are in a good position (as long as they aren't late buyers) and don't feel at all preturbed by the 6 tick pullback with again, is nothing out of the ordinary.

- The shorts from above are (in my opinion) weak hands. The market only has to move up 3 ticks and they'll start second guessing themselves. As the market moves back up the the high, these people will be sweating and ready to puke.

You are all traders, put yourself in their shoes. You know how it is.

So strong/weak buyers - I don't know

 

[DionysusToast]

Take ES or something like that. Now the vast majority of the volume is done by institutions - traditional institutions, HFT firms, major individuals who trade very large and so have the characteristics of an institution and so on. At any point the other side is likely to be this lot (the same is true for people on your side). None of these can be described as weak. They'll all have deep pockets, they'll all know what they're doing.

So the idea of "weak" traders - under-capitalised, inexperienced, and so on - isn't really all that valid or useful in my opinion, because they account for such a small percentage of the market.

I agree to an extent but there are a LOT of short term, speculative traders out there.

On this day, we had 1.7 million contracts trade, we had a range of 17 points and we ended up 9 ticks below where we started. We also saw the difference between market buy and market sell orders being about -13,000 out of 1.7 million contracts traded.

To me, this says that pretty much, everyone that got in, also got out. This was not a day where institutions were making major adjustments because of fundamental data, the market traded 1.7M contracts and did - F&#@ all.

This is quite normal on the ES.

No-one knows the percentages but this sort of activity in my opinions is indicative of a very short term speculative market. When there is speculation, people are going to get offside and they will be trapped. If you see the typical run of stops on the ES, that really doesn't tend to be more than 4-10k contracts causing the initial 2-4 tick move when people puke out.

The point is - there IS a fair amount of short term speculation going on. The percentage differs depending on what's driving the day. It does NOT have to be retail speculation for people to be wrong.

It doesn't take that many speculators to cause the market to move when they all run to the doors. 4k is the low end for a stop run and 10k is high average in my experience. That's enough to knock things off balance temporarily, which is all it takes to nudge the market around.

So - I wouldn't underestimate trapped traders as a force to drive a short term move because they are clearly visible as they exit.

 

[DionysusToast]

so how do we go about finding people who have to buy or have to sell? I guess these will include people who have to initiate a position i.e. at expiries/fixes etc but also people who have to close because they cant take any more heat.

It is easy enough to know where stops are.

The hard part is knowing if they will be run or not.

There is some significance in how often a level gets hit, and by that as a day trader, I am talking short, short term.

It goes to the level they want to run, trades 30 contracts pulls back. Goes back 40 seconds later, trades a few, comes off. If it keeps doing this, then you can have a pot shot at it and that's what some momentum traders do - try to get in a few ticks below the high when it really, really looks like it'll break. The nature of chasing stops is that when you think you will break, the entry price can be quite cr@ppy.

Watching a correlated market could help - so if you want ES to break, wait for the Bonds to break in the opposite direction (or a currency or whatever it is you watch).

What I think is better for me is when the market gets into the tighter 6-8 tick ranges where you know stops are either side. If this range happens after a move up, you know there's a slightly higher chance of an upside break, so you get in @ the low of the range, scale some close to the top and then sit on it in an effort to capitalize on the break. You could well get stopped out on it and you could get shaken out with a poke through the range that then fails before it goes upside but I think on balance, it's a better way to play it (for me).

 

[kimo'sabby]

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?

Current volume levels, in comparison to recent volume levels, is one method of identifying weakness or strength.

 

[wallstreetwarrior87]

Current volume levels, in comparison to recent volume levels, is one method of identifying weakness or strength.

Sounds ok, can you show an example of this?

Maybe draw an illustration on paint and pop it up here.

This way we can see where you believe there is weakness and strength.

Volume can be misleading as it is easy to think we are comparing the same thing. Size of volume has nothing to do with strength or weakness, only to do with participation.

An example will help though.

Thanks

 

[The Leopard]

I agree to an extent but there are a LOT of short term, speculative traders out there.

On this day, we had 1.7 million contracts trade, we had a range of 17 points and we ended up 9 ticks below where we started. We also saw the difference between market buy and market sell orders being about -13,000 out of 1.7 million contracts traded.

To me, this says that pretty much, everyone that got in, also got out. This was not a day where institutions were making major adjustments because of fundamental data, the market traded 1.7M contracts and did - F&#@ all.

This is quite normal on the ES.

No-one knows the percentages but this sort of activity in my opinions is indicative of a very short term speculative market. When there is speculation, people are going to get offside and they will be trapped. If you see the typical run of stops on the ES, that really doesn't tend to be more than 4-10k contracts causing the initial 2-4 tick move when people puke out.

The point is - there IS a fair amount of short term speculation going on. The percentage differs depending on what's driving the day. It does NOT have to be retail speculation for people to be wrong.

It doesn't take that many speculators to cause the market to move when they all run to the doors. 4k is the low end for a stop run and 10k is high average in my experience. That's enough to knock things off balance temporarily, which is all it takes to nudge the market around.

So - I wouldn't underestimate trapped traders as a force to drive a short term move because they are clearly visible as they exit.

LOL I must have expressed myself very badly because this is another post that I think is very good and agree with.

I've seen figures of around 70% of the volume on any given day accounted for by the forces you describe.

Now a lot of this will be done by "strong" hands - well capitalised, expert, successful etc. But any one of their positions might be weak, or easily dislodged, because maybe the programme they are running operates like that. Maybe it bails at the first sign of trouble.

The other thing is (from what I understand) these firms often run programmes across a huge range of markets - stocks, various futures, currencies and so on. So again, immensely strong participants with individual positions that are "weak".

 

[wallstreetwarrior87]

So again, immensely strong participants with individual positions that are "weak".

Exactly!

This is why volume/genre does not define strong or weak.

Think about manipulation tactics, some games require light levels of volume (and light needs to be defined in relation to the tactic) and some need large levels.

So without a solid foundation of how/why markets really move, it will be impossible to answer the original question posed.

What about markets moving up on weak sellers and down on weak buyers?

The avenues are endless, but worth investigating, even if you just gain a few nuggets of information, which can all help with the overall edge.

 

[kimo'sabby]

Sounds ok, can you show an example of this?

Maybe draw an illustration on paint and pop it up here.

This way we can see where you believe there is weakness and strength.

Volume can be misleading as it is easy to think we are comparing the same thing. Size of volume has nothing to do with strength or weakness, only to do with participation.

An example will help though.

Thanks

3k for the proper lesson. I don't do freebees, i'm sure you can appreciate this.

Regards.

 

[wallstreetwarrior87]

3k for the proper lesson. I don't do freebees, i'm sure you can appreciate this.

Regards.

Thought so;

You can never learn anything on da web

To confirm, volume has nothing to do with strong or weak. If anyone would like to understand why, or prove/deny this theory, then this could be debated.


BTW the market is all about the strong vs the weak, and I am surprised that this thread has fizzled out the way it has.

Well maybe its not too surprising:whistling

 

[scholfield]

.


BTW the market is all about the strong vs the weak, and I am surprised that this thread has fizzled out the way it has.

It fizzled out because those that are potentially able to shed some light on the matter seem to prefer to give very vague hints and play games instead of offering some genuine help and putting meat on the bone.

It's the same at elitetrader, and probably everywhere else.

One of the most frustrating threads I stumbled across was this one:
http://www.trade2win.com/boards/home-trader/72058-trading-without-charts.html

In particular, the posts of jonh1 who starts posting a few pages in I believe.
He gives the impression of genuinely knowing something that no other poster does, and to be honest, he seems quite convincing (which makes it even more frustrating!)
But the thread ended with everyone just guessing as to what he was referring.
We're not all rockets scientists, but some of us have been struggling and trying out hardest for years to crack the market and we need more than riddles.

(not directed at you, but it's a recurring theme around trading forums, and i'm never sure whether people are playing a cruel game or they're just torn as to who and how much info to give away)