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Reading 'Master The Markets' - Confused

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rcctradings

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Been reading Master The Markets but got stuck making sense of the following:
Pg 32 – Testing Supply

The danger to any professional operator who is bullish, is supply coming into his market (selling), because on any rally, selling on the opposite side of the market will act as resistance to the rally and may even swamp his buying. Bullish professionals will have to absorb this selling if they want higher prices to be maintained. If they are forced to absorb selling at higher levels (by more buying), the selling may become so great that prices are forced down. They will have been forced to buy stock at an unacceptably high level and will lose money if the market falls.

This seems to imply that a bullish operator would want to be buying at higher prices? Would it not be that one buys when the price is low (accumulation) and sell when the price is high (distribution)?
Am I missing something?
Would be great if a learned trader could share some enlightenment on the above. :confused:
 
rcctradings said:
Been reading Master The Markets but got stuck making sense of the following:
Pg 32 – Testing Supply

The danger to any professional operator who is bullish, is supply coming into his market (selling), because on any rally, selling on the opposite side of the market will act as resistance to the rally and may even swamp his buying. Bullish professionals will have to absorb this selling if they want higher prices to be maintained. If they are forced to absorb selling at higher levels (by more buying), the selling may become so great that prices are forced down. They will have been forced to buy stock at an unacceptably high level and will lose money if the market falls.

This seems to imply that a bullish operator would want to be buying at higher prices? Would it not be that one buys when the price is low (accumulation) and sell when the price is high (distribution)?
Am I missing something?
Would be great if a learned trader could share some enlightenment on the above. :confused:
Click to expand...

It's not a very well written passage.

Essentially it is saying if supply comes onto the market and swamps demand buyers can get locked into the stock at higher prices.
It appears to be referring to buying during a rally not so much buying at the accumulation phase, but without reading the whole chapter can't be 100% sure.
 
"Beyond Greed" by Stephen Fay

is a book written about an ambitious attempt to corner the world's silver market. I believe it serves as an excellent real life example of the scenario that this passage cautions against.
 
rcctradings said:
Been reading Master The Markets but got stuck making sense of the following:
Pg 32 – Testing Supply

The danger to any professional operator who is bullish, is supply coming into his market (selling), because on any rally, selling on the opposite side of the market will act as resistance to the rally and may even swamp his buying. Bullish professionals will have to absorb this selling if they want higher prices to be maintained. If they are forced to absorb selling at higher levels (by more buying), the selling may become so great that prices are forced down. They will have been forced to buy stock at an unacceptably high level and will lose money if the market falls.

This seems to imply that a bullish operator would want to be buying at higher prices? Would it not be that one buys when the price is low (accumulation) and sell when the price is high (distribution)?
Am I missing something?
Would be great if a learned trader could share some enlightenment on the above. :confused:
Click to expand...

Says that when a trader who loves the stock and think it will go higher, will then find that as the stock goes up, and so he's bullish and think it will keep going up... then the market, seeing the price rising, then sell and so there are more stocks than demand for it. With more supply of stocks, for the pro to still be bullish, he must buy and keep on buying to reduce supply and so maintain the [illusion] of a higher and rising price.

But the more the pro buy, the more others will sell... and if he keeps it up, the pro will buy at higher and higher prices and might then be stuffed when he finds out he's the only one buying :)

--

Makes sense, but not sensible... probably is useless.
 
rcctradings said:
Been reading Master The Markets but got stuck making sense of the following:
Pg 32 – Testing Supply ...

This seems to imply that a bullish operator would want to be buying at higher prices? Would it not be that one buys when the price is low (accumulation) and sell when the price is high (distribution)?
Am I missing something?
Would be great if a learned trader could share some enlightenment on the above. :confused:
Click to expand...

Been a while since I read "Master The Markets", and like you, I was left confused.


Money makers cannot control the markets, they just know which direction it is running.
I would suggest that "Pg 32 – Testing Supply" is a separate phase to accumulation or distribution.
My take would be, that they are testing that direction!
 
The Answer is Simple yet Complex---

Volume and Bar structure or Spread are just one of many Technical tools.

Like ALL analysis they INDICATE to those who understand the or any form of analysis Technical or Fundamental what is currently happening in the instrument being studied and at times what the potential for that instrument maybe through that analysis---going forward.

VSA is one of those analysis tools. One which I continue to use in my analysis on a daily basis.
But like ALL analysis they are (all analysis) dynamic.

Its the dynamic nature of all analysis which in my view confuses many traders. They want their and any analysis of others to be set in stone. Its only when you understand how to adapt analysis (Any analysis) to the forever changing landscape of economics within your time frame and instrument that you will have any opportunity of achieving consistent profit.

So specifically to the question and excerpt from "Master the Markets"

The danger to any professional operator who is bullish, is supply coming into his market (selling), because on any rally, selling on the opposite side of the market will act as resistance to the rally and may even swamp his buying. Bullish professionals will have to absorb this selling if they want higher prices to be maintained. If they are forced to absorb selling at higher levels (by more buying), the selling may become so great that prices are forced down. They will have been forced to buy stock at an unacceptably high level and will lose money if the market falls.

This seems to imply that a bullish operator would want to be buying at higher prices? Would it not be that one buys when the price is low (accumulation) and sell when the price is high (distribution)?
Am I missing something?
Click to expand...

There are important questions that need to be posed to the italicized question is---

Is accumulation strictly limited to lower pricing---and by that I mean after a drop or correction in price.
When then is a price "low enough for accumulation" and of course HOW DO YOU IDENTIFY ACCUMULATION
in isolation and for that matter DISTRIBUTION???

Most instruments spend a great deal of their time in various time frames consolidating---I'm a technical trader and think it important to be able to determine a likely outcome of consolidations through analysis---so to the Question related to the Question.

Lets look at some examples.

A and D.gif

A and D 1.gif


We don't want to be on the wrong side of trades so it always made sense to me that if there are signs that can be used to INDICATE a direction in price action particularly in multiple time frames and instruments---then it was worth learning.
So how then can we best take a trade given the information on the charts ---(The two above) to profit??

Some questions then before I go further to answering the question/s.

Whats happening in these consolidations?
Which bars are the most important bars.
What do they tell us?
Where are the entries--Best and not so best and why---are there any??

Are we going to but a high which is too high ??
Are we going to buy a low which is low enough ??
 
Hi folks,
All good points as contributed.
I can try and make sense that an increase in volume at the bottom of a downtrend might indicate that the big moneys could be busy buying at bargain price (accumulation?) and volume drying up at the top of a rising trend might indicate the end of the distribution phase.
Which bars tell me we're at the top/bottom?
How do they manage to help the price rise steadily?
How do they trigger the panic selling?
Do they buy some during the downtrend? What's an ok price?
What are the tell tale signs to help one "read between the bars"? Which bars are the significant ones in relation to what the volume is saying?
Some more pointers please! :xyxthumbs
 
To help discover the answers to your questions lets have a look at the First consolidation and its top.
I have labelled the most important aspects
See if you can use them to consider the direction most likely in the Small consolidation I first posted and also in the largest one I have posted.

I will look at them both in more detail after there has been some---or any discussion.

Click to Enlarge


A and D 2.gif
 
I need help with Area 5. Low activity means that someone is waiting for news/announcements? Attention has been taken away from this stock while everyone focuses on another one? Everyone who wanted to sell has sold and buyers have dried up? The next '1' spike (after Area 5) in volume either means something was announced and/or more buyers wanted this stock? I need help.

Please correct me.
 
Faramir said:
I need help with Area 5. Low activity means that someone is waiting for news/announcements? Attention has been taken away from this stock while everyone focuses on another one? Everyone who wanted to sell has sold and buyers have dried up? The next '1' spike (after Area 5) in volume either means something was announced and/or more buyers wanted this stock? I need help.

Please correct me.
Click to expand...

Since you asked :p...

it could be any of the above, it could be neither, who the heck knows. And if you do not know, and there is no way you could know with certainty from sales/trades volume, you're by definition speculating.

I'm pretty sure that you won't get a better teacher than Tech/A on the subject... and if technical analysis is the way for you, it's fine... but probably best to ask WHY before you ask HOW.

Once you know the Whys, the Hows are pretty easy to get to.

As Enron tells us, Enron: Ask Why
 
Thank you luutzu.

I found another thread by tech/a and he posted a similar graph in Post No. 6
https://www.aussiestockforums.com/forums/showthread.php?t=23721

The main statement he wrote inside a red box which I think sums up Area 5:
"This is Volume Support Zone Resistance will be found here." We are trading inside the two zones. Does this mean share price drops, someone else buys thinking that it is a bargain but they are actually doing is supporting that support line? When share price approaches or minor breaks through resistance, someone else sells to puts resistance on the resistance line. Buying pressure and selling pressure is roughly equal in Area 5.

Each time there is a "minor Pivot done resistance" I think there has been an increase in volume of buying.

I will admit I am not a technical analysis person. After buying 3 good stocks at the wrong time, I need to learn more. I am already struggling with fundamental analysis. Some "value" investors will sometimes write off this discussion.

Tech/A, I hope you don't mind me having an attempt despite of the high risk of falling flat on my face or having egg on me. I was going to sit on the sidelines but it would better if someone exposes my lack of understanding. I don't mind putting my neck out if I can learn something.
 
Area 5, there is not enough volume to break resistance nor support zone.
 
Faramir said:
Thank you luutzu.

I found another thread by tech/a and he posted a similar graph in Post No. 6
https://www.aussiestockforums.com/forums/showthread.php?t=23721

The main statement he wrote inside a red box which I think sums up Area 5:
"This is Volume Support Zone Resistance will be found here." We are trading inside the two zones. Does this mean share price drops, someone else buys thinking that it is a bargain but they are actually doing is supporting that support line? When share price approaches or minor breaks through resistance, someone else sells to puts resistance on the resistance line. Buying pressure and selling pressure is roughly equal in Area 5.

Each time there is a "minor Pivot done resistance" I think there has been an increase in volume of buying.

I will admit I am not a technical analysis person. After buying 3 good stocks at the wrong time, I need to learn more. I am already struggling with fundamental analysis. Some "value" investors will sometimes write off this discussion.

Tech/A, I hope you don't mind me having an attempt despite of the high risk of falling flat on my face or having egg on me. I was going to sit on the sidelines but it would better if someone exposes my lack of understanding. I don't mind putting my neck out if I can learn something.
Click to expand...

This is another aspect of (my own) volume analysis techniques. I haven't introduced it into this discussion.
Just leave it out at the moment. All will be come clear.

beachlife said:
Before you get side tracked into the importance of volume in todays markets check this out from 4:40 onwards

http://www.youtube.com/watch?v=dOSd2oHl4ks
Click to expand...

Guppy has always been an advocate that volume has little place. I don't agree and will present my case as we go.
He does bring up a point which I do agree on Volume is Speculator/Investor Participation shown as volume.

However he points out that in HIS view Volume comes AFTER the crowd.

If that were the case Wouldn't these bars be interpreted----as shown on the chart??

This is the first chart we are looking at.

Click to expand

A and D 3.jpg

If not WHY NOT?----I have my own personal view and answer.
 
Firstly I think you need to identify if your instrument is being controlled by INVESTORS or SPECULATORS. To make it a little easier I believe this chart is controlled by INVESTORS.

If it were an index futures chart or a spec chart Id think differently.

Each act very differently when reading a chart.

I also believe that ANY analysis Technical OR Fundamental--taken in ISOLATION is of little to no value---there are exceptions---but in general.

Technically the ability to construct a story on a chart which leads to a possible conclusion --- sets the tradesman from the apprentice.

The chart marked up (Not with everything I see!---but enough).-------Tells a story.

Ask---what is each bar in isolation telling me about the participants.

THEN what is the story being told by the chart? BULLISH OR BEARISH---what do you think happens---Does the chart reverse back up OR continue down?--What does the chart tell you at the points marked.

IS EFFORT BULLISH or BEARISH---is it succeeding?

I personally think ALL volume tells a story in the CONTEXT of the landscape of a chart.
The most powerful signals are seen in VERY HIGH volume and VERY LOW volume and normal volume----depending on their appearance in a chart.

I will clearly show you as we continue on.
 
Tech,

- Looks to me as though there are some small signs of accumulation.

- Given that we have come from the upside and there now appears to be volume supporting this market, I would be hesitant to play the short side. Although I've been wrong before!!!!

- Area 5 suggests a lack of interest to me (of both supply and demand). I see it of little use right now.

- I find the high volume bar halfway into the consolidation area @ the resistance interesting. - Supply has not yet been removed.

- I also note the tests on the downside are still on high volume which also tells me supply has not yet been removed.

@ this stage of the lifecycle I feel it will continue to range trade. I'd be looking for a clear lack of supply near the lows or a shakeout bar as signs to get long. A big downside push on volume would negate the above analysis.

EDIT: Slow Pony
 
Well that is a text book guppy trade. Trend line break into consolidation, break of resistance out of consolidation, confirmed by the count back line, and confirmed on the next bars open. If I knew what chart it was I could also overlay his GMMA. A great example of trading a break out confirmation without any consideration of what volume was doing or any guesses as to who controls the market, and a great example of how volume came in after the price move.

My guess is that people looking at volume would have seen the break on low volume, ignored it because the volume was low, and missed an easy 2:1 trade. There were probably also some bottom pickers that entered long on the large volume higher close bar that got stopped the next day.

Where to next, no idea, put it on the watch list and look for a better trade.

volume.JPG
 
Same result different analysis
The two bars highlighted show no demand after volume.
No problems with anyone who holds Guppies view.

But with no idea where this chart is going then --- for me at least ---- reading a chart puts you in front
As it should be clear in both charts what is likely to happen -----

Those who don't wish to use volume in their analysis or indeed VSA will tune out.
My postings are for those who have interest in charting and VSA.

I presume there are a few more than firimar PAV and the kid.

Come on PAV what's the chart saying?
 

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