Neilson Smart Money Analyser: POTENTIAL price action

[barney]

Smart money dont wait in the depth.

Coz if you have 10,000,000 shares to sell, placing the bid there would "Scare" the rest of the market, causing the market price to drop, and you get less money for your parcel.
Or if you want to buy, you dont want to put a massive bid in there as it will make the price go up, or is likely to do so.

Smart money, like tech/a described with the QBE chart, ALWAYS buy/sell at market, and do so in a manner to get the price as cheap as they can, or to offload as expensive as they can. Its because of their stealth that they are called smart money.

And i personally think there is some truth to professionals closing the market and newbies opening it - though i havent proved this.

Howdy Niz, Could I offer the thought that "smart money" does (at times) wait in the depth queue, but mostly to have the exact opposite effect of what it appears on the surface .............. as others have eluded to, a massive buy order (smart money) sitting in the queue may have the effect of "pushing" the "less smart" buyers above and beyond the said price, while the same "smart" operator is discreetly selling off his holdings to the "less smart" buyers ............... Vica-Versa for big orders sitting in the sell queue .............. The "smart" smart money wont be fooled, but the smaller punters (like me ) will often get caught up in the "hype" ........... Buyer/Seller beware at all times!! .............. Cheers.

 

[Nick Radge]

Moses,
I can offer 4 real time examples that I have been involved in where the depth has been "exploited". I think manipulated is the wrong word, because what I am talking about is not illegal. Here are 2:

(1)
When I worked in Singapore we did a lot of dealing for the worlds second largest hedge fund (behind Soros) called Tiger. Their macro view was that the Nikkei was going to go sub-10,000 verse the 18,000 it was at then. The trader came to me and asked me to sell 1000 Nikkei at my discretion. I slowly sold these off without "spooking" the market. Obviously such a large order did stand out as it was, but slowly feeding the order out a little at a time was not upsetting the price action a great deal. When I completed the order I was told to sell another 1000. This went on until he had sold about 6000 contracts, which was a huge percentage of the days volume, but never once did the market know what the complete volume was. Even I had no idea how much he was looking to sell. He was withholding from me and I was withholding from the market so there was no possible way that the depth was an accurate indication of supply or demand.

(2)
On the floor of the SFE in about 1993 I was given an order to sell 2000 SPI contracts. Back then it was a substantial percentage of the days volume. The order had no time limit or price limit; the instruction was just sell the 2000 and get back to me when you can. Every 30 mins I walked into the pit and sold 200 contracts. Even that 200 lot order was enough to stir it up. This went on all day. I had about 400 left with a few minutes to go in the session and sold them hard into the close forcing the price down. The average sell price for the 2000 contracts was some 30-points higher then where the market closed placing the clients account into a large credit margin for the evening.

The same thing happened in London and as more recently in 2001 here in Australia with stocks. I would take the full morning to buy and sell positions so as not to skew the price away from what the model was saying to trade at. The orders were simply not placed into the market and therefore not represented in the depth. When they were placed into the market it was hitting the bid or offer without offering the opportunity for the bid/offer to be removed. Clearly then the current bid/offer or depth was not an accurate indication of what the true supply/demand was. I am not saying for one moment that I was Smart Money, but the same processes will occur. The Smart Money will even bid a stock up in order to sell it back down again. They will build an air of bullish confidence with their own bidding, but at the end of the day they have actually built a net short position.

Because any bid/offer in the market can be added to or removed at will, it is in essence a false sense of security. Yes, they may stay until filled, but they can be removed and the fact that they can be removed opens the door for this kind of indicator to be flawed. I would assume that it takes a snapshot or an average for the day? I don't know, but either way it can be exposed to be incorrect.

But as many others have said, if it works for you then that's all that is important.

Regards

 

[nizar]

Moses,
I can offer 4 real time examples that I have been involved in where the depth has been "exploited". I think manipulated is the wrong word, because what I am talking about is not illegal. Here are 2:

(1)
When I worked in Singapore we did a lot of dealing for the worlds second largest hedge fund (behind Soros) called Tiger. Their macro view was that the Nikkei was going to go sub-10,000 verse the 18,000 it was at then. The trader came to me and asked me to sell 1000 Nikkei at my discretion. I slowly sold these off without "spooking" the market. Obviously such a large order did stand out as it was, but slowly feeding the order out a little at a time was not upsetting the price action a great deal. When I completed the order I was told to sell another 1000. This went on until he had sold about 6000 contracts, which was a huge percentage of the days volume, but never once did the market know what the complete volume was. Even I had no idea how much he was looking to sell. He was withholding from me and I was withholding from the market so there was no possible way that the depth was an accurate indication of supply or demand.

(2)
On the floor of the SFE in about 1993 I was given an order to sell 2000 SPI contracts. Back then it was a substantial percentage of the days volume. The order had no time limit or price limit; the instruction was just sell the 2000 and get back to me when you can. Every 30 mins I walked into the pit and sold 200 contracts. Even that 200 lot order was enough to stir it up. This went on all day. I had about 400 left with a few minutes to go in the session and sold them hard into the close forcing the price down. The average sell price for the 2000 contracts was some 30-points higher then where the market closed placing the clients account into a large credit margin for the evening.

The same thing happened in London and as more recently in 2001 here in Australia with stocks. I would take the full morning to buy and sell positions so as not to skew the price away from what the model was saying to trade at. The orders were simply not placed into the market and therefore not represented in the depth. When they were placed into the market it was hitting the bid or offer without offering the opportunity for the bid/offer to be removed. Clearly then the current bid/offer or depth was not an accurate indication of what the true supply/demand was. I am not saying for one moment that I was Smart Money, but the same processes will occur. The Smart Money will even bid a stock up in order to sell it back down again. They will build an air of bullish confidence with their own bidding, but at the end of the day they have actually built a net short position.

Because any bid/offer in the market can be added to or removed at will, it is in essence a false sense of security. Yes, they may stay until filled, but they can be removed and the fact that they can be removed opens the door for this kind of indicator to be flawed. I would assume that it takes a snapshot or an average for the day? I don't know, but either way it can be exposed to be incorrect.

But as many others have said, if it works for you then that's all that is important.

Regards

Great post. Thanks for sharing your experiences Nick.

Barney - on the ball, your absolutely right.

 

[ric371]

Hi Ric, if you could see past T/As sarcasm and look through some previous post and threads you'll see that he is a well respected member of the forum and known through out Australian trading circles as a sucessful trader and mentor to many.

If their was truly something of value in the Nielson SMA he and the rest of us would have been very supportive of the theory I'm sure.

In fact we count on the T/As, the Kenna's, the Wayne's, etc., to keep us up to date on valid analysis techniques.

I'm sure Moses understands and accepts T/As posts as good advice and only looking out for his best interests.



Cheers,

Thanks for the comment CanOz, there is now some good information coming out of this thread, I appreciate that everyone has an opinion and that is normal for differences to occur.

To me it is important in any kind of forum for the "wiser" long termers to be positive when commenting on new comers with ideas.

To help test out the theories I would like to propose a competition that will help clear up some of the muddy waters,

What about using whatever tools you have available to predict from the entries in next months stock picking competition the most likely top ten finishers and the most likely bottom 10 finishers.

To give the charts time to show the way as it were this could close off a week into the competition.

So are you and teck/a and any one else up to such a challenge????

I am and I look foward to a really practical result.

 

[nizar]

Thanks for the comment CanOz, there is now some good information coming out of this thread, I appreciate that everyone has an opinion and that is normal for differences to occur.

To me it is important in any kind of forum for the "wiser" long termers to be positive when commenting on new comers with ideas.

To help test out the theories I would like to propose a competition that will help clear up some of the muddy waters,

What about using whatever tools you have available to predict from the entries in next months stock picking competition the most likely top ten finishers and the most likely bottom 10 finishers.

To give the charts time to show the way as it were this could close off a week into the competition.

So are you and teck/a and any one else up to such a challenge????

I am and I look foward to a really practical result.

I'll be up for it 4 sure.

 

[tech/a]

Thanks for the comment CanOz, there is now some good information coming out of this thread, I appreciate that everyone has an opinion and that is normal for differences to occur.

To me it is important in any kind of forum for the "wiser" long termers to be positive when commenting on new comers with ideas.

To help test out the theories I would like to propose a competition that will help clear up some of the muddy waters,

What about using whatever tools you have available to predict from the entries in next months stock picking competition the most likely top ten finishers and the most likely bottom 10 finishers.

To give the charts time to show the way as it were this could close off a week into the competition.

So are you and teck/a and any one else up to such a challenge????

I am and I look foward to a really practical result.

Dont have the time nor the interest.
There is enough on forums of my stuff,and I spend far to much time on them anyway.
The last thing I wish to do is spend more time.

Goodluck guys hope you find whatever it is your looking for.

 

[ric371]

Dont have the time nor the interest.
There is enough on forums of my stuff,and I spend far to much time on them anyway.
The last thing I wish to do is spend more time.

Goodluck guys hope you find whatever it is your looking for.

I am dissapointed

 

[theasxgorilla]

I am dissapointed

In any case the person to beat is you. Find a relatively objective measure of your performance and try to better it with the technique you are discussing.

Feel free to post your results here, but I wouldn't recommend it.

 

[Porper]

Thanks for the comment CanOz, there is now some good information coming out of this thread, I appreciate that everyone has an opinion and that is normal for differences to occur.

To me it is important in any kind of forum for the "wiser" long termers to be positive when commenting on new comers with ideas.

To help test out the theories I would like to propose a competition that will help clear up some of the muddy waters,

What about using whatever tools you have available to predict from the entries in next months stock picking competition the most likely top ten finishers and the most likely bottom 10 finishers.

To give the charts time to show the way as it were this could close off a week into the competition.

So are you and teck/a and any one else up to such a challenge????

I am and I look foward to a really practical result.

It wouldn't prove anything over 1 month.

You would need to do it for a few years at least in my opinion, then find the average for it to mean anything.Not practical.

 

[CanOz]

I am dissapointed

Don't be mate, these guys spend alot of thier time on these forums.

I'm flat out just trying to keep learning and keep focused on my full time career too.

Thats why i try to learn as much from T/A, Nick, Wayne, Kennas etc.

Good luck and fasten your seat belt for the suspense waiting for the markets to re adjust again.

Cheers,

 

[ric371]

Thanks for the positive responses,
My apologies to tech/a if I misunderstood

Joe has given his approval for a tip the tipsters contest using the monthly tipping contest entries and doing our best to identify the top 10 and the bottom 10 at the end of the contest.

I will be posting the details in a new thread in the next couple of days so start checking out the entries and picking the winners and loosers.
Road test your system

 

[Out Too Soon]

Thanks for the positive responses,
My apologies to tech/a if I misunderstood

Joe has given his approval for a tip the tipsters contest using the monthly tipping contest entries and doing our best to identify the top 10 and the bottom 10 at the end of the contest.

I will be posting the details in a new thread in the next couple of days so start checking out the entries and picking the winners and loosers.
Road test your system

I think it was on this forum I saw a pic of a toilet with computer screen for stock watching installed. Some ppl cant leave it for a moment, hope I never get that tied up but any full timers who spare us beginners the time that they do on this forum is very appreciated, much thanks to tech/a & all the rest of you.

 

[Chorlton]

Moses.
You would do well to study Wycoff on volume analysis,you may well change some of your bias

Tech/a,

I read with interest your comments about Wyckoff. I too, am a great believer in Price & Volume action (afterall, ALL indicators are only normally based on these 2 pieces of information!!!)

I was just wondering whether we could create a new dedicated section on this site (or just a seperate thread if one doesn't already exist) to discuss this side of trading. I'm sure a lot of other posters would be interested in this style of analysis.

Just a thought........

Happy Trading,

Chorlton

 

[Chorlton]

...It would also help you you were able to spell the name correctly it is "Wyckoff" and he did his thing 100 years ago, who knows if he had access to computer power of today he may have developed his own smart money analyser?

I don't want to cause any further arguments in this thread, but IMO sometimes the simple concepts are the best.

With all this computer processing power we now have these days, more & more complicated indicators are being created & released to the public.

My question in response to this, is how did traders make money way back when computers didn't exist???? Answer: They used the only elements known to them - price & volume.

IMO In all these years, Trading hasn't changed (afterall, ultimately its all about Supply & Demand). All thats changed is our perception of the markets.

Just my view and my apologies for interupting this thread........

Good Luck to All,

Chorlton

 

[new_trader1984]

Hello moses,

I recently purchased phoenix ai live data software and they have 6 different indicators which are used to come up with the smart money.

They have a full market depth, the first 5 levels of the market depth and first 8 levels. The other 3 are the same but just the buyers/sellers numbers.

Just with the phoenix ai software with those indicators it changes as the market depth and buyers change. You dont see the black line though but can still work out what the number is during the day. Ive been using the demand/supply indicators on the phoenix ai software and have noticed on some stocks very large increases up to 5 times on the buy side to the sell side but by end of day might finish just above 1.

When the blue line is moving up and the red line is starting to move down it shows there are less buyers but they are buying bigger amounts of shares each time, and looking at the trades at the same time can see some very large trades going trough during the day. Thats when the smart money line would increase on the inside trader charts but you would only see the difference at the end of day but there may be big movements in demand and supply during the day which might or might not suggest big buyers were buying the stock.

The scanner can also pick out stocks that have increased by a certain percentage using the demand indicator with no price movement which could help find stocks before they move.

I think the inside trader blue line is the full market depth, not sure but there can be a big difference between full market depth and using just the first 5 levels.

Just thought i would share what i have noticed using phoenix ai with the same indicators that come up with the smart money line on the inside trader website.

 

[nizar]

Hello moses,

I recently purchased phoenix ai live data software and they have 6 different indicators which are used to come up with the smart money.

They have a full market depth, the first 5 levels of the market depth and first 8 levels. The other 3 are the same but just the buyers/sellers numbers.

Just with the phoenix ai software with those indicators it changes as the market depth and buyers change. You dont see the black line though but can still work out what the number is during the day. Ive been using the demand/supply indicators on the phoenix ai software and have noticed on some stocks very large increases up to 5 times on the buy side to the sell side but by end of day might finish just above 1.

When the blue line is moving up and the red line is starting to move down it shows there are less buyers but they are buying bigger amounts of shares each time, and looking at the trades at the same time can see some very large trades going trough during the day. Thats when the smart money line would increase on the inside trader charts but you would only see the difference at the end of day but there may be big movements in demand and supply during the day which might or might not suggest big buyers were buying the stock.

The scanner can also pick out stocks that have increased by a certain percentage using the demand indicator with no price movement which could help find stocks before they move.

I think the inside trader blue line is the full market depth, not sure but there can be a big difference between full market depth and using just the first 5 levels.

Just thought i would share what i have noticed using phoenix ai with the same indicators that come up with the smart money line on the inside trader website.

Well i dont have this tool but ill tell you what MPO has had smart accumulating and thats what brought it from 10c to 30c.

20-30mil+ vols on the runs, and 5-10mil vols on the pullbacks -- This one is truly textbook. I wouldnt be suprised if Stan was riding it alongside me.

 

[krisbarry]

I don't want to cause any further arguments in this thread, but IMO sometimes the simple concepts are the best.

With all this computer processing power we now have these days, more & more complicated indicators are being created & released to the public.

My question in response to this, is how did traders make money way back when computers didn't exist???? Answer: They used the only elements known to them - price & volume.

IMO In all these years, Trading hasn't changed (afterall, ultimately its all about Supply & Demand). All thats changed is our perception of the markets.

Just my view and my apologies for interupting this thread........

Good Luck to All,

Chorlton

Well said, and again it cements my view that humans just love to complicate things, just to feel more in control of their lives and to create purpose. I bet your bottom dollar that all these charts and indicators are simply keeping them from being in control, but controlling the controls is what humans do best


I say they are all control freaks:

 

[nizar]

Well said, and again it cements my view that humans just love to complicate things, just to feel more in control of their lives and to create purpose. I bet your bottom dollar that all these charts and indicators are simply keeping them from being in control, but controlling the controls is what humans do best


I say they are all control freaks:

Yeh i know.
We should just disregard FA and charts, and just punt on random stocks