Why do sellers jam the sell side?

[krisbarry]

Seems like a question that needs to be posed...

Why do intended sellers jam the sell side and cause stocks to fall by massive amounts?

I understand that traders need to sell their stocks at specific prices, but why do all traders jam it up then watch the stock price fall.

Is this a "Panic" trading system? OR is it a method used to lower the price to re-purchase back into a stock at a lower price and hence buy and own more of that stock.

A better solution that seems more logical but only in a perfect world would be to place sell bids in such a less panicked state, and hence the price moves slower.

This would help long-term shareholders not suffer the crippling ups and downs of stock movements but I understand it would destroy the objective of day traders.

Any comments?

 

[bvbfan]

I'd suspect alot was from buyers in the buying queue looking to add, making it look like there are lots of sellers, but then pull the order if and when it appears they will be triggered.

 

[ice]

Just human nature mostly, which is why most traders fail.
Some people hold out for their price, some trade 'at market', and some do actually panic.
You will never change that, especially now people have access to market depth and do their own trading.


ice

 

[markrmau]

One of my rules is:

Make a decision. Either buy or sell NOW. Don't leave an order sitting around in the depth, miles away from the price action. If it filled (either buy or sell), you may regret it later.

What do others think of this rule?

Also, I have broken this at times and picked up for example QBE for 3% less than my valuation, but I rarely do this. Equally, I have missed out on picking up SGB in the $17 region, because I was too far from action.

 

[DTM]

Seems like a question that needs to be posed...

Why do intended sellers jam the sell side and cause stocks to fall by massive amounts?

I understand that traders need to sell their stocks at specific prices, but why do all traders jam it up then watch the stock price fall.

Any comments?

Herd mentality perhaps. When panic sets in, everyone for themselves. Stop losses are probably automatically triggered thereby leading to more selling pressure.

Seems like a question that needs to be posed...

Is this a "Panic" trading system? OR is it a method used to lower the price to re-purchase back into a stock at a lower price and hence buy and own more of that stock.

With the blue chips, I've noticed that sometimes before a dividend, theres a lot of selling pressure which lowers the price. It may be (theory only) that big boys are shaking out the smaller players because as soon as the price takes a dive, strong buying comes back in. Only theory mind you.

 

[ice]

markrmau,

An excellent rule in my opinion. I either want to be in a trade or out of a trade.

If I set my bid below the market I am only going to get filled if the market falls to that level but never if the market contines to rise. And yet I'm bidding because I believe the stock will go up. Is that logical?

Similarly if I offer above the prevailing market I am going to miss out if the market continues lower which is what I fear is going to happen anyway, else why would I be selling?

Jesse Livermore is quoted as saying the first 8th (of a dollar) and the last 8th are the most expensive 8ths in the world. Sound advice I think.


ice

 

[Smurf1976]

One of my rules is:

Make a decision. Either buy or sell NOW. Don't leave an order sitting around in the depth, miles away from the price action. If it filled (either buy or sell), you may regret it later.

What do others think of this rule?

Broadly agreed although if the stock is relatively illiquid or otherwise prone to unsustainable price spikes then I will place a sell order above the market price in the hope that such a spike does indeed happen. I'm referring to the sorts of spikes that are over in less than a day. Eg. Open 10c, High 20c, close 11c. In such a situation there's an obvious benefit if there's a sell order already placed at, say, 19c but of course the hard bit is knowing at what price to sell...

I started doing this after having missed out on $$$ by not doing it but I must emphasise that this approach does NOT suit all or indeed most stocks. Be careful with it as it can backfire rather expensively.

Apart from that though I do agree with the "make a decision" argument. If it's not reasonably clear what to do then I either wait on the sidelines until it is or forget about it altogether. Lost too much "jumping the gun" with false breakouts.

 

[mit]

I take an each way bet. I buy half in the morning and half towards close chasing a daily low.

MIT

 

[DTM]

With the blue chips, I've noticed that sometimes before a dividend, theres a lot of selling pressure which lowers the price. It may be (theory only) that big boys are shaking out the smaller players because as soon as the price takes a dive, strong buying comes back in. Only theory mind you.

An example would be CBA but I'm not sure when the dividends will be but I know that its soon. If someone can clarify when the dividend is paid out it would be appreciated.

Look at CBA bounce compared to the last few days.

 

[rocker]

Hi,
normally goes ex-div 3 days after reporting.

 

[brerwallabi]

Seems like a question that needs to be posed...

Why do intended sellers jam the sell side and cause stocks to fall by massive amounts?

So we can tell the market that we dont think this stock is worth any more then what we are asking and that it is not going to any higher and we need to get out of.