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Taking a quick break from charting/data tracking to answer some questions.
Last time i did a poll, the top vote was for Volume analysis & how i use it in my trading. This is impossible to answer in a few tweets, bc volume is SO crucial to my trading, but ill try 2 keep it short
Last time i did a poll, the top vote was for Volume analysis & how i use it in my trading. This is impossible to answer in a few tweets, bc volume is SO crucial to my trading, but ill try 2 keep it short
as u all know, the ONLY goal i have when i pull up a stock, is to answer ONE question:
is there a supply/demand imbalance?
Period. Everything I use (ADF score, volume forecast, fundamentals, L2, MAs, Ebony & Ivory etc) is to answer that ONE question. Is there an imbalance?
is there a supply/demand imbalance?
Period. Everything I use (ADF score, volume forecast, fundamentals, L2, MAs, Ebony & Ivory etc) is to answer that ONE question. Is there an imbalance?
stocks go up bc buyers who use market orders & swipe the offer (demand) are more AGGRESSIVE than sellers who use market orders to slam the bid (supply). It& #39;s literally that simple. WHO wants the stock the MOST? who wants to be filled IMMEDIATELY & doesnt wanna sit on the bid/ask?
So if a 1M market buy order is sent at the SAME time as a 5M market sell order, WHAT do u think the stock& #39;ll do? its PURE math. the 1M buy order will get filled, but u& #39;ll be left with 4M shares (from the seller), that has NOT yet filled (an imbalance). so what must the seller do?
The seller must now slam the bid in order to get filled. 50K at $5. another 50K at 4.90, another 50K at 4.80. another 50K at 4.70 etc. Since no one is market buying into his order, he HAS to step down and take out bids, lowering the price on the L2 each time.
What does that have to do with volume? If a stock is forecasted to trade 10M shares today (demand, in theory). But there are 20M bagholder shares that wanna get out. plus 10M from dilution in the filings. thats 30M potential supply, vs only 10M demand. the stock WILL fade ALL day
That& #39;s why stocks with HEAVY dilution in the filings get crushed so hard, and are my FAVORITE all day faders. There are TOO many shares trying to hit the market (supply), but not enough demand (volume) to support it (unless institutions step in w/ their big dicks & absorb it all)
To give u an idea of how HARD it is to unload shares, it takes on average TWENTY minutes to unload just 1M shares, on a lowfloat stock w/ shitty volume. that& #39;s TWENTY fucking minutes of slamming the bid 50K shares per minute. do u realize how crazy that is? how about 10M shares?
On top of that, the HUGE seller has to compete for bids with who? u guessed it. SHORTSELLERS. that are ALSO slamming the bid or clogging the Ask. wait, that& #39;s not it, who else is selling? BAGHOLDERS trapped from months ago. ALL competing for thin shitty bids. See where im going?
That is what u call a supply/demand imbalance. Too many shares trying 2 hit the bid, not enough volume to absorb it all. So the stock flushes, & the people who bought the falling knife are ALSO bagged, & have to ALSO turn around & slam the bid. it& #39;s a perfect cycle. An alldayfade
Thats why when the volume forecast is too high, i ALWAYS say "WAIT for demand to peak". Im WAITING for buyers to stop slamming the offers (they dont have infinite BP). im WAITING for trapped shorts to finish covering. ONCE that happens, demand is GONE, & all thats left is SELLERS
That& #39;s how bubbles end. That& #39;s how stocks peak. that& #39;s how trends reverse. why did Bitcoin top? after our grandmas & cats/dogs were done buying, who was left to buy? who was left to slam the offer? NOONE. Bunch of sellers, ZERO buyers to sell to=everyone has to slam the bid=fade
Anyway there is SO much more to this but I have 2 get back 2 charts & put the lil one 2 bed.
In conclusion, if u& #39;re short, look for PEAKED/weak volume, vs a TON of supply (dilution, bagholders, shortsellers etc). That is the holy grail of my trading: Supply/Demand imbalance. GL
In conclusion, if u& #39;re short, look for PEAKED/weak volume, vs a TON of supply (dilution, bagholders, shortsellers etc). That is the holy grail of my trading: Supply/Demand imbalance. GL
Overwhelming feedback on the #ADFVolumeAnalysis thread. Glad it helped.
Once u UNDERSTAND s/d imbalance, there& #39;s no more guessing, no more blowups, no more FIGHTING against strength. It keeps u disciplined, makes u RESPECT the market, & gives u a MATHEMATICAL approach to trading
Once u UNDERSTAND s/d imbalance, there& #39;s no more guessing, no more blowups, no more FIGHTING against strength. It keeps u disciplined, makes u RESPECT the market, & gives u a MATHEMATICAL approach to trading
You also now see why Im EXTREMELY careful & use bitch size or tight stops on stocks with either:
1-high inst interest
2-thin floats
3-few bagholders
4-little dilution
5-forward looking news
Historically, those factors led to my LARGEST blowups, & also the LARGEST squeezes
1-high inst interest
2-thin floats
3-few bagholders
4-little dilution
5-forward looking news
Historically, those factors led to my LARGEST blowups, & also the LARGEST squeezes
That doesnt mean i DONT short those. im a greedy cunt & get FOMO too. it simply means I start TINY, and i WAIT for confirmation. if the demand is weak, THEN i add size. but if i start & it begins to do fuckboy shit, ADIOS amigo. Im gone. Let others get run over & come back later.
i just gave u guys YEARS of information learned thru ENDLESS blowups, ENDLESS sleepless nights tracking data & reviewing charts, for FREE!! Some of my friends HATE when I do this but fuck it. I love this community & that& #39;s the info i WISH i knew when i started. GL
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