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A "price spike" is an anomaly (not an usual occurrence) to the trend of the
market. Reasons could be varied, the most common of which is, as I've
already read, is bad data.
Trying to figure of WHY spikes occur may be a self-defeating exercise in
futility and drive you to drink.
1) The best way to handle spikes is to understand that most price trends
follow a smooth, Sine-type path. When and if ONE price spike occurs while
prices on either side of it seem to maintain an "average range" (don't ask
for an ela of "average range" - just eyeball it), it should be disregarded
as part of the trend's path.
2) If several NON-sequential spikes occur, something is wrong. Data
transmission is bad, the atmospheric continuum is askew, your computer's
disgronificator is malfunctioning or the trading gods are messing with you.
Either way, if you're not happy with your position...GET OUT. Save your
equity to fight the "Battle of the Buck" another time.
3) If several SEQUENTIAL spikes occur, there may be a fundamental
influences that technical analysis may not reflect - a "big boy" dumped a
1000-lot order, unexpected rain in Iowa were Corn grows, or "floor fever"
over some rumor that's known only to a privileged few in Chicago or New
York, has taken over. Again, as in Step 2), if you're not happy with your
position...GET OUT.
WHY it happens is a far second to WHAT TO DO WHEN IT HAPPENS. "WHAT TO
DO..." is to preserve capital, THEN figure out WHY.
So much for today's Trading 101 lesson.....
----- Original Message -----
From: "Ian McVicar" <icm63@xxxxxxxxxxx>
To: "OmegaList" <omega-list@xxxxxxxxxx>
Sent: Tuesday, November 13, 2001 7:57 PM
Subject: Why the spikes in price compare MSFT ro EBAY ?
> MSFT :
>
http://www.askresearch.com/cgi-bin/intraday?index=%24COMP&intraday=symbol&sy
mbol=MSFT&country=USA&size=640x480&frequency=1+minute
>
> EBAY:
>
http://www.askresearch.com/cgi-bin/intraday?index=%24COMP&intraday=symbol&sy
mbol=EBAY&country=USA&size=640x480&frequency=1+minute
>
> These are two charts at http://www.askresearch.com/, for some reason MSFT
has
> large one minute spike tails of price....WHY is the result of
decimalistion or
> something ? EBAY is free of that spike .
>
> Any ideas
>
> Ian
>
>
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