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There is one thing that we can't see in daily charts is the tick count
or tick count/minute. I have heard it being called 'market
facilitation'. It is this that will move the price up and down quickly.
Although volume is a mover of a stock, but so is the rate at which
buys/sellers transact.
Think of it this way. If you are the market maker taking both postions
of the market both at the bid & the ask. If it is a slow day you might
have a big spread because you want to make money. If it is a normally
busy day there will be other market makers who will step in front of you
at times to make some money too. You will have a normal spread between
bid and ask to make a profit. Probable different than a slow days
spread.
But what happens when all of a sudden the normal volume of trading (Here
I mean order flow to the floor) increases dramatically for a sustained
period of time mostly in one direction, the market maker will spread
there market up between bid and ask because of the increased order flow.
Not that the bid ask spread increases but the market is now moving in
one direction so they have to move their spread higher to get in on the
action.
Think of a car driving down the road and you want to intercept the
vehicle. You are standing at a distance off to the side of the care. The
faster the care is the farther down the road you get before you can
catch it, regardless of your angle.
Anyway I am not sure if I explained what I am trying to say very well.
But when I watch the inside market this is one thing I have observed.
Maybe one of the former floor traders could clarify what i am trying to
say.
Hope this gives yousome additional insight.
Harley
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