|
Group-
I was wondering if I can get some feedback on
the subject of program trading; as it relates to volume
analysis. I've been doing a lot of studying on this subject and here's the issue.
In the old days; total volume of shares traded was just that; insofaras
it accounted for all the exchange trading.
Today; end of day volume of shares traded on both the NYSE and the NASDAQ
is greatly influenced by program trading.
It is said to account for about an estimated 50% of all volume. Stated
simply; program trading greatly influences total
volume. Now; it seems to me this has to greatly impact the
INTERPRETATION OF VOLUME BASED
INDICATORS; because we are no longer seeing
the pure forces of supply and demand as in the days when program trading didn't exist?
To further complicate matters (if it is necessary
to do so; but I am getting ahead of myself here) of all program
trading;
only 10% is the index arb variety where stocks are
sold; and futures are bought simultaneously; and vice versa.
However;
there are OTHER and
perhaps MORE IMPORTANT types of program trading strategies which must impact the
analysis
of supply and demand vis a
via volume based indicators? If I may provide an example. Last Friday sell programs drove the Dow
down about 50-points when sell price levels were hit and program trading came into the market. For
DAYTRADING purposes this was valuable information since one could have
front run these orders on the short side.
However; on some days one would lose money and the correct strategy would be
to fade a sell program by buying into the market
at those levels and times.
Daytrading impact aside; is there a way to modify
volume based indicators which would provide a clearer
representation
of pure supply/demand market generated information
for the purposes of swing and end of day trading? If someone
could
please share their experiences and there are no
answers to this dilema; it will at least save me a lot of wasted time and energy trodding a worthless
path.
If you have been with me this far; thank you for
your time and attention; and any feedback.
Chas
for by program trading
Yahoo! Groups Links
|