Cracks in The Law of Supply and Demand?

[zdo 20]

The market will then go up because we all know there is a buyer in there now, and there is at least ONE person who is short a lot, and about to be offside a lot. It actually happened pre-market today in the S&P.

 

smwinc,

 

If you have time, could you post a graphic / chart illustrating that pre-market action?

 

Thanks,

 

zdo

 

 

 

AND...

 

Thank you all for avoiding KISS and embracing some theoretical complexity.

I really appreciate each of your thoughts

[mister ed 10]

But you're right that a rise in the population can increase the demand, but I don't see how any of this explains how a rise in price can (your emphasis) attract a rise in demand.

 

What I was thinking was that a rise in price can 'advertise' the stock to previously uninterested parties, so increasing the population interested in the stock and feeding thorugh to more potential (then actual) buyers. Whether this a reasonable point or not ....

 

Thanks for the reminder of the curved curves (!), yeah just drew them simplistically.

 

Maybe I am coming at this from the wrong angle completely ... seems to me that the most reliable time when buying can lead to more buying is when we hit the obvious stop-loss level (for shorts) ... normally some mighty good buying then :haha:

[firewalker 10]

I'm clearly missing a few brain cells, because I don't get how any of these examples don't illustrate Supply & Demand.

If all the effects and examples I've used doesn't help in illustrating why the law of supply & demand doesn't hold up, then I'm afraid perhaps somebody else might be better at explaining this than me.

 

Take the endowment effect I mentioned. That's only one of the 'anomalies' or 'challenges' to neoclassical economists who's primary law is that of supply & demand. The assumption is that each agent in an economic system will act to maximise their utility/welfare. However, the endowment effect tells us that the value that we attribute to a good/product/service/... depends on whether we own it or not! This is an important thing to consider when thinking about those who hold stocks and those who want stocks. Why do most people sell when it's too late?

 

I was also hoping for more practical examples? These theories are interesting, but like anything to do with trading, you have to keep it practical or it becomes an endless road of theory. If it doesn't apply in the real world, leave it to analysts, who tell us why something happened 4 weeks after it happened.

I'm not sure why you keep referring to "practical" examples, and "real world", when all the examples where real world applications, with real persons (think of the students in post #1) and real concepts. Nothing abstract about it.

 

At the end of the day, most of what goes on intraday is a game between a whole stack of people who either understand what is going on or don't. "That's fine but I trade longer term" I can hear people say. Just remember though the intraday action creates the daily result, which creates the weekly result, which creates the monthly result. It's not like there is a separate trading session for daily traders only.

Yes, but I don't see how any of the above paragraph relates to what we were saying here.

 

I love these studies by academics who have never traded before.

Why is it that each time people talk about academic studies they are immediately discredited because the researchers haven't traded before? What's more important is that the study group are traders and what has been examined is trading behaviour. The researches used a scientific approach (starting with a hypothesis) to find an answer on their problem.

 

How long was the look back period? It was done in 2006, probably looking back almost 20 years - Australia underwent one of the greatest bullmarkets it's ever seen, taking up nearly the entire history of it's futures market.

Now, first, you're being pretty inconsistent yourself. First you talk about the short term (intraday) and now you talk about the longer term, being a bull market. Second, you apparently haven't taken the trouble to even look at the document, because it clearly states that the data under consideration are "all orders placed on the Australian stock exchange during the five-year period between July 1, 1998 and June 30, 2003."

 

The rest of your post is fine, as far as the example goes, but it doesn't answer any of the questions raised. Assuming the law of supply & demand holds up under every circumstance, is assuming all the actors act rationally because that's implied within the definition. But in the stock market we all know this is not the case. Traders don't always base their decisions on reasoning, but a lot of people trade (or try to) on feeling. They feel "price is too high" and sell. For example: I've seen a lot of shorting on oil last couple of weeks...

 

So how much meaning do we give to this "law", when in the end it seems to come down it's more of a "hypothesis" then an actual law?

 

Soultrader just posted an interesting article for that matter:

http://www.traderslaboratory.com/forums/40602-post1.html

[smwinc 20]

To be honest I don't have much to add, Hopefully a few other people will provide some comments.

[DbPhoenix 42]

To be honest I don't have much to add, Hopefully a few other people will provide some comments.

 

Thanks for trying.

[mister ed 10]

Assuming the law of supply & demand holds up under every circumstance, is assuming all the actors act rationally because that's implied within the definition.

 

So how much meaning do we give to this "law", when in the end it seems to come down it's more of a "hypothesis" then an actual law?

 

FW, I looked at the question, the 'cracks' in S&D using a fundamental of economics. I think I was misunderstanding your questions though.

 

The D&S curves, and their shifts, are based on many assumptions, and that model is a gross simplification of the real world and real markets. I am not sure that the law of supply and demand in economics is nothing more than a model upon which to build better models. If it is, then thats promising for traders, because we can build better models for our markets.

 

There are a multitude of 'anomalies' to the rational player model, Wikipedia has a list of cognitive biases, some of which have been studied from a behavioural finance perspective. Such a list is a good starting point for investigating these anomalies and what they might mean for traders and the markets.

Edited June 21, 2008 by mister ed
spelling corrections

[zdo 20]

More ???'s

 

What is ‘jobbing’?

What percentage of daily volume is ‘jobbing’?

Under what conditions do ‘they’ cease / temporarily refrain from ‘jobbing’?

Under what conditions to ‘they’ resume ‘jobbing’?

[mister ed 10]

More ???'s

 

MORE! I didn't think we had answered the ones we had already LOL.

 

My understanding of jobbing is that it is equivalent to scalping. It is an English expression (I think). Trading for a pip or so, normally in front of S&R and orders; on an exchange floor a jobber can often see where the orders are and trades just in front of them for a tic or so. Jobbing, like scalping now, requires low transaction costs, which is why it was/is popular on an exchange floor with locals and brokers.

 

% of daily volume - no idea sorry. I don't think you could accurately measure jobbing/scalping volume so any thoughts on % of volume would be anecdotal. I imagine an experienced floor trader could make a good guess, but maybe a screen trader (in a screen-traded market) would find an estimation a lot more difficult.

Cease/refrain conditions - if there is a sharp directional move on then jobbing will decline (but not disappear, always orders to get in front of) until price settles.

[BlowFish 10]

Did anyone state the 'laws' of supply and demand? It occurs to me that people might be singing from a different song sheet.

 

For me there can be no cracks in supply and demand as the way I view it is as a simple fundamental. e.g. for someone to buy a contract someone needs to be prepared to sell one. If they can agree on a price there is a 'market' other wise not. To be this is irrefutable.

 

Whether one chooses to believe that this price represents value or is prescient of subsequent prices or whatever else is likely to depend on how one builds subsequent rules. Of course its when the rules become more interpretive (e.g. tendencies rather than hard and fast rules) then people searching for absolutes might see these as cracks.

[firewalker 10]

Did anyone state the 'laws' of supply and demand? It occurs to me that people might be singing from a different song sheet.

 

I could copy and post several definitions here from various sources or books, but there's not much point in doing that, since you all know how to google... I'll try and formulate these things in my own words instead (beware that this is a simplification):

 

The 'law' determines price and quantity sold in a market, and is fundamental to developing further theories and models in micro-economics. It states that:

 

(a) the higher the price of a good, the lesser people will want to buy it (the law of demand)

(b) the higher the price of a good, the more manufacturers will produce, because selling at higher prices means more revenues and profits (the law of supply)

© the point of equilibrium (where demandline and supplyline intersect, in a price-quantity graph) represents the price level where buyers and sellers agree upon price

(d) if demand outweighs supply -> price will need to rise to form a new equilibrium (otherwise there can't be a transaction)

(e) if supply outweighs demand -> price will need to drop in order to form a new equilibrium point

(f) there are several determinants that influence the quantity of goods/services demanded/provided, but none of these change the fact that consumers and producers (buyers & sellers) strive towards utility maximization

 

Price behaves in this way because buyers and sellers act rationally and want to obtain the best price possibly. Micro-economic theory says that, given any set of goods, each participant in the economic process/system will try its best to obtain the best point of equilibrium which means that the consumer will strive towards utility maximization, by acting rationally (this is where it gets problematic, since reality seems to prove otherwise at times).

 

I'm leaving out a lot here (shifts of demand/supply curves, elasticity, inverse curves, the slope of the curves, aggregate demand/supply, etc, etc), so keep in mind this is a serious simplification.

 

I've given plenty examples in this thread about 'anomalies' (or cracks) in the law of supply & demand, so I'm not going to repeat these here.

 

Perhaps we could move along by asking in what cases (or why) the 'law of supply and demand' does (or does not) hold up in the stock market? Take (a) for example, is this the case in the financial markets? Because volume is the highest near the end of a bull market when prices rise the fastest and the greatest number of people are attract to buying... so despite the high prices of stocks, more and more people want to buy. Some might say this demand is not 'real' because the smart money isn't playing along. But does it matter?

 

For me there can be no cracks in supply and demand as the way I view it is as a simple fundamental. e.g. for someone to buy a contract someone needs to be prepared to sell one. If they can agree on a price there is a 'market' other wise not. To be this is irrefutable.

 

That is a valid point, but you are describing the process of a transaction. It goes without saying that for each buyer there needs to be a seller...

[smwinc 20]

 

(a) the higher the price of a good, the lesser people will want to buy it (the law of demand)

(b) the higher the price of a good, the more manufacturers will produce, because selling at higher prices means more revenues and profits (the law of supply)

© the point of equilibrium (where demandline and supplyline intersect, in a price-quantity graph) represents the price level where buyers and sellers agree upon price

(d) if demand outweighs supply -> price will need to rise to form a new equilibrium (otherwise there can't be a transaction)

(e) if supply outweighs demand -> price will need to drop in order to form a new equilibrium point

(f) there are several determinants that influence the quantity of goods/services demanded/provided, but none of these change the fact that consumers and producers (buyers & sellers) strive towards utility maximization

............

Price behaves in this way because buyers and sellers act rationally

...........

Perhaps we could move along by asking in what cases (or why) the 'law of supply and demand' does (or does not) hold up in the stock market? Take (a) for example, is this the case in the financial markets? Because volume is the highest near the end of a bull market when prices rise the fastest and the greatest number of people are attract to buying... so despite the high prices of stocks, more and more people want to buy. Some might say this demand is not 'real' because the smart money isn't playing along. But does it matter?

 

For the record, I believe we were previously talking about different things here.

 

(A) That statement is assuming that the good remains the same.

 

I.e. a Demand & Supply curve might be drawn for a Basketball. The good remains the same throughout the curve.

 

The big question is whether a market is the same "good" at different prices.

 

I would argue not.

 

As the price of a basketball is increased, it remains the same basketball.

 

As a technical trader, the market (the "good" ) is constantly changing. Price is linked to the actual dynamics of the good.

 

For example, imagine a strong double bottom with the S&P at 1300. As the price increased, the double bottom is confirmed and the good has CHANGED in my mind. Price has increased, but we are now talking about a different good.

 

It would be like comparing a D&S curve for a basketball, that then changed to baseball, beachball, tennis ball, etc as you moved along the curve.

 

In addition, Price can go out the window with futures.

 

I have the same limits to buy/sell X quantity of S&P contracts, whether it's at 1300 or 1800. It makes no difference to me. A tick is still worth 12.50.

 

I might be a buyer (Demand) at a test of Yesterdays Close. It is completely irrlevant what price the S&P is trading at.

 

I'm thinking as I write here, but what does make more sense if you were striving to apply this law, is Price with regards to % movement. E.g. I know for a fact certain funds have automated trading based around various % up/down. It is not the price of the good, but rather the price of the good with respect to prior prices. E.g. 1% down on YC, 1% down on YL, etc. etc.

 

Hence, rather than thinking of a D&S curve with the price of the good on the Y axis, it might be more accurate to have %+/- YC, for example.

 

(B) Yes, I think this applies day in day out. Market moves to facilitate liquidity. I.e. We move the market towards where "producers" are willing to step in - in the form of Supply (at highs in the market) or Demand (at lows in the market).

 

© This is happening every time there is a transaction. In a thin market, you can watch the process occur as the spread moves without transactions occurring, as equilibrium is attempted to be found.

 

(D) & (E) - Yes, that's an easy one I think.

 

(F) - Not realistic in the real world. They teach this one in Economics 101. The whole assumption of "participants will behave rationally" complicates it. We all should be able to think of at least 10 trades where we didn't behave rationally.

 

In addition, we are only ever guessing in the market - we take actions that we 'believe' will maximise benefit. After all, you wouldn't buy if you didn't think it would go up, while simultaneously someone is selling it to you, thinking it will go down. We are both striving towards utility maximization, however one of us will quite simply be wrong.

 

Clearly it gets more complex, I am keeping it simple here too.

[atto 20]

Could you elaborate on your comment regarding the "good" (of a financial market) changing? I have a very firm grasp of economics, and I've never heard anyone say that, so I'm open to your theory.

 

I've always believed that the "good" in an ES contract is simply $50 x S&P 500. The S&P 500 is a "good" comprised of the biggest market players, which are goods representing companies. That "good" doesn't change. The value of it may change (such as when Steve Jobs joined AAPL), but that is then reflected in the price.

 

In your example, how does a confirm double bottom change what the ES is? It seems like it's exactly the same thing, just at a different valuation. That is a function of supply and demand, which would also govern the price of your basketball.

[smwinc 20]

Could you elaborate on your comment regarding the "good" (of a financial market) changing? I have a very firm grasp of economics, and I've never heard anyone say that, so I'm open to your theory.

 

I've always believed that the "good" in an ES contract is simply $50 x S&P 500. The S&P 500 is a "good" comprised of the biggest market players, which are goods representing companies. That "good" doesn't change. The value of it may change (such as when Steve Jobs joined AAPL), but that is then reflected in the price.

 

In your example, how does a confirm double bottom change what the ES is? It seems like it's exactly the same thing, just at a different valuation. That is a function of supply and demand, which would also govern the price of your basketball.

 

Let's take a step back. The first problem we are keeping it simple, and everyone is going to see the ES as something different. That's another inherent problem - As an intraday trader, a lot of how I trade is based on patterns.

 

In my view, each pattern throughout the day is a different product.

 

I will always Buy (Demand) certain pattern within the market depth, and I will always Sell (Supply) certain patterns in the depth.

 

Price is utterly irrelevant.

 

If I had to compare the ES to an item, I would compared it to Lego blocks (the plastic blocks that connect to each other for any poor soul who has never seen lego).

 

Throughout the day, it remains Lego. It is always $50 x S&P 500 . However, it constantly forms different objects, which I base decisions off - I demand / supply these objects. Once the object is 'created', imagine a corresponding D&S curve is created.

 

A 'double bottom' at 1300 after the market has fallen for a week, is a different object to a market which has rallied all week to hit 1300.

[atto 20]

Okay, I understand what you're getting at. You're considering an upward-biased market (according to your own analysis) a different good than a downward-biased market (same).

 

Under that line of thinking, I agree. There are biases that cause me to value the market higher than it is, so I trade. Thanks for explaining that out.

[david111 10]

There is no law of supply and demand, its a fallacy.

Market movers act on "needs" and ES is used mostly for Hedging thus in essence when you trade ES the "law of supply and demand" is in reverse most of the time since the 9000 Hedge funds use the ES/SPY/SPX for Hedging against position Long/short on stocks or cross country arbing etc.

 

No offense, but trying to apply logical laws to Chaos is absurd, there are 1xxxxxxxxx variables that move the markets.

Its all a game of probabilities, Nothing is constant, and nothing is "law". Every day and every second in the market is unique.

Market movers don't scalp they arb...

 

Sorry for the harsh comment, but trading should never be your primary resource of income, you shopuld trade only what you can loose. Invest in Real estate and renovate/sell with leverage on non recourse bargains or foreclosures - let the bank take most of the risk...

 

 

 

Let's take a step back. The first problem we are keeping it simple, and everyone is going to see the ES as something different. That's another inherent problem - As an intraday trader, a lot of how I trade is based on patterns.

 

In my view, each pattern throughout the day is a different product.

 

I will always Buy (Demand) certain pattern within the market depth, and I will always Sell (Supply) certain patterns in the depth.

 

Price is utterly irrelevant.

 

If I had to compare the ES to an item, I would compared it to Lego blocks (the plastic blocks that connect to each other for any poor soul who has never seen lego).

 

Throughout the day, it remains Lego. It is always $50 x S&P 500 . However, it constantly forms different objects, which I base decisions off - I demand / supply these objects. Once the object is 'created', imagine a corresponding D&S curve is created.

 

A 'double bottom' at 1300 after the market has fallen for a week, is a different object to a market which has rallied all week to hit 1300.

[firewalker 10]

There is no law of supply and demand, its a fallacy.

Market movers act on "needs" and ES is used mostly for Hedging thus in essence when you trade ES the "law of supply and demand" is in reverse most of the time since the 9000 Hedge funds use the ES/SPY/SPX for Hedging against position Long/short on stocks or cross country arbing etc.

 

No offense, but trying to apply logical laws to Chaos is absurd, there are 1xxxxxxxxx variables that move the markets.

Its all a game of probabilities, Nothing is constant, and nothing is "law". Every day and every second in the market is unique.

Market movers don't scalp they arb...

 

Sorry for the harsh comment, but trading should never be your primary resource of income, you shopuld trade only what you can loose. Invest in Real estate and renovate/sell with leverage on non recourse bargains or foreclosures - let the bank take most of the risk...

 

(1) There's not much I can say to that, as most of it is diametrically opposed to how I see things.

 

(2) I don't see the market as 'chaos', although there is a lot of irrationality in human behaviour, I consider some of the price action actually very logical.

 

(3) It wasn't me who said the markets moved according to supply and demand, it was Wyckoff and probably others before and after him as well.

 

(4) I think that it goes without saying that 'trading should never be your primary resource of income' is probably going against the purpose of what many on this trading forum want to achieve, which is trading for a living.

 

(5) As for risk, I'd rather take care of that myself any day, then let someone else do it for me.

[firewalker 10]

For the record, I believe we were previously talking about different things here.

 

(A) That statement is assuming that the good remains the same.

 

(F) - Not realistic in the real world. They teach this one in Economics 101. The whole assumption of "participants will behave rationally" complicates it. We all should be able to think of at least 10 trades where we didn't behave rationally.

 

In addition, we are only ever guessing in the market - we take actions that we 'believe' will maximise benefit. After all, you wouldn't buy if you didn't think it would go up, while simultaneously someone is selling it to you, thinking it will go down. We are both striving towards utility maximization, however one of us will quite simply be wrong.

 

Clearly it gets more complex, I am keeping it simple here too.

 

Thanks for taking the time to reply smwinc. You clearly have a good understanding of all of this and you seem like a smart guy. Not to mention you make interesting analogies. But... keep in mind, you don't need to convince me that market participants don't act rationally. I'm with you on (almost) everything you said, but it wasn't me who stated the markets moved according to the law of supply and demand. In fact, it was I who questioned if that really was the case... so we might be more in agreement than we previously thought.

 

There are basically two assumptions we make when we are talking about the laws of micro-economics. One is that the goods being offered are all the same. And you've already pointed out that is not necessarily always the case.

 

The other one hasn't been mentioned yet. Or at least not explicitly. The law of supply and the law of demand requires a market of 'perfect competition'. This basically means that no single buyer or seller can influence the market price... well we know this is not the case in the short term. Otherwise we wouldn't be talking about the smart money, or the professional money, versus the herd, etc.

[zdo 20]

There is no law of supply and demand, its a fallacy.

Market movers act on "needs" and ES is used mostly for Hedging thus in essence when you trade ES the "law of supply and demand" is in reverse most of the time since the 9000 Hedge funds use the ES/SPY/SPX for Hedging against position Long/short on stocks or cross country arbing etc.

 

No offense, but trying to apply logical laws to Chaos is absurd, there are 1xxxxxxxxx variables that move the markets.

Its all a game of probabilities, Nothing is constant, and nothing is "law". Every day and every second in the market is unique.

Market movers don't scalp they arb...

 

Thanks.

Harsh!

Radical!?

Out of the box??

What do you mean by "Market Makers" ??

 

 

let the bank take most of the risk...

In trading...just let the yen take most of the risk :o

[DbPhoenix 42]

 

(3) It wasn't me who said the markets moved according to supply and demand, it was Wyckoff and probably others before and after him as well.

 

Not exactly. As I tried to point out dozens of posts ago, the law of supply and demand as it relates to economics is not the same as the law of supply and demand as it relates to the markets no matter how much one may believe otherwise.

 

It was to avoid this source of confusion that I stopped referring to "supply and demand" years ago and began using "buying pressure and selling pressure" instead, which is what Wyckoff means. Unfortunately, I had to pick up the supply and demand terminology again when nic and I started the Wyckoff Forum. That, as it turns out, may have been a mistake.

 

The market does not sell goods and services. It sells hopes and dreams, and the "law of supply and demand" that operates in the markets is not very different from that which operates in other "tangibles" that have little or no intrinsic value such as fine art, collectibles (depending), gems, and, in certain circumstances, real estate, among other things. Anyone who doesn't understand this is in for a hard time.

[smwinc 20]

There is no law of supply and demand, its a fallacy.

Market movers act on "needs" and ES is used mostly for Hedging thus in essence when you trade ES the "law of supply and demand" is in reverse most of the time since the 9000 Hedge funds use the ES/SPY/SPX for Hedging against position Long/short on stocks or cross country arbing etc.

 

No offense, but trying to apply logical laws to Chaos is absurd, there are 1xxxxxxxxx variables that move the markets.

Its all a game of probabilities, Nothing is constant, and nothing is "law". Every day and every second in the market is unique.

Market movers don't scalp they arb...

 

Sorry for the harsh comment, but trading should never be your primary resource of income, you shopuld trade only what you can loose. Invest in Real estate and renovate/sell with leverage on non recourse bargains or foreclosures - let the bank take most of the risk...

 

Fantastic post .. you're right even though trading has been my income for 6 years, clearly I should go and take up a job in real-estate. I can see the logic there.

 

:rofl:

[mister ed 10]

What do you mean by "Market Makers" ??

 

zdo - David actually said Market "movers".

[BlowFish 10]

 

___

 

The market does not sell goods and services. It sells hopes and dreams,

___

 

 

I rather liked that quote for some reason, though some instruments (commodities for example) are more 'tangible' than others.

 

David111 you mention 'needs' and hedging, aren't the needs of those hedgers the epitome of supply and demand? If you are a utilitarian trader (i.e. not profit motivated) you need to buy/sell at the best price, but buy/sell you must. There is real demand in the markets from some the many types of participant.

[DbPhoenix 42]

I rather liked that quote for some reason, though some instruments (commodities for example) are more 'tangible' than others.

 

So's gold. But, like gold, they have no intrinsic value per se.

[MC 10]

The market does not sell goods and services. It sells hopes and dreams, and the "law of supply and demand" that operates in the markets is not very different from that which operates in other "tangibles" that have little or no intrinsic value such as fine art, collectibles (depending), gems, and, in certain circumstances, real estate, among other things. Anyone who doesn't understand this is in for a hard time.

 

This is a crucial distinction!!! Very well defined stuff here, good work as usual sir.

 

We're trading/investing in a pretend slice of a company or contract with the hope that enough people will be joining us on our side of the see saw to profit.

 

The issue with this see saw theory though, is there really are 2 supply & demand chains at work in these non tangible markets. Since there are no hard goods, the scales can be tipped or manipulated by those with deep pockets. Maybe to a lesser extent on futures with no real limitations on open interest. But certainly heavily with stocks where there's a set amount of shares to soak up before you're in relative control.

 

So instead of this...

 

We have this...

 

I'm not saying it's a must we over complicate things as a daytrader or even short term swing trader. But in general it's very beneficial to learn to read the accumulation and distribution patterns of big smart money. I'm sure since this dual S&D chain is nothing I've seen talked about, many will think I'm a bit crazy. I won't argue that, but I will argue that there is absolutely 2 chains at work in the speculative markets. :o

 

Chain 1 (Smart Money)...

1) Smart/big money accumulates low (Chain 2, step 2), in gradual increments in the downtrend (once they start to see a value imbalance and the dumb money begin to throw in the towel).

2) A large portion of the float is now in strong hands and an uptrend ensues with the occasional balancing period or correction.

3) Once they're done with the uptrend, they then distribute (Chain 2, step 1) at the top. This causes a lack of significant, sizable interest which is needed to keep the ship afloat.

 

Chain 2 (Dumb Money)...

1) Retail/Dumb money accumulates high (Chain 1, step 2) often all at once due to the emotion of the newly advertised high prices which appears to be a big bullish push.

2) Some realize the gig is up quickly and promptly head for the exits causing a sharp move down, setting off a new downtrend.

3) The remainder become bag holders and will gradually exit until their individual pain threshold is hit and they finally begin selling to smart money (Chain 1, step 1).

 

Rinse N' Repeat.

 

All JMHO, but this is how I look at the market at this stage of my learning.

To me thinking there is only one S&D chain is like thinking the markets operate in a vacuum and that they are tamper free and pure.

I feel the better I get at reading the volume based disparities the closer I am to riding the trends on the coattails of smart money.

 

Disclaimers:

There are many additional nuances, like deep corrections with no distribution or where a breakaway gap is used to turn weak hands into strong hands, to name a few.

 

I'm not saying all retail is "dumb money". There surely is allot of smaller traders that know how to read the writing on the wall. (Many of whom are here on TL)

[mister ed 10]

some instruments (commodities for example) are more 'tangible' than others.

 

Yes, the physical commodities have many industrial uses and must be bought to manufacture goods etc. Real demand, not much intangible about putting diesel in your truck or coal into your power plant.