Jump to content
  • 0

Spread and the Charts


RichB-Trader

Question

Hello,

Pretty obvious question but just wanted to check. On the attached image I have annotated an example of trading a resistance break on Sainsburys. I would normally identify the resistance then put my entry above this with some clearance  for fakeouts, in this case it was 0.75 of a point of clearance.

 

As you can see the trade opened before it got to the line, I assume this is because it has reached the buy price, due to the spread. See circle in top right corner. If so am I right that on spreadbetting I just need to allow for my clearance plus spread, therefor put my entry a bit further from the resistance point?

 

Thanks all.

3945869D-9FEB-4552-803F-6FEC93367BE1.jpeg

Link to comment

13 answers to this question

Recommended Posts

  • 0

Hi, thanks. The system is IG's trading App. I had a look at the Ask and Bid prices, so thanks for that. When I click them all the bars move up and down as you would expect. 

So I guess I need to look at my Mid market price on the chart and add or subtract (depending if I am going Long or Short) away the difference to the Buy/Sell Price.

For example if I wanted to go long at 1000 points (this being the resistance level found when drawing on the mid price chart). If I was putting in an order to be filled later and I knew the spread from Mid to buy was say 10 points, I should go in at 1000 +10 points minimum. The opposite is true for going short once through support.

Link to comment
  • 0
16 hours ago, Caseynotes said:

Indeed @RichB-Trader, most people stick to the mid price and give it a bit of lee way. If you look at a price ladder you would see a cluster of orders about a resistance level with orders at every point a bit like a standard deviation bell curve laying on it's side so creating a resistance zone rather than a defined singular level.

Hello,

 

Thanks, that makes sense. What is a price ladder or is that just a metaphor? 

 

I seem to be sometimes just triggering the order then it retraces the counter way, however sometimes I set it higher and miss out on profits. I guess this is the art of technical analysis. 

Link to comment
  • 0

Hi @RichB-Trader,  yes it does do that doesn't it ? and yes there is an art to it.

A price ladder is just another type of trading platform that shows resting orders above and below price, IG has one on the DMA platform.

See pic below, the sandy coloured bars on their side are total traded volume for each price level (I've drawn a red curve round them). The largest vol bars would have been at a significant level but orders were building up leading into it and building down leading out of it so more of a zone than a level.

pl1.PNG.0c89798906551d44eebc7754a2199448.PNG

Link to comment
  • 0

Thanks so much for that, really helps.

 

Are the bid and the ask prices what’s in the market, I.e the lowest price someone will sell and the highest price someone will pay. Or is the mid market the actual last price paid on the market and the bid and ask is the spread where IG make the markup. 

 

Thanks.

  • Like 1
Link to comment
  • 0

@RichB-Trader,  yeah, the bid price is the 'best' bid price available as in someone has an order there to buy from anyone willing to sell at that price, and the ask is the best available price someone is willing to sell at. The mid price doesn't exist as such but is just a half way reference point between the two. As best bid and ask orders are consumed the mid moves up or down to sit between the new next best bid and next best ask prices available.

 

  • Thanks 1
Link to comment
  • 0

Hi, 

 

Thanks. So if you don’t mind can I do an example so I fully understand. If I take the candle from Vodafone yeaterday, it showed for it low:

 

Bid: 145.85

Ask: 146.23

Mid: 146.04

 

Does this mean that at some point yesterday there was a sell price of 145.85, at that same moment there was a buy price of 146.23. Meaning somebody actually sold at the lower 145.85? But after that the bid prices went up. 

 

So therefore let’s say the resistance I found looking at the mid market price was exactly 146.04, for arguments sake it is not a zone as you showed. Does that mean I should actually look at the bid price and short just beyond there as that is the lowest price somebody paid.

 

Reason being I haven’t been doing that, so when I trade support and resistance breakouts just beyond the highest or lowest price I end up opening the trade then it at times reversed just at my entry point. Having back tested there seems to be a few examples where if I had used the Bid or Ask price rather than mid market it would never have opened and therefor not made my losses.

 

Thanks for all your help.

Link to comment
  • 0

Hi @RichB-Trader,  the market is not as ridged as that unfortunately, the market is an auction, if you have ever seen a car auction the bidding can get very frantic at times and single prices can get knocked out very quickly.  The trading markets are two way auctions so there is buying and selling at the same time with traders constantly trying to get in or out so price oscillates in the small time frames such as seconds while also moving in waves in the larger time frames. Trying to pick the exact breaking point with a tight stop is a very tough game. Take a look at this video for some ideas on different ways to play breakouts.

 

Link to comment
  • 0

Hi,

 

Thanks I will have a good look at that video.

 

Am I correct in my logic that in my example some point yesterday there was a sell price of 145.85, at that same moment there was a buy price of 146.23. Meaning somebody actually sold at the lower 145.85? But after that the bid prices went up. Understanding it would be by the second bidding but the lowest price sold was the bid price at 145.85?

Link to comment
  • 0

In the example, someone was willing to sell to you at the ask price 146.32 while at the same time someone was willing to buy from you at the bid  price 145.85 (you having borrowed the shares off IG).

So to get into a trade you either sell the bid to short or buy the ask to go long.

To get out of a trade you do the opposite.

Link to comment
  • 0

@RichB-Trader, Hi Rich, not necessarily, there may have been a gap leading up to the current prices or may have climbed smoothly through the levels or may have been oscillating back and forth in the same region for some time.

On high volatility and looking at small time frame candles you will often see the candle pulse up and down before closing, to demonstrate what is actually happening I've included a video of a price ladder in action. I'm not suggesting you need to learn how to use the ladder but just to watch it for a short while. Current price is in the middle and next to that on either side are the orders being consumed and reloaded at split second speed causing price to jump up and down about the same few points before one side is overwhelmed moving price on to a new level.

The ladder part starts about 3 min in, price is in the center grey column, buy orders on the left in blue and sell orders on the right side in red. This is in a major index and a single stock won't usually be as volatile as this but it shows the battle between buyers and sellers over just a few points.

  

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      20,147
    • Total Posts
      88,272
    • Total Members
      69,129
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Psouthby
    Joined 07/10/22 05:36
  • Posts

    • We are moving into ‘nonfarm payrolls Friday’ and the potential for volatility is significant after a broad mix of preceding employment statistics. While the employment report can certainly spur the markets like the S&P 500 and Dollar to action, traders should keep tabs on growing warnings from the IMF and Fed officials.   Full article on DailyFX  
    • United Parcel Service Inc., Elliott Wave Technical Analysis United Parcel Service Inc.,  (UPS:NYSE): Daily Chart, October 7 2022,   UPS Stock Market Analysis: Moving as expected, we are looking for further downside with at least one more move down.   UPS Elliott Wave count:  (iv) of {c} UPS Technical Indicators: We are below all averages UPS Trading Strategy: Looking to short on wave (iv) to potentially target equality of {a} and {c} at 148$. TradingLounge Analyst: Alessio Barretta Source Tradinglounge.com Get trial here!       United Parcel Service Inc.,  UPS: 4-hour Chart, October 7 2022   United Parcel Service Inc.,  Elliott Wave Technical Analysis UPS Stock Market Analysis: The subwaves are pretty clear which gives us additional confirmation. Looking for further downside and potentially a sideways wave (iv) alternating with wave (ii). UPS Elliott Wave count:  Wave (iv) of {c}. UPS Technical Indicators: We are using the 20EMA as resistance as well we are starting to form RSI divergence. UPS Trading Strategy: : Looking to short on wave (iv).  
    • FTSE 100, DAX 40 and Nasdaq 100 stall ahead of US jobless data Outlook on FTSE 100, DAX 40 and Nasdaq 100 ahead of US Non-Farm Payroll data which may influence the US Federal Reserve’s (Fed) monetary policy going forward. Source: Bloomberg   Indices Federal Reserve United States Monetary policy DAX FTSE 100  Axel Rudolph | Market Analyst, London | Publication date: Friday 07 October 2022  FTSE 100 rally taking a breather The FTSE 100 is retracing lower ahead of the widely anticipated US non-farm payroll (NFP) data which may influence the Federal Reserve’s (Fed) monetary policy going forward. The index has so far rallied by over 4% from its September low on the back of hopes of a slowing tightening path by the Fed after softer US economic data earlier in the week but ran out of steam slightly above the 7,100 mark. The June low at 6,966 may be revisited. Below it sits further minor support in the 6,945 to 6,934 region, made up of the 26,27 September lows and the 3 October high. A bullish reversal and rise above this week’s high at 7,104 would likely engage the early September low at 7,131 as well as the 8 September low at 7,174. Source: ProRealTime DAX 40 slips ahead of US unemployment data The DAX 40’s swift ascent on hopes of a slowdown in the speed and size of global rate hikes following the Reserve Bank of Australia’s (RBA) lower than expected 25 basis point rate rise on Tuesday is taking a breather ahead of Friday’s US unemployment data. Following the contract’s technical bear trap, in which it dipped below its key March to July support at 12,386 to 12,432, only to then rally by over 7% to 12,704 before slightly coming off again, led it to revisit the 12,386 July low. Between this level and the 3 October high at 12,275 the DAX 40 may find support, however. If not, a slide towards the 30 September high at 12,138 may be witnessed. Immediate resistance comes in at the 12,596 early September low above which lie the 23 June low at 12,839, followed by the mid-June low and 20 September high at 12,940 to 12,944. The next higher 26 July low, 2 September high and 55-day simple moving average (SMA) at 13,021 to 13,066 may still be reached in the days and weeks to come, provided that no drop below the September low at 11,810 ensues. Source: ProRealTime Nasdaq 100 rally stalls ahead of US Non-Farm Payroll data The Nasdaq 100’s near 7% rally from its September low has given way to some profit taking ahead of Friday’s US jobless data which should give clues as to the direction the Fed will take with regards to its monetary policy. Throughout this week various Fed officials have continued to pour cold water on the idea of a pivot, suggesting that there is little likelihood of a change in policy due to the persistence of high inflation. This has led to the Nasdaq 100 giving back some of its recent strong gains and it slipping towards the 11,306 low seen on Wednesday. A rise above this week’s 11,668 high would put the early September low at 11,918 on the cards. Source: ProRealTime
×
×
  • Create New...