Forum Archive Index - February 2002

[Phaedrus <Phaedrus@techemail.com>]

>>> Is (Market Depth) a topic discussed by Tech Analysts? <<<
Not to any great extent, that I am aware of. I have not seen any reference to 
anyone else using this info to derive some indication as to the "size" of the 
average Bid vs the average Offer - an interesting exercise. It is not uncommon, 
for example, after a significant rise in the price of a flaky stock, to see 
lots of little guys scrambling to get in, while a small number of big guys (the 
smart money?) are getting out. Redistribution, from professionals to amateurs 
perhaps? 

>>> I note the actual value of the depth is quite small compared to 
the volume. Does this make the data irrelevant? <<< It must make it much less 
relevant, when this is the case. In some instances, though, the number of 
shares sought (or on offer) can exceed the average daily turnover by a huge 
margin. In these cases, market depth info would have much more relevance, I 
would think. 

>>> (Market Depth)...doesn't seem to mean too much when analysed by itself 
>(especially on big stocks). <<<  Absolutely. It is merely one of the "second 
>tier" factors that may be used to augment a trading decision made primarily by 
>other means.

>>> Maybe volume/trend analysis needs to be added to the formula. <<<
It was never, ever, missing!

>>> ...historical end of day depth data seems to be unavailable...<<<
Even if you could get this data, it would be of very little value, as it would 
only consist of GTC orders. All the "Day Only" orders drop off at the market 
Close. 

 It is important to keep this topic in perspective, and not let the tail wag 
the dog. I was just trying to show that market depth info can give a positive 
spin to a trading decision made by other means, as in the case of BPC, or a 
negative spin as in the case of LSG. It does not form an integral part of my 
system, and I am happy to trade without it. But, if you have access to this 
information, may as well try to derive some value from it, no matter how small 
this contribution may be.

  Regards,
              Phaedrus.

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