Forum Archive Index - March 2002

["second LIFE" <secondstep70@hotmail.com>]

Phaedrus,

I totally agree with your analysis on volume. It is quite frustrating 
analysing some small stocks. If 'number of trades' data was available, it 
would make volume analysis more relevant because it could filter out big 
'one-off' trades by insitutions and directors etc. Does anybody download 
this kind of data?

Second

>From: Phaedrus <Phaedrus@techemail.com>
>Reply-To: sharechat@sharechat.co.nz
>To: Sharechat@sharechat.co.nz
>Subject: [sharechat] TA and Volume
>Date: Tue, 26 Mar 2002 02:37:04 -0800 (PST)
>
>Ruth,
>       The story of Richard Dennis and the Turtle Traders is an interesting 
>one. I had to laugh at your reference to the TurtleTrader website as being 
>"slightly more rational than some". TA, like many other endeavours, does 
>indeed have a lunatic fringe, as it seems you have discovered.
>
>  There are many issues involved with low volume stocks. At worst, it is 
>not even possible to use Japanese candlesticks effectively on very lightly 
>traded stocks. I would not consider trading these stocks at all.
>
>  For many of the small to midrange NZ stocks, the problem is not the 
>lowish volume per se, but more the often very high day to day random 
>variations that occur. For this reason, I do not normally use volume based 
>indicators on most NZ stocks. This would exclude indicators like Money Flow 
>Index, On Balance Volume, Price Volume Trend etc. I would still refer to 
>the usual volume bar graph though.
>
>  Another issue is the ability to buy or sell a reasonable parcel of shares 
>without shifting the market. My general rule of thumb is this. If my trade 
>would comprise more than 5% of the average days turnover, I will not trade 
>that stock.
>
>  I would think that the main reason managed funds are unable to trade out 
>of positions easily would be the large relative size of their holdings in a 
>given company, rather than a simple lack of liquidity. This would be just 
>one of many reasons for their poor performance.
>
>  While other markets are much larger than NZ, they still have some stocks 
>that are too lightly traded to use TA very confidently, so this is a stock 
>issue, rather than a market issue.
>
>  One final point is the time taken to fill an order. Some people are happy 
>to wait, perhaps even for weeks to buy or sell a stock at their nominated 
>price. I am not. If I cannot complete my order more or less straight away, 
>the stock is too lightly traded for me, and I will avoid it.
>
>  None of the above would qualify as Universal Truth. These are merely my 
>current views, and in matters of this nature almost everyone would have a 
>different opinion, and their own set of rules and procedures tailored to 
>their individual situation and preferred approach.
>
>       Regards,
>                Phaedrus.
>
>
>
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