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As for me, I don't really understand this line:
The imbalance we are looking for is on the side with the least amount of activity because the longer-term trader is only a small percentage of total trade in the value area.
How can the imbalance be on one of the sides? As my understanding goes, imbalance can be either on both sides (too much on one side and to little on the other) or there isn't any. But according to the text we are looking for imbalance on the side with the least amount of activity... What exactly does it mean? |
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I spent some time thinking about that one... and honestly I was like "what???" over and over again. Did
Steidlmayer write the packet? Because the writing is very unclear and hard to interpret.
From my own interpretation, I believe the author is saying that the majority of transactions take place among short term traders and floor traders intraday. Transactions or activity is different from volume. Which is why I believe when the author mentions activity, I think he is referring to transactions. Because these short term traders place most of the activity between price levels where the market is in value, the side with the most activity represents short term traders. The side with the least activity represents long term traders because their perception of value is different from short term traders. While a short term trader may see the
value area as a price region of fair value, a longer term trader may see it as a bargain or overvalued.
Of course this is not to say I agree with the author. I do not fully understand why the author would need to include such a phrase in the book.. it seems to just confuse the heck out of me. It also seems extremely irrelevant in my opinion. Maybe someone can clear this up for us.