What Does This Mean?

[cmach123 10]

I have pretty good understanding in regards to reading a candlestick/bar chart, and what to expect. But when a horizontal line (blue arrows pointing) appears, I have no idea what to expect. Can anyone explain what this means? Is it no demand bar, or no supply bar?

[sevensa 10]

I have pretty good understanding in regards to reading a candlestick/bar chart, and what to expect. But when a horizontal line (blue arrows pointing) appears, I have no idea what to expect. Can anyone explain what this means? Is it no demand bar, or no supply bar?

 

You probably should reread the defintion of a no supply and no demand bar then you'd be able to answer your question yourself if they are no supply/demand or neither.

 

How relevant they are and what they means, depends on the background/context. Don't try to explain and make decisions based on single bars without taking background into consideration. Without considering background, you are looking at "random" bars.

 

What to expect is that price will move either up or down or continue sideways. It's up to you to manage it.

[VolumeJedi 10]

Basically, that type of bar means : Open=High=Low=Close. The spread, or range, of the bar is zero.

 

These usually appear with little volume. This makes sense as volume is activity and there is a relationship between volume (activity) and range.

 

As far as being no demands or no supply, it gets a little hazy.

 

If the volume is less than the previous two bars on such a narrow spread and closing up, then you have the base definition of No Demand. This is the definition that is in the MTM book. Unfortunately people were simply trying to short on any No Demand. Tom then had to "change" the definition to stress the idea of background weakness (or strength in the case of no supply). Hence, many now would say they are just low volume up bars showing little professional activity in the market. Considering that 80-90% of the volume "figure" is professional money.

 

Tom and Todd used to talk about "a polar bear" in Hawaii, when a no demand showed up in the wrong place. Like when there is not weakness in the background. They used that term because the bar met the base definition (book) of no demand. What people seemed not to grasp was that all up bars on a narrow range with volume less than the previous two bars are no demand, but not all no demand bars are tradable.

 

As you are just starting out, you should put the bars into context. If there are no signs of weakness behind you, then look at the bars as simply low volume up bars showing little professional activity. If there are signs of weakness (like high volume up bars closing off the high with the next bar down) then look at the bars as no demand. Which still means there is little professional interest in upside prices, but now you have the background context for a tradable bar.

 

Sorry for the lengthy answer but this is a pet peeve of mine. In order to appease critics and traders that did not understand the idea of context and for software purposes the definition was "changed".

[cmach123 10]

Thanks for the response. I appreciate a detailed answer. You made a point related to background weakness. How does someone measure this?

[VolumeJedi 10]

Thanks for the response. I appreciate a detailed answer. You made a point related to background weakness. How does someone measure this?

 

Read any of Eiger's posts for this one.