Trading Volume Codes

I often get moans from investors who follow the volume of buying and selling in particular companies.

I get mails like: "Why is the share dropping when there are so many more buys than sells"?

Or: "It's not fair my share's going down when so many people are buying."

Or: "I bought a share but ADVFN has got it down as a sell!"

I'm sure most of us like to watch the buys and sells coming in on our various favourite shares.

The way to do it is to press "trades" on the top ADVFN bar while looking at a quote on the share you want.

But what you must realize is, the "buys" and "sells" you see listed on trades are GUESSES by a computer!

They are really good guesses but still guesses!

So when you see trades listed under "buys" or "sells", that "buy" could easily have been a "sell".

You'll see from the trades page that shares get put into a "buy" "sell" or question mark column.

The problem arises because of two facts:

Firstly the Stock Market has no obligation to tell anyone whether a trade was a buy or a sell so that info is just not available (hence the guessing).

And secondly Market Makers can delay the publication of trades that are over the normal market size of a stock.

So the trade you see at 14.20 could well have been made at 10.20.

The lesson is to treat volume trade data with caution. The way the share price is going is the best rule of thumb as to the real volume of buys and sells.

When you see a big trade going through which is marked as a "sell" but the share price has shot up, it's probably a buy!

You'll notice that there is a letter that goes by every trade - that at least gives some sort of clue as to the sort of trade it is.

The main one to watch for is when you see "T" by a trade. This in market jargon means "single protected transaction".

So the trade you see going through is someone who has bought or sold a lot of shares over a period of time and it all goes through as if it was one transaction.

That makes it hard to know whether the trade is a buy or a sell. But usually if the share is rising it's probably a buy and if falling it's probably a sell.

Quite why the buyer needs protection I'm not sure!

When you see "X" by a transaction even if it's for a big amount of shares you can kind of ignore it.

This is just a parcel of shares being swapped between two parties. One wants the shares the other doesn't. So there are no real conclusions to be drawn and the share price is rarely affected.

"O" means it's an ordinary trade… this is normally broadcast immediately unless it is over six times NMS in which case it can be delayed.

"L" means a late reported trade. Again one worth watching for as a buy can seem like a sell.

"M" is a deal between two Market Makers. This usually means one of the Market Makers is short of stock.

"AT" Automated trade dealt through the order book.

Really all these codes do is give you a clue as to whether a trade is a buy or a sell. The "T" trade is the most important one to look for.

My view is: come on stock market! Let's have a rule, which forces Market Makers to tell us whether a trade is a buy or a sell and right away!

What's this protection nonsense! Stop protecting buyers and sellers and start protecting us investors!!

I'm sure all of you would agree but I suspect it will be a long time before us investors ever get the real truth regarding share trades.

Anyway, thanks for reading, I feel better now!