Why are buys showing as sells & vice-versa?29 Sep 2022 13:27
"Why is my buy showing as a sell?" or "Why is my sell showing as a buy?". (the key bits at the bottom in terms of the relationship between buys / sells and the price ratio.......)
The simple answer to this is that buys are showing as sells and vice versa, because the algorithm used to determine these trades is outdated and decidedly more useless than it would have been thirty years or more ago:
Effectively, a trade is given a "Buy" or "Sell" status depending upon which side of the mid point price of the Bid/Ask spread the trade lands on.
e.g.
Bid= 2p
Mid Point= 3p
Ask= 4p
My trade is filled at a price of 3.1p and is therefore shown as a "Buy" by the system.
Now, errors occur because the actual Bid/Ask spreads at market prices aren't necessarily the same as those that are "officially" listed and used by the algorithm.
I would add, that as more firms are making markets and as brokerages become more price competitive, we've seen a gradual tightening of spreads over the past thirty years, which is the cause of this problem.
When market spreads are nice and wide, this system does actually work accurately, with a smaller level of error.
Linked to this is the phenomenon of this system showing a stock as having more "Buy" trades than "Sell" trades and still falling in price:
In the case of market orders, this happens because because smaller trades (often the case in stocks with small market capitalisations - you can't get the liquidity for large trades meaning only small players exist in the market) tend not to cause large swings in the market Bid/Ask prices, but smaller moves instead.
ps. Junior / Newbie traders at smaller firms ... will cut their teeth with trading small stocks like this & others, to learn the game ... albeit i'd stop short at saying ' manipulating'
GLA / news soon ... we all hope ... Eddie too !! ;-)))
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