Pre-Market sudden spike at 0800-0801

[Hamish Arnold 1]

As a new day-trader, I was wondering if anyone could explain to me what happens on many equities at just after 0800 when a spike appears against the equity as a high/low?  Typically very low volume transactions, but confused as to what is happening here.

 

Looking forward to enlightenment!

[rinran 2]

@Hamish Arnold I'm guessing 0800 is the market open for you. Typically equities will have huge price moves at the opening bell, this can be for various reasons (market orders being filled either long/short, limit orders being filled from swing trades to sell/cover, large spreads, etc). Having low volume can exacerbate this, because small orders can change the price significantly.

So on a stock like SPY, a 10,000 share order won't move the price much because SPY trades millions of shares a day. But on a stock that trades only 100,000 shares a day a 10,000 block order could move the price by a huge amount relative to the current price.

This low volume/huge price move issue can also be exacerbated again if the stock has low share float too, meaning that 10,000 share order is a significant percent of all the shares available.

https://www.investopedia.com/terms/f/floating-stock.asp

Hope that helps.

Edited October 7, 2020 by rinran

[Hamish Arnold 1]

I only wish that the timing was the market open, where instead the time referenced was NY time.  I heard someone mention that this was called the tinhat - but that made no sense to me, hence the query to the forum!

[rinran 2]

On 10/7/2020 at 10:22 AM, Hamish Arnold said:

I only wish that the timing was the market open, where instead the time referenced was NY time.  I heard someone mention that this was called the tinhat - but that made no sense to me, hence the query to the forum!

Hope my info helped.

[Alastair 111]

The 8:00 am NYT wicks are created by an internal clearing process among the exchanges/market makers.   

Bankers from the old days would clear cheques accepted/paid on behalf of other banks to increase efficiency, speed and better customer service.  This is all internal and done at low transaction point of the day for the previous day.  It has its roots when paper cheques were heavily used.  Its all electronic now but same concept.  

The horizontal levels it creates existed before and are price ranges at which transactions happen during the previous day.  Its very logical if u are a central banker from the old days. 

 

Its like an Automated Clearing House (ACH) software solution process except its for STOCKS.  

 

In my pervious life was a software dev/consultant/project manager/head cook and bottle washer for the integration and implementation of retail banking and investment banking systems and networks,

 

Thor calls it "Tin Foil Line"  ........  bcoz he was applying a conspiracy theory to its creation of the wicks.  Google Tin Foil hat. Ask him during his sessions. But serious regulations and compliance restrictions guide the MM who MUST operate ethically, bcoz they are guaranteed a profit for providing Market Making functions to the market.  Market Makers are almost like a monopoly (e.g. OPEC...oligopoly / monopoly / cartel, ur choice).

 

 

Edited October 8, 2020 by Alastair

[Adam Lewis 64]

With these 8am spikes, I don't think it's possible to buy and sell at the low and high, shares aren't available for trading at these prices from what I know. The spikes on your chart are just recording the transactions. If you watch the L2 you won't suddenly see shares available -50c and +50c, for example. Otherwise you could set some very nice limit orders right before 8am and get heavily discounted stocks!