For Boyd Stone, our charting expert

Hi,

First, thanks for your comments. I mean, if I was Boyd I'd thank you for your comments. But I'm not Boyd, I'm Mr. Anonymous.

Onward LOL.

The ledge signal works in this way. After a ledge forms, buy stops tend to appear above it and sell stops tend to appear below it.

(Leastways, that's what happens with commodity futures.)

The floor is well aware of the positions and numbers of these stops because they have the home traders' tickets in their hot little hands LOL. To execute your trades "efficiently" they have to know where you want to buy or sell. Does this give them a way to make money?

The way I interpret the Nortel chart is that before the move to the downside, the floor traders first cleaned out all the buy stops above the ledge. See what I'm saying? The floor was happy to sell high to all the private traders who wanted to buy above the ledge.

Then the real move to the downside happened, with the floor in the nice position of having sold at the best possible point. Some of the private traders who bought high now realize what's happening, and they panic and try to exit their losing positions. Everyone's selling, which is why you got that long down bar.

What will happen next is a period of consolidation of sufficient duration for the losing floor traders or market makers to make back the money they lost. Then, another "real" move might happen.

Or it might not LOL. To make money as a trader you have to either make allowances for how the floor brokers make money, or you have to only trade when the floor brokers are out of control of the price movement. The latter way is best.

Yours,

-Mr. Anonymous