How does the course of sales work?
With course of sales I notice there are lots of trades for single shares sometimes a whole stream of them one after the other. What's going on? Why bother selling one share at a time?
The course of sales is a chronological record of all trades which have taken place for a particular stock throughout the day. It includes price, volume and time of trades, allowing investors to determine what time in the trading day the stock is most active.
Investors can also use course of sales to see if any large orders are being executed, to better understand what may be moving the stock. Large lines of stock may be an indication of corporate activity that is occurring or about to occur.
Stocks that often trade high volumes are more difficult to decipher in this way as there are always large volume orders. However, more illiquid stocks who suddenly start trading large volumes may prompt investors to investigate further. Large orders in a large cap stock may not raise concern but large orders in an illiquid small cap may.
An important factor to note here is that both retail and institutional orders make up course of sales, so it is difficult for investors to know who is responsible for the activity, and therefore deduce why the market is moving a particular way.
Another key factor to be aware of when viewing course of sales is the increase in the use of automated trading, which has changed the trading landscape over the last three years
Increasingly, course of sales is filled with small volume executions that look unusual. These are signs of automated trading or what is referred to as algorithmic trading. Essentially, this is an automated order manager which has instructions to feed the order into the market gradually throughout the day. In the past, brokers would manually enter orders to market. With automated trading, preset order details can be used to ensure large orders are managed effectively throughout the trading day without causing large price movements to the disadvantage of clients to get a good price for their client or trade within the trading range of the stock for the day. Now with the use of automated orders, brokers can preset their instructions and the order manager does the rest.
By Stephen Karpin, General Manager, CommSec
The views expressed in this article are those of Stephen Karpin, a representative of Commonwealth Securities Limited (CommSec) ABN 60 067 254 399 AFSL 238814. CommSec ABN 60 067 254 399 AFSL 238814 is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 23495 and a Participant of the ASX Group.
This article was produced by CommSec. Except to the extent that any liability under any law cannot be excluded, no liability for any loss or damage which may be suffered by any person, directly or indirectly, through relying upon any information or statement in this document is accepted by the Commonwealth Bank or CommSec or any of their directors, employees or agents, whether that loss or damage is caused by any fault or negligence on their part or otherwise. Commonwealth Bank and its subsidiaries do not guarantee the obligations or performance of CommSec or the products or services offered.
As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances and if necessary, seek appropriate professional financial and taxation advice. The article does not representation a recommendation on any particular company.
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