Complete transcript
0:00 Displayed is not traded.
A large number in the order book is not a completed trade. In this lesson, separate what is available from what has actually traded. The numbers in our diagram are invented for teaching.
0:11 Start with the spread.
The best bid is the highest displayed buying price. The best ask is the lowest displayed selling price. Here, the difference is zero point two five points: the spread. The quantities show displayed liquidity at this moment.
0:26 A quantity can disappear.
Suppose the ask quantity falls from twelve contracts to four. That change alone does not prove eight contracts traded. Orders may have been cancelled, changed or executed. Look for the corresponding executions.
0:40 Now check the tape.
In this invented example, the tape reports three, two and three contracts at the ask price. Eight contracts executed. Every trade has a buyer and a seller; execution at the ask describes which side took the available liquidity.
0:55 Did the price advance?
Eight contracts trading does not guarantee the next price move. Watch whether the ask lifts, stays or replenishes. Repeated executions without progress may suggest absorption, but they do not reveal a trader's identity or guarantee a reversal.
1:11 Write what you observed.
Pause the replay. Write three facts: the displayed quantity, the executed volume and the price response. Keep your interpretation separate. This makes an observation easier to check when you replay the sequence.
1:25 Try the distinction yourself.
Open the free NQ Replay linked below. Find the bid and ask, watch a few seconds, then compare the book with the tape. This is an observation exercise using recorded data, not a trading signal.
YOUR TURN
Turn the lesson into an observation.
Open the free Replay, pause it and write down the best bid and ask. Play a few seconds. Check which trades appear on the tape before explaining a change in the book.
References and method
This lesson is published by The Winning Curve. Illustrated examples are separate from the session offered in the demo. The reference below documents the topic or the recording provenance.
A correction or a question? thewinningcurve@gmail.com
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