Bo Yoder
MenuClose
01–03

Approach

01The idea

Every market is a supply chain

Think of a supply chain: goods are bought cheaply at the source and transported for sale where the buyers are. Markets work the same way. The largest players can fill orders only where enough counterparties wait on the other side, so price tends to travel toward those pools of orders. Those are measurable, economic levels that can be forecast.

Every market is a supply chain Conceptual diagram. Orders gather at levels everyone can see, above prior highs and below prior lows. Price is drawn to the orders waiting above, large orders fill there, price turns toward the orders waiting below, fills again, and the cycle repeats. Orders waiting above Buy stops and breakoutorders above prior highsand equal highs Orders waiting below Sell stops and breakdownorders below prior lowsand equal lows 1Orders gatherAt levels everyone can see 2Price is drawn inBig orders need counterparties;this is where they wait 3Orders filledLarge orders fill againstthe orders waiting there 4The turnNothing left to push price;it turns toward the other side 5Filled again…and the cycle repeats Orders waiting above Orders waiting below 1 2 3 4 5
  1. Orders gather at levels everyone can see.
  2. Price is drawn in: big orders need counterparties, and this is where they wait.
  3. Orders filled: large orders fill against the orders waiting there.
  4. The turn: nothing is left to push price, so it turns toward the other side.
  5. Filled again, and the cycle repeats.
Conceptual illustration, not market data.
02Why it works

Big orders need counterparties, and this is where they wait

i.

Size needs a counterparty

A $50 million order cannot fill in thin air. It needs a large pool of opposing orders, and the deepest pools sit at obvious levels where stops and breakout orders cluster.

ii.

Everyone is paid on activity

Exchanges, dealers and brokers earn on transactions and size. Activity concentrates where order density is highest, so that is where the market spends its time.

iii.

Filled orders leave no fuel

Once the waiting orders have filled and the large order is done, nobody is left to push price further. The path of least resistance is back toward the opposing pools of liquidity.

A dominant buyer who simply stops buying is enough to move price to where the next buyers are waiting.

03Why it matters now

Everyone now has the same answers

Ask the same question of the same tools and you get the same names and the same thesis. That is useful for research, but it is not an edge.

When many investors act at the same obvious levels, the crowd itself becomes the pool of orders that larger players fill against. A good thesis still does not say where to enter, where it is wrong, or where to take profit.

  • Why this name?
  • Why this level?
  • Where are we wrong?
  • When are we out?

Research answers the first question. The liquidity map answers the other three.

Contact

A private conversation

If a written, dated view on levels, risk and exits could support your team’s decisions, I would welcome a private conversation. Inquiries are kept in confidence.

Request a private conversation bo@boyoder.com