How Does the Course of Sales Work

Course of Sales Data as a Trading Tool

While some investors might jump into a stock based on vague “tips” about a “can’t miss” opportunity, the vast majority of Aussie investors spend time researching a stock that has caught their eye before buying.

Regardless of how they assess a potential buy, at some point they have to determine a target price they are willing to pay for the stock. Investors who research a company’s fundamental financial and operating performance as well as those who rely on technical analysis of price and volume history, both end up at the same decision point – what is a good price for the stock?

Checking the stock’s price movement over time using a financial website’s charting tools provide a history but lack the specificity of what the stock is doing on the day the investor is ready to take the plunge.

For that, the ideal tool is the course of sales data.

What is the Course of Sales

The course of sales lists stock buy and sell orders as they are executed. The list provides a veritable gold mine of information for both short-term traders and long term investors, including the sale price, the volume of the order, and the time of execution. Course of sales is available on top trading platforms, sometimes requiring a subscription fee.

At a glance investors and traders can identify if the stock price is trending up or down or staying in a stable range. They can test whether the price they are hoping to pay is realistic given the actual trading history of the day.

Course of Sales versus Market Depth

Market Depth charting is another tool available for investors and traders to track price action. Market Depth lists potential trades before they happen and jump from a potential trade to an actual trade added to the course of sales data.

Market Depth lists both the number of buyers and sellers of a stock and the prices at which they want to buy or sell. Buyers post a “bid” – the price they are willing to pay – while sellers list an “ask” – the price at which they are willing to sell. Market depth information also includes the quantity available to sell and the quantity wanted to buy. In essence, the pre-sale information provides a snapshot of the supply and demand for a stock at different price levels.

Market depth shows the potential while course of sales shows what actually transpired.

Incorporating the Course of Sales into Your Trading

Course of sales identifies potential trends in stock price movement. For example, tracking the course of sales over a few days can reveal the price of the stock rises at the open as buyers rush in, ebbs in the middle of the day as buyer demand diminishes, and rises again at the close.

This suggests investors and traders looking to sell would find the best price at the open while buyers would find the best price in the middle of the day.

Course of sales also shows trending movements. A stock in high demand will see the share price rise throughout the day while a stock in low demand will see its share price falling throughout the day.

Large buys sometimes indicate interest from managed funds or high-net-worth individuals, or both. Large buys and sells can move the stock price. While large buys or sells in stocks with historically high trading volume may not indicate potentially renewed interest, in smaller, less liquid stocks like start-ups and small caps without profit or revenue big moves can be a sign of a developing upward trend. This suggests investors should start digging into coverage of the stock to see what may be in progress.

The rise of automated trading has made it more difficult to spot trends based on order quantity. Newcomers to using course of sales data are often surprised to see orders as small as a single share. This is an artifact of algorithmic trading. Automated trading systems are programmed to stagger buy and sell orders throughout the trading day to avoid the impact of exceptionally large orders placed at one time. Automated trading has made using course of sales in the trading strategies of investors and traders more challenging. The data in course of sales does not identify retail investors from institutional investors.

Course of sales trading strategies include issues commonly associated with technical analysis, such as swing trading, momentum trading and bounce and breakout trading based on support and resistance levels.

Studying course of sales data for a particular stock over time can uncover the support and resistance levels for the stock price. Support and resistance represent both a ceiling price above which the stock simply will not go and a floor level, below which the price will not fall.

The floor is support and the ceiling is resistance. Once this pattern becomes evident, investors can trade the “bounces” as the share price hits resistance and begins to fall till it hits support and then begins to rise again. Investors and traders could sell at resistance and buy at support, trading the bounce.

If the bouncing is continuous, the floor and ceiling begin to weaken, eventually leading to a breakthrough where the share price breaks out, rising above resistance or falling below support.

Course of sales data is a check to the viability of the desired buy or sell price investors and traders are seeking. Prices nowhere evident in the course of sales leads investors and traders to rethink their expectations, wait, or seek other investment opportunities.

Large buys or sells can give investors and traders misleading signals about impending trends. Large orders sometimes are simply “one offs,” momentarily impacting the stock price upward or downward before returning to normal supply and demand balance.

Corrective action for this disadvantage is extensive research to see if something has happened to the company or its business sector that justifies the increase in interest as valid.

Course of sales records buy and sell transactions for a particular stock as they happen during the trading day, from opening to closing. The record can become a trading tool for both short-term traders and long-term investors willing to invest the time necessary to study the data looking for patterns and trends.