Trader Lingo: Blip

A blip is a big sudden jump in price. It means that the price does not move in a nice continuous flow, with small pushes and retracements to another price level, but gets there immediately without touching or going through the prices in between.

Some markets that are liquid because of their volume usually don`t blip. The thinner markets like the Footsie blip more often.

Some traders deliberately create blips, by not buying or selling at the market or close to it, but several ticks away from it. They do it by mistake or because they can profit from it.

On possible trick to do this for example is when the market is making new highs or new lows. The highs and lows are usually strongly defended and the market has to apply a lot of pressure to these prices to break through. Sometimes the momentum is so strong, that there is not much resistance at the highs or lows, but that is usually not the case. The market has to demonstrate sufficient power to break through. So, what some traders do is when the market is siegeing these levels is they are willing to take an immediate loss, by buying several ticks above or below the old extremes.

One example is when the market is making new highs. Since it may cost more lots to drive the market up there and take out the sellers their offers, it could make sense for this trader to apply this technique and buy several ticks higher than he otherwise could. If he does it, the reaction is something like this:

The defending algorithms and human traders see that the market had a transaction several ticks above them and they panic. They don`t know what happened, who did it and how many lost went through, but they know they have to get out immediately. The algorithms are the first one. They know that their positions are offside, so they have to get out and buy in order to cover their shorts. Then humans make the same reaction. This will cause the sellers to become buyers and for a few seconds there are essentially no sellers anymore, everyone is a buyer. Now the entire market is up at the level, where the first trader created this blip or maybe even higher, depending on the momentum this small panic has caused. Our trader now can decide to take profits here or wait for the momentum to drive the market even higher.