What is Positions Cost Distribution?
Positions cost distribution assumes all free float shares were purchased and held by investors. Based on this assumption, the positions cost distribution analyzes the cost prices at which those shares were purchased, how these different price points are distributed at one time and changed on a daily basis.
For example, there are 1,000 free float shares of ABC in the market. One day when the market closes, it is found that these shares were purchased and held by public investors at the different cost prices, namely: 10 shares were purchases at $5.00, 120 shares were purchased at $6.00, 100 shares were purchased at $7.00, 30 shares were purchased at $8.00, 100 shares were purchased $9.00, and 640 shares were purchased at $10.00. This is the distribution of costs of positions of all free float shares at that time.
The cost concentration is the overlapped portion between 90% Cost Range and 70% Cost Range. The higher the cost concentration ratio is, the more likely that the stock price will fluctuate.
Profited Shares at Market Close:
This shows the proportion of free float shares held by investors which were purchased at cost prices lower than the closing price (profitable).
Profited Shares at Market Close= Profited Shares / Free Float Shares
What does the Positions Cost Distribution indicator tell you?
There are two major factors in using the positions cost distribution indicator.
1. By comparing the stock chart to the cost distribution chart, you can find the proportionate profit and loss amongst all the free float shares. Therefore, it may help you predict the future movement of a stock. In the case above, if the stock closes at $9.00, there will be only 260 shares profitable and 100 shares break-even. 640 shares have an unrealized loss. Generally speaking, if the stock price is high and there are many shares having unrealized losses, it is likely the stock price will drop again in the short term. Therefore, the positions cost distribution indicator can help in making investment decisions.
2. Within a certain time period, you can use the positions cost distribution indicator to determine the possibility that the momentum of a stock will reverse or not by viewing the cost basis changes of the free float shares. In the previous example, if 3 months have passed and the cost basis of the shares are changed to the following,
250 shares were purchases at $5.00,
520 shares were purchased at $6.00,
90 shares were purchased at $7.00,
80 shares were purchased at $8.00,
20 shares were purchased $9.00,
and 40 shares were purchased at $10.00, then we can deduct the stock is at a relatively low price. The stock is likely to rise as it has low resistance.
How is the positions cost distribution indicator calculated?
The positions cost distribution indicator is a technical indicator that obtains data from the transaction record covering the 13 national exchanges in the U.S. on a daily basis.
The transaction record shows the filled prices of all orders executed during a certain time period- typically one business day, it indicates that the cost basis of the circulating shares are moving towards the filled prices. We will take these accurate filled orders as "open position" orders and the filled prices as "cost prices" of new positions held by investors, adding the corresponding shares into the different price points. These transaction records are accurate data from the exchanges.
However, we do not know which positions of investors were closed. The decrease of shares at each cost price from the previous distribution is estimated based on the profitable ratio.
In general, the positions cost distribution is an estimated result and is for reference only and does not constitute an investment recommendation.
The positions cost distribution data is for reference only and does not constitute an investment recommendation.