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semar Nov 26, 2007 1:57am | Post# 21

thanks fti for all your insights.

I think it's better to continue here your post, otherway you'll end up with 15 threads that nobody can find )

In the retail forex world, everyone is talking about money management and never risk more then 1-2% of your trading account. What is the institutional opinion about this (on other thread you said that institutional traders don't calculate risk/reward, do they take in mm?)

Thanks again

Oromis Nov 26, 2007 2:24am | Post# 22

fti,

glad you returned and thanks for taking the time to share.

fti Nov 26, 2007 2:45am | Post# 23

Hi All,
tks , will answer soon, now watching EUR/USD flying.
Anuone watching?

regards

kiwi_trader Nov 26, 2007 3:14am | Post# 24

I thought your posts on forex in the banking system were interesting. I find the initial one in this thread a little bizarre ... too many words maybe which invites dissection.

1. Leonardo didn't "have made public, their inventions of reading probabilities into Technical Indicator."

2. Technical analysis is generally accepted to encompass most strategies for trading decision making that exclude analysis of fundamentals. Basically if it uses price and volume as input and excludes most other stuff then its TA. The whole indicator fascination is not necessary although its very popular here.

3. Gambling can be carried out with fundamental analysis, ta, astrology, no analysis or anything. TA is not the common denominator ... its the attitude of pursuing a thrill rather than executing a planned business.

4. I think that saying "these tools are used for measuring the markets health" is an analogy stretched way too far as I'm sure that they will fail in that objective. Also suggesting that "that all these studies, basically are statistical tables plotted in graphic form" implies statistical knowledge and input to elements of TA that frequently (perhaps mainly) are simply not there.

However, I would certainly agree that success in the markets requires elements beyond an entry and exit strategy. I post this reluctantly but found the assertions in that first post invited some sort of response. I suspect I agree with you though on your underlying attitude to method and trading.

Green_David Nov 26, 2007 6:20am | Post# 25

Hi All,
tks , will answer soon, now watching EUR/USD flying.
Anuone watching?

regards
Thank you very much for sharing your knowledge, experiences and wisdoms with us.


I totally agree with you indicators are just tools. Price action/pattern analysis is king.

I observed the E/U is going up again. And I hate that my E/U long position was stopped out again at 1.4817 with only a small amount of pips left with me.

I really doubted that the market knew my stop loss (stop win actually) was between 1.4920~1.4900. Is it possible that some people will sweep the S/Ls in this range before E/U goes up again?

I think my stop loss (stop win actually) was just sweeped. That is a problem, if you place a stop loss/win, after being hit, the price goes further, if not placing a stop loss, the price may go down and my position is in trouble.

kiwi_trader Nov 26, 2007 7:00am | Post# 26

1 Attachment(s)
Thank you very much for sharing your knowledge, experiences and wisdoms with us.


I totally agree with you indicators are just tools. Price action/pattern analysis is king.

I observed the E/U is going up again. And I hate that my E/U long position was stopped out again at 1.4817 with only a small amount of pips left with me.

I really doubted that the market knew my stop loss (stop win actually) was between 1.4920~1.4900. Is it possible that some people will sweep the S/Ls in this range before E/U goes up again?

I think my stop loss (stop win actually) was just sweeped. That is a problem, if you place a stop loss/win, after being hit, the price goes further, if not placing a stop loss, the price may go down and my position is in trouble.

EUR.USD right?
Ignoring the times (mine) where did you get stopped out?

Assuming you're talking about the moves down to 4805 a few hours back then there is nothing I see on that chart that isn't the normal back and forth motion of the markets. Said motion is natural and needed if the larger players are going to get filled (and any stops that get picked up in it are opportunistic rather than evidence of conspiracies).

Long now 4837 has the potential to be a cool trade (tight stops though).
Click to Enlarge

Name: eur.usd.jpg
Size: 148 KB

Green_David Nov 26, 2007 7:47am | Post# 27

EUR.USD right?
Ignoring the times (mine) where did you get stopped out?

Assuming you're talking about the moves down to 4805 a few hours back then there is nothing I see on that chart that isn't the normal back and forth motion of the markets. Said motion is natural and needed if the larger players are going to get filled (and any stops that get picked up in it are opportunistic rather than evidence of conspiracies).

Long now 4837 has the potential to be a cool trade (tight stops though).
You are right. My long position of E/U is stopped out with 20 pips of profit. There are too many false break-outs on 15M chart.

thanks.

fti Nov 26, 2007 9:28am | Post# 28

Hi All

@ Kiwi _trader,
Thank you for your respond.
Sorry that my reply is a bit late , that I had other engagements, and being old and slow on the key board have delayed the respond.

Before i try to throw some light on the points that you have put forth. Let me say that personally, having being a Technical Analyst professionally, I feel much sadden by some of the things I seen, and the directions that the pursuits of modern Technicians have taken. Nevertheless in the guise of advancement and development, things are bound to change, But when basic principals are sidelined , people like myself should come to the fore to direct the way back to basics, as best we can. This is esp so for the benefit of the newer generation of analyst, who may see things from a totally different perspective.

Please do not perceive that I insist that ,there are no other forms of technical analysis classes acceptable. The intent was to highlight that, a lot of the development have moved away from the core.
My comments, they truly represent my earnest opinions and it come from my heart without prejudice. And if you truly feel that I was too harsh , in my statements, then I seek your indulgence and empathy.

1. Leonardo did make public, his studies in his notations which much later, lead to the wide use of the fabonacci principles in Technical Analysis. It was his initial studies made on the the human anatomy, in how the human body extended itself and sub divided into systemic proportions that sparked later findings in the use of the fabonacci and string sequences in their class of studies. These studies may survive today by the newly coined names of "the Golden Sections".

2.Technical Analysis never did excluded the fundamentals from it core of analysis, but made the assumption that all fundamental factors that were market sensitive would have itself present within the data of the price movements, thereby facilitating a complete analysis of all relevant fundamentals. Basically the components of time, price and volume, as inputs for data massaging, At Advanced levels components of volatility and derivatives of the "greeks" were also used.

3.As you have so rightly pointed out, Gambling can be carried out based on a myriad of underlying components as a basis for risk taking. But TA becomes the common denominator.... when its the attitude in the pursuit of greed, rather than a respond to calculated risk, based on technical analysis expertise. eg "Black box" models, breaks and crosses trading.

4. Technical Analysis has its foundations in "after the fact" market data analysis and is used to detect systemic responses of markets. If these are not to be considered as tools as I have suggested, then maybe if you could highlight your suggestions, I would surely be all ears, to learn from you of what classifications they should come under.

The reason why i suggested that they are "statistical tables plotted in graphic form" is because when I was a student of technical analysis in the late 70s, we had to manually tables the necessary components in rows of formulated columns to facilitate manually calculations, to get the required statistics for plotting it on manually drawn charts. Some of us who were better at figures actually worked from memory of the stats, instead of chart plots. It was not until 1981 when I bought my 1st apple 2e computer that I had the computations done on a computer visicalc spreadsheets. I therefore find it difficult to comprehend your suggestion of the non existence of statistical data and tables.

I am extremely glad that, notwithstanding our differences of opinion on issues of basic Technical facts, that we can find synergy in the requirements of underlying attitude to methods, for successful trading.

Please do enquire again, where I have not clearly explained to your satisfaction. I enjoyed pleasant reminisces of the old days, in my jogging of my memory for answers to your enquires.

Thanks Again.

@ Green_David,

Thank You for your kind words.
You seem to be grappling with the market due to your technique being conservative with your Stops within sweep reach.
A remedy can be found in varying your, overnight sizes by taking some profits on your exposure, and using the acquired profits as a buffer, so that your term position may have more leeway to sustain market stop sweeps. Of course when you do this your "at risk" position size would be smaller.

Ponder on this and see if it may improve your position's whipsaw sustainability in the market.
You may remember that I do not advocate stop loss. But as this is a contentious issue that numerous other traders do not agree upon. I will leave that for further discussion when I get to that segment of the discussion. Your patience is appreciated.

regards

SunTrader Nov 26, 2007 9:38am | Post# 29

Anyone who believes the market is a battlefield or wild beast or the enemy or hates their broker who trades against them, or runs their stops....... has lost before they even begin.

leighsww Nov 26, 2007 1:04pm | Post# 30

Anyone who believes the market is a battlefield or wild beast or the enemy or hates their broker who trades against them, or runs their stops....... has lost before they even begin.
You have to remember, fti was a bank's dealer, traded strategic arbitrage, was a marketmaker in tier 1 Interbank Forex for 26 years, as well as held other senior positions of the sort in his career.

From his quote below ...

From my engagements in the markets as marketmaker, FX spot interbank, we actually capitalise on these "sitting duck levels" by sweeping for them, esp the stops zones. I will be discussing on this subject abit later when we come to it.
... he is not "speculating" on the stop sweeps (aka stop hunting), he is giving us valuable information on what the interbank dealer's actually do ... they stop sweep the "sitting duck levels."

When he says it's a battlefield, he is analogizing how his side of the fence looks at it, because the banks use strategic, almost militaristic lingo/plays to do their trading. This is how they (the banks) look at the market.

Did you read the PDF's that fti linked us to earlier in his Post #11?

Here's the link again from the Federal Reserve Bank of New York's website (read "Chapter 7: How Dealer's Conduct Foreign Exchange Operations") --> http://www.ny.frb.org/education/addpub/usfxm/

On Page 2 of that particular chapter's document, they talk about the trading rooms being the trenches where the battle is joined and that a winning strategy and a sound battle plan are essential, etc. etc.

For me, I would prefer to take what fti has presented and use it to my advantage in bringing my awareness of what the "big guys" do (in essence, knowing what the plays in the battlefields are) and stay clear of the dangerous battle zones' land mines, target areas, etc. where they may be looking to take me out, instead of viewing the situation as "I have lost before I have even begun."

We do not have to feel we have lost, but rather that we have obtained the map/game plan of the opponent. To me, that is more realistic and advantageous than to resign to the fact that we have already lost.

We can use the valuable info that fti is presenting here to help us strategically make better trades, to make more winning trades ... because to disregard his knowledge/experience of how the "big guys" do it, would be like throwing away the opponent's game plan map, and saying, "We don't need to know how they will be attacking us or the strategies they will be using ... we have optimism and hope on our side, and that's all we need."

Yes, it's GREAT to be optimistic and have a positive outlook on things, but it sure doesn't hurt to have your opponent's game plan on your side, as well, no?

Anyway, that's my opinion about what fti is sharing here and how I choose to look at what he is saying

Green_David Nov 26, 2007 1:24pm | Post# 31


@ Green_David,

Thank You for your kind words.
You seem to be grappling with the market due to your technique being conservative with your Stops within sweep reach.
A remedy can be found in varying your, overnight sizes by taking some profits on your exposure, and using the acquired profits as a buffer, so that your term position may have more leeway to sustain market stop sweeps. Of course when you do this your "at risk" position size would be smaller.

Ponder on this and see if it may improve your position's whipsaw sustainability in the market.
You may remember that I do not advocate stop loss. But as this is a contentious issue that numerous other traders do not agree upon. I will leave that for further discussion when I get to that segment of the discussion. Your patience is appreciated.

regards
Thank you for your advice. It is a good idea. Actually I did close some profitable positions to buffer the loss that may occur for the positions which I shall hold long.

It's my own problem, I haven't transfer my trading style from day-trading to long term trading.

In fact for this wave of E/U increase from 1.4520 to now 1.4950, I opened long position around 1.4570. Nice price, right? But I closed and opened several times since 13 Nov. till last week, actually I made nothing.

I really think it is right that buy-and-hold is a good operation.

Thank you. Yes, you are right, I need patience.

FXBaby Nov 26, 2007 1:55pm | Post# 32

Iam confuse again
 
Well trading market is based on probabilities (as i know). We follow technical indicator to judge a right place of trade(oversold/overbought). Fabonacci or other tool for exit signal and price action or other signal action for enter in a trade.
Many traders in forex trade only basis of history data(charting mathod). Some people looks MA crossover and some looks for fundamental news.

You want to say how we can trade in future using history data. Yes you are true.

Iam newbie on this forum. I have some funny questions. Please answer.
(1) Do banks take intrest in technical analysis ? If yes give me timeframe and technical analysis tools name.
(2) Or they believe in only fundamental analysis.


Iam using priceaction with BB and MACD. I just a child when i compair myself with u. Please reply what am i ask.Iam little confuse.
thanks.
Sorry for poor english. Iam not english.

fti Nov 26, 2007 8:48pm | Post# 33

Well trading market is based on probabilities (as i know). We follow technical indicator to judge a right place of trade(oversold/overbought). Fabonacci or other tool for exit signal and price action or other signal action for enter in a trade.
Many traders in forex trade only basis of history data(charting mathod). Some people looks MA crossover and some looks for fundamental news.

You want to say how we can trade in future using history data. Yes you are true.

Iam newbie on this forum. I have some funny questions. Please answer.
(1) Do banks take intrest in technical analysis ? If yes give me timeframe and technical analysis tools name.
(2) Or they believe in only fundamental analysis.


Iam using priceaction with BB and MACD. I just a child when i compair myself with u. Please reply what am i ask.Iam little confuse.
thanks.
Sorry for poor english. Iam not english.
---------
hi fxbaby,

There are many ways to trade, and for everyone the decision making process is different.
What you have discribed are very mechanical methodology.
It would be the way to go , if you were a machine.

Try to feel the market, ask yourself questions all the time.
You are not carzy if you ask the questions , only if you listen.

Look at the chart, ask yourself,
what didi the market do when it was last at this level, historically?
was this levels significant chart wise?
which direction is the market trending?
try to feel if its try to go up or down?

if you have determined the direction, its most likely to go.
if you use indicators, try to determine the nearest safe levels to sttempt entry,
try the super over bought or oversoldlevels.in you bolinger bands.
fabonnacci levels are supposed to show market at its best equilibrium,
when at the fabo levels, whatch the mkt, is it behaving steady?
MACD are just multiple averages and are lag indicator,
intrendy mkts they widen ,
in letagic mkts they close up,
incongestions they spagattie cross.
don't read too much into that.

after entry watch the mkts.
Is it doing what you thought it should be doing?
are you comfortable with the position, if yes then add to the position.
if not get out, find a different level. and do itagain. and again until you are satisfied with your position.

when you are riding pprofits, take some out at the oversold levels to reenter near the overbought levels , vice versa.
After a few weeks , you should have a better feel of the market, you are trading.

Don't watch too many pairs.
focus on majors,
GBP and EUR should move quite in syn. YEN should behave the reverse.
watch those intermarket relationships, if any is not behaving normally ,
then be aware that something is happening in the fundamental front.
try to find out if there;s any special reason from the news releases.

On the questions you asked

1.yes, most dealers have basic grounding in technical analysis, it differs from one to another.
Most dealers do not deal in time frames, we manage it mark to NOW,
if its going up forever, we'll keep turning long forever.

You must understand that unlike traders, the market keep making the dealers short of usd if usd keeps going up.
This is because customers will keep buying usd from them making them short,
so the dealer will have to go interbank and keep getting his dollars back to stay abreast of the markets.
For dealers, timeframe is of no consequence, it is constantly being managed.
Some dealers uses the averages, mostly just look at price levels.

There are special dealers in special Strategic Arbitrage & trading units that trades the markets like traders,
they manage exposures for the longer term.
Some of them are economist some are technical analyst.
at this section , some more advance instruments are managed, eg, OTC currency options and sythetics.

2.refer above

fxbaby, keeping up with the jones is a very unhealth attitute to have, be yourself.
If you think you are a child compared to me, you are right,
but then you have good health and you have youth, which I have not.

Don't worry about your english, I can understand what you said.
Inferiority complex is not the mark of a good trader,nether is arrogance,
however humility is.

Hope I helped.
I like your avatar.

regards

PS @ green_David refer email on advise.

fti Nov 26, 2007 10:52pm | Post# 34

Hi All,

A little info for those actively trading.
read
BOJ Governor Fukui Speaks
http://www.forexfactory.com/ read calendar
Fed activity sighted.
http://www.forexfactory.com/news.php?do=news&id=57753

looks like the BOJ and the Feds are getting ready to defend the usd, in any eventualities.
this funding exercises, are meant to give mkt lip service,so warning have been issued.
warning that you may see them in the mkts, if the usd drop gets out of control.
be careful, you may be walking into minefields.
looks like usd would still be soft, but watch out for the volitility.
could be a downhill rollercoaster ride for the greenbag.

who died , why's it so quite in the mkts?

regards

SunTrader Nov 26, 2007 11:16pm | Post# 35

Although it is trivial, note that it is Fibonacci and not Fabonacci (sounds like '60's teen idol).

Not a question of English in this case but of correct spelling even if it is only a nickname of Leonardo of Pisa aka Leonardo Pisano. And he is the one who is given credit for the use of these numbers today even if Da Vinci used it in his art work, most were not aware of the math involved.

fti Nov 26, 2007 11:35pm | Post# 36

Hi suntrader,

Thank you.
I stand corrected.

much obliged for your help.(sharp)

I seek your indulgence for being old, fat fingured, and slow typer with bad spelling.

Mkts extremely quite today?

regards

leighsww Nov 27, 2007 12:23am | Post# 37

You may remember that I do not advocate stop loss. But as this is a contentious issue that numerous other traders do not agree upon. I will leave that for further discussion when I get to that segment of the discussion. Your patience is appreciated.
I want to clarify something with others that might be important with understanding fti's methodology of not advocating stop losses (because this is the one thing that most will have a hard time agreeing with him on unless you understand and grasp where he's coming from) ...

If you read his two consecutive posts in this thread --> http://www.forexfactory.com/showthre...69#post1712969

... fti's method is that of a shorter-term trader. He once mentioned that he traded on "daylight" lines which I take to mean "intraday". Although they (bank dealers) at times do leave a trade overnight, from what I gather, "daylight" dealers are in and out of the trade the same day.

This quote of his says a lot ...

In term of Stops, I agree that its is a way of controlling negative exposure.
But this can only happen if a position was left unattended to.
All pro market participants, never leave positions open and unattended to.
How long would you leave you babies unattended to?
Unfortunately the FX markets do not sleep.
So if any trader left their positions unattended to , they may as well be gambling.
AND leaving positions for dealers to watch stops, is worst.
Might as well give bank robbers the keys to the vault.
His "non use of stop loss" is not without a strategy to help safeguard his risk, however. He also uses strategic game plans in which to rescue a trade in trouble, or to surrender (exit) the trade with the least amount of casualties. If he needs to leave a position overnight, he has positioned it with a strategy that puts it way outside the battle zone's vulnerable targets, thus his man left in battle most likely would never get hit in the time he has left his man unattended (although, when he was a dealer for the banks, the trades were always "on call", as seen in the below quote) ...

basically we do not carry mental stop-loss levels, in reality it is being managed around the clock on a "on call mode", standby mode, if you like. For banks, that does not operate a 24 hr crew, they pass "wake up call zones" to their active branches.

Regarding the placing of stop loss levels,there is no safe zones. It all depends on the market sentiment and how the dealers' blotters are behaving on that certain day. Be assured, that all good dealers knows where the sweeping zones are and we know that placing stop-loss away from such zones actually defeats the purpose of the stoploss order, except to protect from overloss situations for customers. This is because when a sweep zone is under attack, no one can tell how far the stops self-feeding will over-shoot, in terms of the volatility and also the resultant rest point, this always works against the stops. This is the nature of stop-loss orders.
If you are a trader who trades short-term, shorter-timeframes and uses tighter stops, then you truly need to read more carefully what fti is trying to say in regards to this, so that you do not put yourself in the line of fire with the "sitting ducks."

So, please, before you disagree and judge fti's non use of stop loss as irresponsible, think about this ... would the bank's dealers be trading $500mio and do so irresponsibly? They have no room for irresponsible trading behavior. They have too much at stake with the millions they are risking.

Anyway, when you understand more of fti's methodology, you will grasp what he is talking about more clearly.

I believe he wants to gradually introduce things here, so in time, I'm sure (I hope) he will discuss these things in more detail. I just felt I needed to say something, because I know he feels a little hesitant to disclose too much about his methodology if people will not be very receptive to it.

In the meantime, absorb everything that he has to say and apply whatever parts you can utilize to your advantage.

----------

With regards to the margin call auto liquidation , why would traders put stop loss orders for protection, when there is an auto machanism to protect them already? In effects, wouldn't the traders using stop loss orders be actually pointing a loaded gun at their own head? if the average extreme volitility of 25% up, is used for benchmarking, I would guesstimate that almost all accounts as you suggested, probably won't last a few months unless no leverage was used.
fti ... since I can't post in the "Trading Room," I wanted to address something you said in the above quote. The reason most traders use stop loss orders and do not wait for the margin call to take them out, is because we rather lose money slowly, little at a time, rather than blow our account all at once, lol :

In the same sense that you cannot get used to yet trading in the retail market, since you have been so used to dealing with other banks in the mios in your career days, the retail market trader needs that security blanklet of putting stop loss orders, especially for their overnight trades. It's more for the peace-of-mind when leaving the baby unattended. Most longer-term traders put their SL well out of reach of the stop sweepers, I'm sure (and if they don't, they will now, lol).

Please be patient with those of us who cannot yet trade like you. I can see your points are very valid, especially with what you know about stop sweeps and how you trade (your strategies, etc.). When you are ready to explain more, you may get more people seeing more clearly what you are saying, but for now, you need to have patience with understanding why we need to put stop loss orders, lol :

----------

I seek your indulgence for being old, fat fingured, and slow typer with bad spelling.
LOL, yeah, your fat fingers always spell things wrong, but heh, I spell a lot of things wrong too, so don't even worry about it, cuz we know what you're referring to. Besides, if you have to keep editing your posts due to typos, sheesh, you'd be editing them 20 times or more, haha :

fti Nov 27, 2007 12:50am | Post# 38

Hi leighsww,

Glad you're back.
I see that you've read the links,
did you get a chace to search out Paper Money?
iTs a very good read for understanding the mkts.

If you read the Feds info, you would basically understand how they think.
No one answer the questions, so I guess no one wants to go into market structure.

regards

leighsww Nov 27, 2007 1:01am | Post# 39

did you get a chace to search out Paper Money?
iTs a very good read for understanding the mkts.
No, not yet. Sheesh, I'm still reading the PDF links :. There's a lot there to consume!! Very interesting readings!!

No one answer the questions, so I guess no one wants to go into market structure.
What are you talking about? semar answered your question ...

I think it's better to continue here your post, otherway you'll end up with 15 threads that nobody can find )
... and Bunton is very interested in Market Structure, as well as probably a lot of other people ... so please continue!

fti Nov 27, 2007 1:16am | Post# 40

MARKET Structure
 
Hi All,
ok, leighsww, here goes

About market strucuture.
You see the brokers are not all bad people out to get everyone. They provide a service of creating a replica model of the interbank mkts for the consumption of the small traders at large.
Of course their motivation to do so is profits but nevertheless they provide a service.

At the very top of the battlefield command is the Feds. The are the owners of the market. Whatever you may trade its normmally against the USD. (even the crosses.) So in perspective you will always be walking into their radar.

They have this big chief, brainspan (used to be the cigar chewing...paul )who have a whole squad of ppl crunching numbers to determine their position and whether there're things they could do to improve their position.

then down the food chain there's the Other Central banks having their radar on their respective currencies.

The hands and legs of the feds are the CB dealers, who's resposibilities are to police the market place,
making sure that its behaving itself. Its chief responsibility is to acertain that there's no riots in the market.
So long as things are peaceful, they leave everybody alone to do their thing.

then just under them is the tier ! bank dealers. These dealers are normally marketmakers to the interbank mkt, and have very large daylight limits and risk parameters to work within. They are also the eyes for the CB dealers, as most large customers go thru them to deal. So they can see who's buying or selling dlrs.If there are irregularities where by some large customers comes into the mkts to buy or sell dlrs the CB dealers are put in the know and will be on standby to see if markets may be disturbed.

Then under teir 1 banks will be tier 2 banks, and tier 3 banks, they function as the lines of distribution. If as in the eg above, alarge corp comes selling dlr and the CB dealers do not intervene, then the tier ! banks will start selling the dollar down to tier 2 banks in smaller packages, and tier two banks will like wise start selling to tier 3 banks in smaller packages. In 20 to 30 mins that process who fizz out and most dealers would be short of dollars. to a certain extent.

Please be aware that I am talking of a one off scenerio, where there is only one customer in the whole wide world.

watch it the mkts moving


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