Taken just now - one of those brave or stupid moments but it’s only demo
So the hypotheses I am proposing is that G’s method “target levels” might include the diagonals of Laurentiu Damir’s value areas - and not purely horizontal levels This example appears to have both...
please be be advised this chart is done with all the precision of iPhone in a coffee shop
@Nih98 also has a nice dashboard -- search for his profile and thread.
I've made and shared another sort of pointer. I've clarified how it functions. I've given several instances of how it might be joined with different markers. The activity is left for you to decide (an) if the pointer gives any esteem and, assuming this is the case (b) how best to utilize it in your exchanging. What's more, on the off chance that you discover a mix that functions admirably for you, at that point, ideally, you would impart it to the remainder of us.
This post is referring back to your Hedging question and how it can make you money (which I assume was what you really wanted to know) , so with you being a coder and a person that comes across has being methodical/analytical, I thought I would share this with you and the members of FF that might be able to code or have an EA coded (it would be an EA that you could add to your portfolio)
Back in 2014 I developed an EA with lots of variable parameters especially how it managed trades once they were opened and it had the ability to Hedge.
So I accepted the fact that the market was totally random and EA's needed to follow PA which is not easy, because trying to find the perfect entry within your strategy is very difficult and SL's regardless of where you place them will get hit, so R:R is very important when using SL's
However when I looked at Hedging, the only real killer is the spread (so code in a spread filter and also you do not need a News filter if you have a spread filter) and due to the natural flow of money the following results are achieved.
1) One trade closes taking full TP while the other takes small profit (best possible result adds to the account)
2) One trade closes taking full TP while other takes a small loss (again adds to the account)
3) Both trades take a small profit (covers the cost of opening the two Hedge trades)
4) One trade hits full SL and other trade makes small profit. (takes money from the account)
You very seldom get two losing trades, this can happen, but is mainly caused by an event where you get TP's being ignored due to slippage or spikes,
So the EA makes around 40,000 trades per year per currency pair and it is constantly trading, there is no real strategy other than excepting the market in random, so every time an Hedge trade is placed one of the above results will happen. To make the above happen you just need to apply the correct Money Management to both trades, and your target (in terms of pips) need to be small, because as soon as one trade closes another opens. This is because the market is totally random so why try and guess its direction if you can just open an Hedge trade and let the EA take care of the rest.
I know you live in the US where Hedging is not allowed but I know there are ways around this like trading through an offshore entity or some overseas relatives account.
To me this concept of 'fair value' is reminiscent of an equilibrium. In science and engineering the term equilibrium is often used to describe a situation where a system returns to some optimal state after being perturbed. As an example, take body temperature -- 98.6 F (37 C) is optimal. Our body temperature fluctuates in response to being stressed, but it always returns to an equilibrium. The same with forex, as shown by Laurentiu Damir's diagonals and TMS bands. In the case of forex, I imagine fair value refers to the true ratio of the base and quote currencies in a currency pair that does not include any MM manipulation -- hence the return to the center TMA band.
I like your introduction of the term "buy / sell fests". The TOPS and BOTTOMS target levels that @George recommended we draw are an attempt to show the artificial support and resistance levels the MM creates to lure traders. They aren't real target levels in the sense that they reveal where the MM really wants the price to go. Rather, TOPS and BOTTOMS are target levels the MM later intends to take-out in order to close out trades and make available more currency units. So, in that sense the horizontal TOPS / BOTTOMS and diagonal target levels are zones I wish to stay away from. These are the "buy / sell fests" that are artificially created to generate liquidity. Some experienced traders can trade these areas successfully, I can not (yet). Since LD's diagonals are associated with areas where most of the buy / sell fest is occurring and which I intend to avoid, then LD's diagonals hold less interest for me.
I'll continue my thoughts shortly in another follow-up post...
We also need to watch out for false breakout from these zones.
So, analyzing Georges posts in terms of "MM showing its hand", a certain set of conditions must be met - from what I have been able to pick up (by no means complete):
1. Price must break out of a 'Herd Area' (price consolidation area) to take out accumulated stop orders
2. This means when price is breaking upwards, MM is selling (to the herd) at inflated prices into a bunch of stop buy orders and vice versa
3. from 2 above, after MM has sold at these very attractive prices, the natural intent would be to drive the price down in order to buy back at low-low prices and maximize profit (and vice versa)
4. Price interaction with MMdetetective and Liquidity Gap indicators along with TMA bands and confirmed by some filters should tell us when the critical mass is reached for the MM to start heading in the other direction to take profit on amassed sells/ buys and load up again for the reverse trip
1) TMA bands with settings of 60/120 and 6 & 8 Multipliers on M15, H1, and H4 timeframes
2) SMA 200
3) SMAs 20 and 7
4) Levels marked by higher lows (when price is stepping up) and lower highs when price is stepping down
5) Though George doesn't specifically mention liquidity gaps in his posts, it seems to 'fit in' nicely into the counter trend trading method and could serve as additional confirmation of the critical mass point
However, its not only the retail traders that use stop losses.
I have personally only ever traded counter trend and without stop loss. But in early days, I used to be curious as to how the 'big boys' trade - do they use stop orders or stop losses, do they ever take a loss, etc - these questions used to intrigue me. So I set about building contacts and talking to active traders from major brokerage firms, hedge funds, and banks who run forex trading desks. What came out surprised me - everyone I talked to said that they do use stop loss levels, though most did not trade breakouts. Some brokers even said that they square their positions at the end of their trading session (go flat) whether at profit or loss.
All this would add to some % of the 5% retail traders who do use stop loss levels or stop orders as entry points
Didn't you watch the video I posted awhile back by G. Edwards Griffin titled "The Creature From Jekyll Island" about the creation of the US Federal Reserve Bank?
Somewhere along the way "herd" got misinterpreted to refer to lowly, retail traders. But it is much bigger than that --commercial and institutional traders fall for many of the same manipulations as we do.
Dude -- you have this habit of taking everything so literally. Who the hell cares who exactly the "herd" is -- should I send you a list of names? Reference to the "herd" simply means any entity that is not the MM. As for "dumb money" -- this is the first time anyone has used that expression on this thread. "Dumb money" is your creation -- a consequence of taking everything literally. Even though I've never used it, your brain has you thinking that I have.
The MM does not have some skyscraper in Brussels with its initials emblazoned on a logo at the top of the building. We've been through this a few times before -- target levels occur at very precise levels -- by deduction, this suggests it is the work of an algorithm -- by deduction, this suggests there must be a MM. If this explanation offends your brain, then you've been following this thread much too long.
I never used the word "conspiracy" or said the purpose is to trick all those thousands of institutional traders -- that is your brain manipulating my words so you could later mock them.
What I did say is the purpose is to generate liquidity so that the system doesn't freeze-up and become paralyzed. In forex some entities will benefit more than others -- they have more information and more resources. So what? Is that really news to you?
I've reached the point where I no longer worry about good guys and bad guys -- it's a waste of time, serves no purpose (except as a distraction), and probably is wrong. I figure it's a good thing that each day there is sufficient liquidity that allows me to trade. If there weren't then I would have to move on to my next hobby -- playing professional basketball. Yes -- I'm at a disadvantage compared to other members of the herd, but I've developed an edge and now I'm looking to improve it.
From more simple point of view, in general there's 2 type of 'transaction' in every levels of world financial food chain;
1. The 'speculative' transactions with the main purpose to get 'gain' in value,
2. The 'immediate' transactions with the main purpose to fulfill immediate 'needs'.
Retail traders as tier 1 in the lowest floor of financial food chain work in point 1, with very limited information.
the 2nd tier; brokerages, hedge funds, pension funds, insurances, etc, get better information like local DOM/Orders book (Depth Of Market).
the 3rd tier; Liquidity providers, multinational banks, stock exchanges, etc get more better and wider information, centralized DOM for stocks/equities/futures, and regional DOM for spot and commodities, they have access to inter banks market.
the 4th tier; Central Banks, World Bank, IMF, BIS ( Bank for International Settlements) get real time worldwide data access for their specific fields.
the 5th tier; Big One Eye In The Sky ("shadow commander' who originally create Bretton Woods Agreement) get all real time data available in the world, with the main job 'balancing' the powers.
All of them, work to make this financial world 'grow' bigger and faster with 'mass psychological manipulated/speculative' ways (in positive tone).
In the other side, 'immediate' transactions on daily basis mostly also 'retail' transaction, but millions daily small transactions around the world will become billions in value. Let say you are USA Tourist, pay your Lunch with CC in Bangkok Local Restaurant, this 'immediate' transaction use foreign exchange electronically to convert from THB (Thailand Bath) to USD 'at that approval second, without waiting for 'better' Bath price. Multinational company like 'Toyota' will pay world wide level taxes according to each countries tax rules not base on 'trend line' chart, but base on each country tax date line, and that will always involving 'immediate' foreign exchange transactions. Also learn about Option Expiry that, if big stacked enough in same time and date will make 'liquidity gap'.
Maybe right, maybe wrong, but the most important thing, how we could make money from all of this.. and be happy with that of course.
It's been a pleasant surprise to me how this thread has progressed. When I first created it I had no particular goal in mind other than to share an indicator. @George had frozen his site and I thought the indicator would save people some time creating all those TOP and BOTTOM target level lines. I probably also wanted to keep alive the notion of MM psychology and price manipulation.
I've learned a ton from y'all and I'm looking forward to learning more. And, of course, it goes without saying I enjoy the interaction-- even though my remarks are often sarcastic.
In this post I wanted to summarize where I think we are and also the direction I would like to head.
Where we are -- or, more accurately, where I am:
1. Prices are manipulated -- probably for the purpose of generating liquidity. If it weren't for liquidity there would be no forex trading.
2. My MMDetective and @SwingMan's smFractalLevels indicators can be used to draw TOPS and BOTTOMS lines. In @George's thread these were drawn by hand. @George referred to these lines as "target levels".
3. The purpose of these target levels is to lure traders into buying, selling and moving their stop losses. The reason this MM psychology works is because traders at all levels have been taught and trained to view these lines in terms of support and resistance. In other words, the MM creates an illusion it is safe to trade because there is a "safety net".
4. At some point, when enough stop losses have accumulated, the MM generates a spike in price. The result is all the accumulated stop losses get taken out and trades are closed.
5. The net result of closing trades is to free-up units of currency, creating liquidity for the next round of trading.
6. If units of currency were not constantly being freed-up, the entire foreign exchange system would freeze and come to a standstill.
7. If there is insufficient liquidity then prices would be the same from day-to-day. The only way to profit in forex is vertical price movements.
8. Even though I doubt the MM's goal is to make the world a better place, the fact it manipulates prices to keep currencies liquid probably benefits us, as well.
9. A few posts back I mentioned that while rearranging my charts, experimenting with different combinations of indicators, something dawned on me. We
all want to trade, right? So I'm looking for setups that will help me decide whether to enter a BUY or SELL order. But with all these target levels (TOPS and BOTTOMS, gaps, etc.) I have a hard time deciding (a) whether or not to even open a position, and (b) if I were to open a position, then which direction. But then @imeandmyself reminded me of the importance of waiting for the MM to "show its hand". So, now I'm beginning to break price charts into two types of zones -- zones where the MM is playing its manipulation game to shake some units free, and zones where the MM has shown its hand (and where it's best to trade). So, two zones:
Zone #1: buy / sell / stoploss fest
Zone #2: MM Show Hand
10. When I now look at a price chart in terms of these two zones, it becomes much simpler to analyze -- since I can ignore 90% of the chart (where the buy / sell / stoploss fest occurs).
11. I'm embarrassed to admit I've stopped using the MMDetective indicator (for now) because the target levels it creates relate to the Zone #1. I mean, it is interesting to watch how the MM manipulation unfolds, but since I'm restricting my trading to Zone #2, then I don't know how to make use of those target levels when trading.
Where we go from here:
1. Above is a screen shot of my current chart. Please do not take it too seriously -- it's just an example. Your's will (and should) look differently. I like @Nih98's tools and, so, I started with his template and then customized it to better suit my experimentation. The main differences are I've substituted the
MMLiquidityGap indicator for smFractalLevles. Also, I like using Heiken Ashi for momentum (and trend).
2. Near the middle of the chart you can see the bullish spike -- this is where the MM showed its hand (i.e. Zone #2)
3. This is important -- a consequence of using a spike to close trades and free currency units is that a liquidity gap is formed. In other words, the side effect of such a rapid price change is that it leaves behind a lot of unfilled orders -- which we have been referring to as a liquidity gap. I'm not sure this is intentional. It could be that the spike is the best way for the MM to free-up currency units -- even at the cost of creating a liquidity gap. You can then see that over time the MM revisits the liquidity gap and eventually fills it -- precisely.
4. Zone #2 is where I would like to trade since the MM has shown its hand, but I'm not sure how best to trade it. I'm pretty sure the price will eventually dip downward to fill the liquidity gap, but I'm not sure exactly when to pull the SELL trigger. Do I "basket trade" and open several SELL positions? Do I use a stop loss?
5. And when should I exit a trade? In the above image, hindsight suggests to exit when the gap has been fully filled. But that is not always the case -- sometimes the MM makes multiple stabs at filling a gap. Also, I don't like continuously watching the screen -- so, I'm fond of using TakeProfit. My TakeProfit is usually very conservative, so I end up leaving lots of pips on the table. But at least I only need to press the order button once and then I can walk away.
So, going forward, I'm wondering if we could move on to focusing on Zone #2 (MM Show Hand) and experimenting with how best to trade it. And, of course, I continuously have my eye on whether something is codable and could be incorporated into an existing indicator or used to create a new indicator.
@Nih98 -- no one writes posts like you. The information and insight you share is unmatched here at FF. @Nih98 -- as always, indebted for your wise words. Thank you.
© Forex Factory