The Equilibrium, a key to success!

Whistleblower / MAD World


Hello dear subscribers,


With my last article that I posted on Sunday, I seem to have struck a nerve with some traders, which has caused them to react differently.

Which is stronger, market orders or limit orders?

First of all, I would like to emphasize that the vast majority of traders have reacted very positively to this contribution, I would like to thank you for this. But there were also clear hints that I had already revealed too many secrets, which would significantly reduce my market advantage and that I should therefore consider discontinuing this thread. Some others expected me to publish my complete filter setting in the form of templates to make it accessible to the people concerned. This prompted me to choose a heading that I have used in the past for a post. I recommend reading this post again to get a little closer to the big players.

Mad world

It's actually a crazy world, if someone posts on Forex Factory posts that are utter nonsense, the majority are expected to stop these posts so as not to misinform traders. When someone posts something that comes very close to a possible truth, there are also people who expect to stop it so that they don't have to give up a possible advantage.

I asked this writer to post his message to me on my blog. He wrote back to me that he would not do it because this blog would get even more attention and we would both get more damage from it. First of all, I can understand his approach, because if someone uses a similar advantage, he also worries that my publication will reduce his own advantage. While I have no doubt that the person who wrote to me followed a similar approach, I do not believe that they are able to get the same market overview that we are working with.

As far as I know, there are currently only one or two platforms on the market that are capable of realizing these representations. With over 1 million different filter setting options, it is also unlikely that someone will work with the same setting as me. First of all, I take his friendly request not to reveal too much as a compliment and would also like to thank the writer for this. He just meant it well and wanted to protect himself and me with it. But am I really a whistleblower and is my information so crucial to change markets?

First of all, let's take a closer look at what I have revealed in detail and what effects this could have on a market.

From the perspective of a forex or future trader who has never dealt with algorithms, this information may be new at first, but he cannot do anything with it. The reason is that the market is far more complicated than I presented in my posts. There are different data feeds, with different information that have to be intercepted in a certain way in software. Then the actual work of the different filter settings begins to identify the different algorithms. I not only work with filter settings provided by the software, but also use my own programmed filter settings. These own programmed settings are my personal trading advantage as they are tailored to my personal needs. I willnot publish this information and I will not sell it. I only earn my money from trading and use my creativity to decipher algorithms.

Another point that is very crucial is the complexity of the market. The way big players work means that I have to optimize and adjust my filter settings every day. My posts, which I posted a few days ago, are already a thing of the past for me, since my filter settings and my optimizations have been extremely changed again. We have to be aware that this market changes every day and those who don't adapt to these changes cannot be successful in this market.

Another point is very important, there is no successful system in this market and there will never be. A profitable success always depends on a single trader if he is able, in the complexity of the market, to filter the big player algorithms in such a way that he can gain a trading advantage from them. And that will never work by putting a template on the screen to be successful. Then a Formula 1 driver would also be able to become world champion the following year with the racing car setup of the last world champion. And that is precisely what does not work because the world champion has personally tailored his setup.

I started this blog because I write my own trader diary and generate new ideas for my personal setup. The second, crucial point is to find dealers who share the same level of knowledge. These are crucial points that help me personally. Why should I stop this thread and block my own development?

Of course, I reveal some things that the majority of traders may not yet know, but we should be aware that sooner or later this knowledge will reach retail traders anyway. There are already well-known traders who have worked with high-frequency traders or big players in the past and who unfortunately sell their knowledge at a high price today. I offer my knowledge for free, I don't want to be a trainer, I don't want to sell trading signals or EAs or any templates to identify algorithms.

My information can ensure that you already have 80% of the knowledge to be successful in this market. But you have to walk the last 20% of the way yourself. This 20% of knowledge is the exact breakdown of the algorithms that make a trader trade profitably. And this 20% is my personal market advantage that I would not sell for any money in the world. This is my personal racing car setup that is tailored to me. And that's the only key to success for me.

If you first deal with the 80% and familiarize yourself more with the matter, you will be able to create your own profitable setup that will give you an incomparable market advantage. But that's the hardest and most time-consuming job. I have already pointed out that anyone who develops a working lottery generator will always use it himself and never sell it. This lottery generator can be compared to the identification of the algorithms. The big problem is that the algorithms change daily and there will never be a sustainable, functioning lottery generator. So it's an ongoing development process. First of all, it is crucial to decode the basic algorithms and then to adapt them depending on the market development.

I do not need to tell you that there are insanely clever minds on the market, especially in the field of algorithm programming, who come up with new strategies every day and make them available to the big players. My job will be to follow these algorithms to decrypt them in a short time. This is a very demanding job that I see only as a challenge. Therefore, the information I posted last week is already a thing of the past.

The aim of a trader is to orientate his knowledge as closely as possible to the present. And that's the biggest challenge in these markets. We should be aware that the markets will change even faster in the future and the algorithms will adapt even faster to different market conditions. The big players are already developing self-learning algorithms that learn from their own mistakes in order to exploit the market even more efficiently. What I'm posting here is just the tip of the iceberg and it's not because I want to conceal it, it's because I don't know yet.

I will continue to share my knowledge with you, but everyone should be aware that my knowledge is always a little behind reality. The big players have a huge head start and whoever gets a little closer to this information automatically has an advantage over 90% of most traders. I would like to emphasize again that I do not believe that my knowledge is the decisive factor for successful trading. I have my own opinion, which I propagate as long as I can. There are certainly much more successful traders at Forex Factory that I really appreciate and each of these people has their own opinion that I absolutely respect. Perhaps it is possible for me to give a little help to one or the other trader, because many statements by these traders have also helped me. I would like to thank you for this.

I hope that I was able to make my point clear to you, wish you a successful trading week and continued success

Lovely wishes
Michael

The trading world has no secrets. Whatever you reveal or try today has already been dwelt with earlier. It is for doers. Non doers like fake Gurus, inexperienced Techies try to trap effortless success seekers.

Secrets

Hello Simnz,

I generally agree with you on the statement that whatever you reveal or try today has been discussed earlier.

But this automatically results in four assumptions.

1.Technology (quantum computers, self-learning algorithms) change the markets and ensure that the big players today work with changed strategies (own liquidity). This technology didn't exist before. How could you have spoken about something that was only developed today?

2. Revelations regularly come to light, let's just think of the market manipulations by large banks that were previously unknown to the general public.

3. There are trade secrets in the market, Deutsche Bank will not publish which algorithms they work with and which strategies they use to deceive retail traders. Even the employed traders at the big players have no idea how the algorithms work. Therefore, our knowledge of their strategy is based only on assumptions. A disclosure would present facts, but so far they are still pending.

4. If everything has already been discussed, the effort to run threads and blogs would be unnecessary.

One speaks of revelations when information is made available to a mass of people that they did not have before. Of course, some people have to talk about strategies and algorithms, otherwise you couldn't develop them. In this respect, I agree with you that everything has been discussed, but the majority of traders are not yet informed about it.

Exactly for this reason, an exchange in such forums as Forex Factory is important and also helps through your good work, that many traders, lose less money. In addition, there is very little information about how the big players work. However, since they have the greatest impact on the courses, our attention should focus on how they work.

An important point that you raised is the wrong gurus who make a lot of money with the inexperience of beginners. There should be a blacklist at Forex Factory listing these scammers to protect beginners from it. For a newcomer to trading, the first thing is to lose as little money as possible. The challenge of getting the right information is also very difficult at Forex Factory. Some traders sometimes work here with very high risks, which can quickly mean the end for a beginner. Even the recommendation to test all new strategies with a demo account is not a solution. Because with real money you always trade differently than with a demo account. I think we would all have been happy back then if we had a good foundation as a beginner. In the end, we only have the time, the longer you persevere and learn, the more likely you are to become a successful trader. But that's not a guarantee.

Thank you for your statements

best regards
Michael

[quote=Bionics;12890414]Whistleblower / MAD World Hello dear subscribers, With my last article that I posted on Sunday...

Hi Michael

It is really sad to hear/read that one/or more person writing to you about your work here, even in these days where are people really scared and facing such hard times in the whole world.
Is not new at least for me, see what the world has become and why, the same human the are capable to do horrible things is the same able to do the amazing things for others.

I am really happy to follow your/our(as you say) blog here at FF and congrats you for your really amazing work and i am sure that a lot of friends here stand the same.

I can only ask you that if you at some point here not be able to share your work/research at FF anymore please let me know where i can keep contact with you and follow your amazing hard work, I am sorry not be able as much as i would like to be here at FF, but at this time is not possible i hope soon be able to be more active here and collaborative, but has being hard to even keeping reading the topics here at FF.

I can only congratulation to you wish all the best and say that you can count with me and I am sure a lot of other friends here.

Stay Safe
Dcrs

Whistleblower / MAD World

[quote=Dcrs;12892340][quote=Bionics;12890414]Whistleblower / MAD World Hello dear subscribers, With my last article that I posted on Sunday... Hi Michael I am really happy to follow your/our(as you say) blog here at FF and congrats you for your really amazing work and i am sure that a lot of friends here stand the same.


Hello Dcrs,

First of all, thank you for your kind words. It's normal for people to react differently, and it often sounds dramatic at first.There are often translation problems too, so one see many things more dramatically than they actually are. For every trader who runs his own blog here, it is always a tightrope walk. You can't please everyone and you should always keep in mind that different mentalities meet here. Nevertheless, we should be grateful to all traders who make their knowledge available free of charge and unselfishly. I too could already benefit from many statements from different traders.

In my view there is no reason to stop or leave this blog. Forex Factory is a great platform for me to exchange ideas with great people I would never get to know in real life. In addition, this blog is an excellent opportunity for me to accelerate my own development. When I publish a certain topic, I have to deal with it in depth beforehand. Otherwise I would not do it with such intensity. In addition, I always try to present my findings very visually, which helps me to understand some things better. Although I don't claim to be right. Many statements are based only on my personal opinion and are not scientifically proven. In principle, recognized science is nothing more than what most people have agreed on. Until someday someone comes who knows better and then everyone involved has to agree again. I wrote something interesting about science 2 years ago:

Science and practice

The main sentence in this article:

Every person writes a doctoral thesis or a professorship in his life, not on paper but in his head, about things that he has been dealing with for many years. This experience is very special, it is his own science, the experience of his own life.

Every trader who has his own blog has this ability. And that is exactly our greatest opportunity to advance together in this market. Most of the discoveries and inventions were discovered by accident, but not by scientists, but by ordinary people like you and me. That should give us hope. After that, science only makes sure that very few people understand it.

I sincerely wish you that you will weather this extreme world crisis well.

best regards
Michael

Technology is the brain child of a human being. Who is powerful? The machine or the brain?

We are all products of different environments. I was raised in a community where nobody kept any secret or talked about it.
So I am free from any kind of delusions. This is a blessing.

I share whatever I know without bragging or expecting any compliments. It may be new interpretation or not I don't know.
Forums like FF are not being used by generous people like you.

It is being used for self-adulation, self-aggrandising rather than for self-learning or self-education.
Still it is forum where you can expect all kinds of reactions. Including scammers. Like in real life you come across all kind of people.
Greedy or lazy people are prone to get scammed at forum or even in real life.

People have short span of attention and so posts like yours or mine do not attract readers.
Yet you and me have to carry on sharing what we know even if one among 100,000 readers gets benefitted by it.
Forum organisers are doing good job of identifying scammers and in the process sometimes even innocent people get affected.

If Deutsche Bank had such good tools, why would they lose money and close down their retail forex platform years ago.
If Warren Buffet was so good with trading, why would he lose 50% of his portfolio?
Trading is full of uncertainties. Yet you can make good money out of it.
Life is a gamble. Invisible forces as well play part.

My whole idea of encouraging you was to keep sharing your new observations. But looks like you took it otherwise.

Misunderstandings

Hello simnz,

First of all, I really appreciate your opinion and I am pleased that successful traders like you support this blog, I would like to thank you for that. When two people speak to each other, one can express themselves incorrectly or another can misunderstand. Due to translation and different mentalities, it can sometimes happen that two people who have the same goal and think similarly talk past each other. It often happens to me in my own language. If I have expressed myself incorrectly, I am very sorry.

Error and misunderstanding are the scourges of humanity; but they are also powerful motors of evolution.

I wish you a successful trading week.

Lovely wishes
Michael

Identify iceberg orders



Hello dear subscribers,


In the last year I have dealt very intensively with the stock exchange data and specific filter settings of a corresponding software. In over 3000 hours I compared all possible chart settings with different filters. Some chart views have proven their worth, and I want to go into them today.

As we know, there is a long-term, medium-term and short-term price analysis that help us traders. In the past, I was very happy to use a H4 or D1 chart to get an overview of the long-term price trend. Since I usually work with key candles to identify a possible turnaround, it usually worked well, but in many cases I was extremely wrong. The main reason for this is the current market situation. In order for the big players to work efficiently in this market, the retail traders must always be exactly in the opposite position of the big players. As soon as a large number of retail traders act in the same direction as the big players, they are forced to react.

A nice example was created on February 20, 2019. The big players had already collected a large number of limit sell orders to push the price into the gap that was still open at the time. However, the majority of retail traders also assumed this and positioned themselves short. That's why the big players sold their short positions to retail traders at short notice, built up ASK positions at the same time and then pushed the price up sharply. Here you can read the article again:

Strong Buy Limits on Thursday

At the time, I could have sworn the price would go lower to close the open gap, but the big players used February 20 to switch positions. For me this is a crucial point why a long-term price forecast can never work. While many retail traders are looking for the least resistance, the big players do the opposite. You are looking for the path of greatest resistance, because the more retail traders are short, the more an upward movement is worthwhile in order to obtain the necessary liquidity. And since you can't determine from the outset how retail traders will position themselves during the day, a long-term price movement for me is a forecast with too much uncertainty.

The long-term course analysis can be compared, for example, with a map of Germany. I compare the medium-term course analysis with a navigation device and the short-term course analysis is while driving, the current view through the windshield. Since the long-term course analysis brings too much uncertainty, I would like to concentrate exclusively on the navigation device (medium-term price analysis) and the view through the windshield (short-term price analysis) in order to efficiently achieve my goal. I have now sorted my most efficient chart views according to this.

Medium-term course analysis
In addition to the open interest and the cumulative delta, a special footprint chart that focuses on the limit order and a limit delta chart that we have spoken about a few times help me.

Short-term price analysis
The respective strength of the different market orders and limit orders quickly show a trader the current market situation. I have already written about this in detail:

Act in the eye of the tornado

The headmap is a quick way to identify big player algorithms, and you also get specific information about what is happening in the current market. Here you can find the article:

Identification of the big player algorithms

The fastest price changes are only possible in the DOM and with a time and sales list. So I focus almost exclusively on these two elements. On April 19, 2020, I showed you specifically how the big players withdraw their limit orders in order to move the price extremely in one direction with a small number of market orders. Here you can find the article:

Which is stronger, market orders or limit orders?

This is the well-known spoofing, which you should definitely take a closer look at to identify short-term price changes. I would like to show you a specific example that I also deposited with a video.



In this example we consider a small trend change (12 pip) after a stronger uptrend of 30 pip. In the video we see the movements that took place within the yellow rectangle. The price movements were not too strong at the time because initially a larger equilibrium was formed for the next 2 hours.



As I have already shown a few times, the market sell orders (point A) run into the limit buy orders (point B). Behind the limit buy orders are the invisible iceberg oders (point C), which are added or subtracted from the limit buy orders as required. The market buy orders (point D) run into the limit sell orders (point E). Behind the limit sell orders are the invisible iceberg orders (point F), which are added or subtracted from the limit sell orders as required. For this I use a spoofing display from the DOM, which shows me the accumulated and current spoofing. Spoofing is all about how many limit orders have been added or subtracted in the waiting position, in the DOM. Special algorithms are used to facilitate identification.



Now let's start with the video sequence just before the course went down. In the M1 Forex display (Point A), it initially looks as if the price continues to go up. We can see that stronger positions were added in the area of limit buy orders (point B), while positions were subtracted in the area of limit sell orders (point C). This information initially indicates an upward movement. This is contradicted by the strength of the limit sell orders (point D), which is significantly higher than the strength of the limit buy orders (point E). At the same time, we recognize that the strength of the market sell orders (point F) is significantly greater than the strength of the market buy orders (point G). Overall, there was a short upward movement, but this was intercepted by the stronger limit sell orders. This clearly speaks for a downward movement.



Now the course begins to run downwards (Point A). We see that strong sell limit orders were added in spoofing (point B), while limit buy orders were withdrawn (point C). The limit sell orders (point D) and the market sell orders (point F) are significantly stronger. than the Limit Buy Orders (Point E) and Market Buy Orders (Point G). This clearly speaks for a further downward movement.



At Point A we see that the course is trying to go up. However, spoofing points C and B speak against it. The limit sell orders (point D) are much too strong and there are no current market buy folders. Although these could come into the market at any time, the weakness of the limit buy orders speaks against the fact that further market buy orders come into the market. The strength of the market sell orders (point F) is significantly greater than the strength of the market buy orders (point G). That speaks for a further downward movement.



We now see the reaction to our previous analysis. We recognize, that further limit sell orders are added (point C), while at point B more limit buy orders are deducted. The Limit Sell Orders (Point D) and Market Sell Orders (Point F) are significantly stronger than the Limit Buy Orders (Point E) and Market Buy Orders (Point G). That speaks for a further downward movement.



Point D and F is still stronger than Point E and G. In this example, we now recognize two decisive factors. The limit buy orders (point E) are getting stronger. Spoofing in the area of limit sell orders is decreasing (point C) and at the same time the reduction in limit buy orders (point B) has become smaller. Since we are close to a key candle, one could expect a trend change.



The price has now bottomed out. The market sell orders (point F) are even stronger than the market buy orders (point G), but with spoofing we can see what the big players are up to. At Point C we see that limit sell orders are already being deleted as more and more limit buy orders are added. Since our key candle has been reached, the current situation for a stronger upward movement. In slide number 1 you can see how the course developed afterwards.

First watch the video with this information and pay attention to the individual things that I have drawn attention to.




Conclusion:


The fastest course information can only be obtained from the DOM and the time and sales list. This information is available in stock market data. The main thing here is how to configure and display the individual filter settings. Of course, a prognosticated course of the course is only possible from a series of different information. To do this, you have to be able to absorb and implement different information at the same time. I am aware that this presentation is very complicated to grasp, since you have to consider many factors at the same time. As we already know, the market is anything but easy, but from my point of view, these modules are best suited to accurately grasp the current situation.

The illustration shown here is over a week old and has already changed completely on my screen. A racing car setup has to be changed regularly to achieve even faster lap times. As a scalper, the short-term movements are particularly interesting to trade in the equilibrium. However, this procedure can also be used to handle larger movements. The decisive advantage is that this approach can be used to identify very good entries and exits with very small stops. The representation I am showing is far from the end goal, because the actual work is only now beginning. The goal is to optimize the filter setting with my own programs so that one can distinguish between major trend changes and pullbacks. It will definitely take a few more years, but we get a little bit further every day.

I wish you a successful trading day

best regards
Michael

While the formulas below offer a simple definition for icebergs, the most important characteristics is actually the gradual refreshing or stacking of the limit liquidity, never showing the full size of the intended position . Many believe it is this specific behavior that is associated with the building of a new position as opposed to exiting of a old position, which is also normally done via limit orders.

Bullish Iceberg:
Bid Volume > (10 * Average Bid depth) and Bull candle close

Bearish Iceberg:
Ask Volume > (10 * Average Ask depth) and Bear candle close


Note: some would consider the above a simple absorption and reserve the term iceberg for a significantly larger event 20X - 50X the average liquidity.

Work on the stock exchange at the weekend!


Hello Nik-Nyc,

Thank you for your information, I absolutely agree that adding or subtracting limit orders is not the same as building positions, because you cannot identify how many limit orders were actually executed. If you compare the market orders that were actually executed with the spoofing, you can see that the number of spoofing is significantly larger.



If there is a massive addition of limit sell orders at a price level, one could assume a possible defense of this price level. Unfortunately, spoofing is often used to create an incorrect supply and demand ratio in the market to deceive traders. If, for example, a price rises sharply, the trader suddenly sees an above-average limit sell order in the DOM. Many now believe that the course is turning at this point. The price actually stopped there and went down a few ticks. Now other short traders were hoping for a stronger downward movement and at the same time some long traders got out. Then the big player pushed the price high and used the stops of the short traders to push the price higher. If there are such strong limit sell orders in the market and they absorb so little ask at the same time, you should always be careful. Since a big player can work with iceberg orders that absorb Ask unnoticed, he will rarely come out of cover to tell the market what he is up to. But many traders always believe what they see.

As I wrote in my last video article, the identification of limit orders including iceberg orders is a special challenge that will take some time.

Identify iceberg orders

By the way, I also have a little tip for all subscribers. The DOM and the time and sales list only work in the current stock market. Although I can call up the time and sales list retrospectively for certain periods, I then lack the DOM and spoofing. During the week, I look for distinctive points during the day that I record with a screen recorder. As a rule, the recording time is approximately one hour and requires a storage space of 5 GB at 4K. I usually record 2-3 videos, like in my last post. Then at the weekend I have enough time to analyze certain situations carefully and, if necessary, to stop or start again. This gives an enormous insight into the depth of the market and on the weekend I have enough time to analyze these striking points. I use ScreenVideo 2020, a free full version that you can download. The program is very compact, easy to use and very efficient. However, this only applies to Germany, in other countries there are certainly very good free alternatives.

This video analysis on the weekend has many advantages. During the course of the day, so much different information comes in within a short time that you cannot process all, at the same time. All decisive chart templates are stored in the video and can then be analyzed in peace. This has often helped me to better understand certain situations. Of course you can also record your own trade in order to analyze it later. There are no limits to creativity here.

Education is what is left when we forget what we have learned.

I wish you a great weekend.

best regards
Michael

Hi Michael,

Thanks for your reply.

The point i was trying to make is that the classic definition of an iceberg is: a massive absorption at a single price level that occurs through constantly refreshing liquidity as opposed to large resting liquidity.

You video shows a nice absorption sequence followed by sell market orders to drive the market lower. A classic play, but from what i could tell there wasn't an iceberg present.

In regards to resting liquidity, it is certainly true that important information can be learnt through its analysis. My suggestion is to view the limits at or near the inside price differently from liquidity further away. Remember, only the resting orders at/near the inside price are in immediate danger of getting filled, therefore "playing games" here can be dangerous, even for the bigger players.

Furthermore, while i certainly do not want to discourage you from the further study of limits/spoofing/pulling/stacking, i will mention that the most important data to study and understand is the executed transactions (not talking market orders). Executed orders obviously represent real money and they are therefore more indicative of the true state of the market. Luckily, there are no games in executed orders, once and order is matched and transacted its record is forever present in history.

I look forward to your continued posts. Have a great weekend.

N.

20% of the total volume are iceberg orders



Hello Nik,

An iceberg order is a limited buy or sell order on a stock exchange where the actual volume is not visible in the open order book, but only a small fraction of it. In addition to the total number of pieces, the peak number of pieces is defined for the iceberg order, which corresponds to the visible part of the order. After they have been fulfilled, another order with the same peak volume automatically moves in until the entire order volume has been fulfilled. This means that an iceberg order is only effective at one price level. The CME only supports two types of iceberg orders: native and synthetic.

Native iceberg orders are managed by the exchange itself. All new tranches are treated as modifications of the first order, so that the original order number is retained throughout the term of the iceberg order.

Synthetic iceberg orders are submitted by independent software providers whose infrastructure is physically separate from the exchange. These software providers split the original iceberg order, submit new tranches and track their execution. These tranches are indistinguishable from the usual limit orders of other participants.

Recognizing native iceberg orders is much easier because the order number only changes when the iceberg order has been fully processed. The big players work exclusively with synthetic iceberg orders in the stock market, which makes identification much more difficult.

A very complex analysis was carried out 8 months ago in the S&P 500 to identify iceberg orders and investigate them further. The algorithms used for this achieved an accuracy of 68%.

Result: Around 20% of the total trading volume is accounted for by iceberg orders, which can rise to 52% depending on the market situation and market environment. Over 50% of synthetic iceberg orders were canceled before they were fully executed. The synthetic iceberg orders use an average of 4 -5 tranches with an average peak of 4-5 lots. The average total volume of complete synthetic iceberg orders is between 10 and 20 lots. It is interesting to mention that the order sizes are often a multiple of 5, such as B. 10, 15 or 20.

The iceberg orders you mentioned, with a massive absorption, we find increasingly in the stock markets, they also occur in the EURUSD, but primarily through the provision of own volume. This is because in most cases the big players will only find enough volume at one price level if they are triggered stops from traders and some institutional traders, since the big players work without stops. However, stops have the peculiarity of being at different price levels, which is why the big players are forced to occupy multiple price levels with their iceberg orders in order to absorb the decisive volume of the stops. The result of many analysts who have dealt intensively with iceberg orders in recent years shows that we are dealing almost exclusively with smaller iceberg orders of 10-20 lots. That also coincides with our experience. Smaller iceberg orders are permanently abandoned in the EURUSD to hide the real interest in certain price levels in the DOM. So we have to assume that a number of iceberg orders were used in my video.

Identify iceberg orders

At the moment we have about 35 lot limit orders on one price level in the DOM, before the corona crisis we were around 70 lot per price level. This initially shows that there are significantly fewer big players on the market, which is understandable due to the quarantine regulations. The volume, on the other hand, remained the same, which resulted in higher volatility, since the limit orders could be broken faster. In this case in particular, the big players have to resort to iceberg orders to hide their interest in certain price levels.

Visible limit orders and invisible iceberg orders can only take up as much volume as the market currently provides. I see that immediately in the DOM, the time and sales list and with my liquidity profile. I absolutely agree that orders executed represent the true market situation, but at this moment that is already the past. No future forecasts can be derived from this.

Limit orders are added and deleted permanently, whereby either limit sell orders are deleted and limit buy orders are added, or limit sell orders are added and limit buy orders are deleted. In connection with the strength of the market orders and limit orders, this is the fastest way for me as a scalper to predict future movements with a very high degree of probability. We know that at CME, cumulative limit orders in the queue are given priority. This leads to the conclusion that identified, cumulative limit orders are always as close as possible to price execution. Spoofing is therefore a reliable way of optimally identifying future price defenses.

We recognize the tremendous power that the limit orders have in the market, which is why we will deal with them even more intensively over the next few months. The reason why so many traders lose is due to the ignorance of these things. To achieve a goal, we need to be able to identify the path. Together we can achieve that faster.

I wish you a nice weekend.

best regards
Michael

Hi Michael,

Thanks for your reply.

It appears we have a small semantics issue regarding the word "iceberg". No need to continue debating it as firstly this is your thread, and secondly, what really matters is the results of our testing & trading that help untangle the complex nature of orderflow, providing us clarity, which we can then add or apply to our edge.


While obviously executed orders are not the entire picture of the current market situation, i do believe they hold tremendous value, including forward looking value. Two simple assumptions we can make about some larger players are 1) before moving the market they prefer to be holding a sizeable portfolio of orders in that future direction, 2) Because of the size of their holdings they tend to operate on wider ranges in order to be able to wind and unwind their positions efficiently. Therefore, IMHO, properly parsing the executed order data, and identifying 1 & 2, can offer amazing insight into future forecast of price movement. Obviously this is not the only piece of the puzzle, but it's a valuable one.


There is no doubt value in the proper interpretation of the pulling and stacking of limits on both sides of the market in conjunction with the market orders firing on either side. In terms of pinpointing an exact ideal entry price/time there is no better data to use. Clear patterns exist in this two-way dance, often times with a very objectively identifiable final pirouette directly before the price movement. However, in my experience, the final trigger for entering a trade is less indicative of the total outcome of the trade than the analysis that lead up to that trade. Perhaps this difference exist when looking at something longer than a scalp, i cannot be sure.


I look forward to your continued research. Enjoy your Sunday.

N.

Spoofing algorithms



Hello dear subscribers,

As we already know, long-term price forecasts are not reliable and certainly cannot be read from candles. Since the big players only need the volume of retail traders and institutional traders, a current price trend is always dependent on their trading behavior. While the big players focus more on limit orders, the majority of retail traders work more with market orders. So my priority is more on limit orders.

In the DOM we can see ten levels of limit sell orders and limit buy orders. In earlier stock market times, these limit levels were a very reliable indicator of possible trend reversals, but the more market participants took advantage of this situation, the more difficult it became for the big players. In the nineties, the high-frequency traders then demonstrated how you can make a lot of money with deception. The big players then adopted some tricks from these high-frequency traders and use these tricks today to give the market a wrong picture of supply and demand.

We often experience in the market that there is an above-average number of lots at a certain limit level, which suggests to the market that the price will not be passed there. First the course runs to this zone and cannot break through it. Since the large order is not withdrawn, the market takes it seriously and now more short traders come into the market, which push the price down further. Potential long traders will exit this zone because they fear the price will go down. First the stops of the remaining long traders are triggered and the price accelerates downwards. The big player uses these stops to get out of the dollar that he has taken up with his large limit sell order. In addition, he can also sell his position to the other short traders who are now entering the market. With an invisible iceberg order, the big player stops the price down and pushes the price back up. Now the stops of the short traders are triggered and further accelerate the price. We had a similar situation this morning in EURUSD, which we will take a closer look at shortly.

First of all, this means that the visible limit orders in the DOM are not a reliable indicator in order to be able to do concrete trading transactions, since we never know whether a large visible limit order in the market is just a fake or real. Another problem is the iceberg orders, which are hidden behind the limit orders. Of course you can identify an iceberg order, but only after it has been executed. My approach, which I have been following for a few weeks, is to identify this iceberg order beforehand. In advance, that's basically possible, but the challenge is that we can only see ten price levels in the limit area. The big players are smart enough to set up their iceberg orders beforehand, so that there are certain difficulties with my idea. But there are also solutions for this.



This morning, from 9:00 a.m. to 10:24 a.m. CET, the price has already gone up to Point A, 39 pip. Now he came to a resistance zone, which I had already drawn in the heat map. From this resistance zone, the price then went up 8 pip and there was a pullback from 14 pip to point B. After that, the price went up another 41 pip to point C until just before 12:00 CET. The video includes the course of the course in the yellow square. Let’s take a closer look at that first.



In the heat map I marked the resistance zone at point A, where the course had some difficulties getting through. At Point B, we see different filter settings in spoofing in the DOM that took place in the limit buy orders. Point C shows spoofing in the area of limit sell orders. Point D shows the visible limit sell orders and Point E shows the visible limit buy orders in the DOM.

Limit orders are deleted or added during spoofing, a special algorithm makes these changes visible. I first used the different filter settings to filter out the retail traders and smaller institutional traders. In the DOM we see that the limit orders are constantly changing. This change is also indicated by spoofing, sometimes orders are subtracted, other times orders are added. It becomes interesting for me when spoofing changes in a certain filter mode without changing the limit orders in the DOM. This allows Eisberg orders to be identified before they become active.

Another crucial point is that the big players can stop a price with the limit orders. However, they are also able to accelerate a course with it. I have already written a detailed article, I will post the link here again.

Which is stronger, market orders or limit orders?

Using algorithms, big players are able to completely remove sell limit orders from the market and at the same time push the price up with market buy orders. With this, you manage to move the market significantly with few market buy orders. This process is a permanent interplay and the algorithms are programmed exactly on it. Since up to 50% of the total volume with iceberg orders is used in the EURUSD, this process is very easy to identify with my presentation. With this, I can almost exactly determine trend reversals. Since I am often only a few seconds in the market as a scalper, it is therefore not critical that the trend reversal is sustainable. It is much more important to precisely identify the change in trend.

At Point F we see that additional orders have been added in the Sell Limit area, which made it difficult to raise the price. At Point G we see the reason for this, the price was absorbed by the limit sell orders, possibly to realize a partial exit from the euro. At Point H we see that the strength of Limit Sell Orders decreases, while the strength of Limit Buy Orders increases (Point I).



The course has now reached the resistance zone already described. The limit sell orders are still strong (point B) the limit buy orders are gaining strength (point C). At Point D we see that a lot of limit buy orders were added in the area of spoofing, while massive orders were withdrawn on the limit sell side (Point E). Point F shows an increase in executed market buy orders. In the overview at Point G we see that more limit buy orders have been added and limit sell orders have been deducted at the same time.



The price has now broken through the resistance zone (point A). The market buy orders and the limit buy orders are significantly stronger than the opposite side (point B). At Point C someone starts buying the dollar or getting out of the euro. In spoofing, on the limit buy side, there are additional strong limit buy orders (point D). At Point E we clearly see that massive limit sell orders are being withdrawn. In addition, large market buy orders are now coming into the market, which were primarily triggered by stops (point F). At Point G you can see a nice overview in the spoofing.



The price went up a little bit and we now see at Point A that an above-average limit sell order appears in the DOM. However, at this moment we do not know whether it is a fake. At Point B we see that larger orders were added at several limit sell levels. So the larger limit sell orders don't seem to be a fake. The large addition of limit buy orders initially shows that the price is still held in this zone and that someone is willing to buy a larger number of ask. This gives me the hint that the upcoming turnaround could be a possible pullback. At Point D, we can assume that someone bought the dollar. The strength in the different orders is balanced, this is a small equilibrium. At Point F we can clearly see the little equilibrium again. The overall situation is rather bullish, with the upcoming pullback being bearish, of course.



The course is now down (point A). At point B we see that the strength in the sell area predominates. Point C shows that a large number of orders have been added to the limit sell page and at Point D we can see the sell market orders that have been executed. Point E shows the strongest level, in the Limit Buy area and first we want to check whether it is a fake. At Point F we see that in the area of limit buy orders, strong orders have been added at several price levels. These are iceberg orders. Later the course ran exactly at this point, again 41 pip up. Point G shows the stronger addition of limits sell orders. This shows how exactly you can identify specific turnarounds in advance. However, this always depends on different information, the data shown here is only a small part of my overall overview.



Here is the video, take a look at it in peace and compare it with my information. There are still many interesting aspects to be seen that I could not go into in detail.



At 14:00 CET the price then reached its high and went down. At 15:06 CET at Point A there were two strong limit buy orders in the DOM and I wanted to find out if this was a fake zone. At point B we see that strong limit sell orders have been added. The next point is very interesting. We recognize that more limit buy orders have been added to the large limit buy orders, but at the price levels below, massive limit buy orders have been subtracted. Point D shows the situation again in the overview and at Point E we can see how strong the sell limit orders were. Then the price went up a bit again. As he come back, I start a short trade in the strong buying zone. That was 20 pip in half an hour. One could clearly identify the optimal exit with spoofing.

Even if you identify an iceberg order, you still cannot draw a concrete conclusion from it. The following example is intended to support this statement. After an accumulation phase, the price is pushed up and suddenly comes into a price zone, where it is braked abruptly. We recognize that strong market buy orders are absorbed by limit sell orders. Many will now think that the price is now going down, but that is a mistake. If a big player with limit sell orders absorbs different market buy orders, there could be two reasons. He either gets out of the euro or buys the dollar. However, if it is a partial exit from the euro, there is a very high probability that the price will continue to rise as the big player still holds a euro position.

In our last slide we saw that a big player was ready to place iceberg orders on several levels. With limit buy orders you can only take market sell orders. Since I could not see any major exit from the euro before, the probability is very high that the price could then move up. And that's exactly how it happened.

Of course, trading only consists of assumptions that every trader receives based on their individual information. The more specific and precise this information is, the more precisely a trade can be carried out. When I started the spoofing project, I had no idea how accurate this information actually is. However, the filter settings still need to be significantly improved to optimize the flow of information. If I compare this procedure with a MACD or RSI strategy, my procedure is much more complicated but more precise and efficient. Whenever a simple strategy is published at Forex Factory, it attracts many traders because they hope for a quick success. If someone are ready to learn a completely new strategy, it is obvious that the old strategy was not sustainable.. This is not dramatic since one always want to improve, but a dealer should always strive to achieve an individual market advantage away from the crowd.

In addition, you should know that the more participants follow a similar strategy, the smaller the chances of winning. Unfortunately, the laws of nature forbid that you can achieve a high yield with little effort. A quick success is rarely sustainable, and to achieve sustainable success I have to be willing to invest a lot of time. We should always think about it, if the market is really that simple, wouldn't all big players work with a simple MACD, RSI or moving average strategy and save billions of dollars for their analysts and traders at the same time?

These complicated diagrams and views I taught myself in my own study. I started doing it 1 year ago. If you really want that, you will reached it. Before that, I only traded the small movements in the Equilibrium and was lucky that the big players only collected there. However, I was unable to identify any concrete trend reversals, nor did I know exactly what was happening inside the candle. What I built my trade on was the price, but the price is only the result of Bid and Ask. So I only acted with the effect but never knew the cause. This is exactly the crucial point that distinguishes a successful trader from others. Of course, I still haven't found my concrete way with the stock market data, after a year I'm still at the beginning, but my return has doubled. That gives hope for a very promising future. But the time required for this is very high, this willingness one must bring.

I wish you a very successful trading week

Lovely wishes
Michael

Hi Michael,

Good analysis. Is the above analysis on EURUSD spot forex or EUR/6E futures ? If it is spot forex how come you have 10-level DOM data ?

Limit order book in forex


Hello pooh123,

Welcome to our blog and thank you for your kind words. The data comes from the Euro FX 6E, the analysis relates to the Forex market, since both prices behave in parallel. There is an anonymized, central limit order book in Forex, which is maintained by EBS (Electronic Broking Services), unfortunately it is not available to the market. You can find more information about this here:

Forex versus future

In the Forex market we only receive price and time data, the volume data provided are calculated from ticks and have nothing to do with bid and ask. Therefore there is no possibility in the Forex market for a closer look at the candle. I only trade in the forex market and use the data from the stock market to make my trading decisions in forex. There are some crucial things to consider, which I describe in detail in this blog. If you are interested in this information, I recommend that you first work through this blog. It is structured chronologically and sorted according to different projects. In addition, you will find some self-developed indicators for MT4, a lot of interesting information about money management, trading in equilibrium and tips for everyday trading in forex. You may find a few ideas that will take you further.

All the best for the future

best regards
Michael

The interplay of algo


Hello dear subscribers,


For hundreds of years, traders have been trying to identify patterns in prices or candles in order to derive them. All attempts to date have failed and there is no decisive starting point that is worth pursuing. The most common indicator used is without a doubt the moving average. Basically, a moving average is an instrument to identify market trends, but it is a lagging indicator. He can only display a trend after it has developed and he also shows a trend that has long since ended. This automatically brings delayed market insights. The price is the result of volume and liquidity, this information is not available in Forex. Basically, all indicators are lagging behind the price, so you can not expect an advantage for a better trading decision.

The probability of winning is 1:19 in the Forex market and 1: 6 in the Future market. This means that you get a 3 times better chance of winning with stock market data. This also results in a different distribution of profits. In the Future Market, 1 winner receives the losses of 6 losers, while in the Forex Market the winner receives the losses of the 19 losers. In addition, the forex market is over 100 times larger than the future market. The Future Market offers the greatest chance of winning, the Forex Market the best profit distribution. This results in a clear result: You should trade in the Forex market, but only on the basis of the future data. I have already described this procedure in great detail in this blog.

There are 5 times as many price movements in the Forex market, because one pip (10 pipettes) corresponds to 2 ticks in the future market. Therefore, the Forex market is much more sensitive to identify the key candle for a possible Stophunting with the help of my Bionic candle and the calculation of the ZigZag movements. In addition, the currency strength in Forex is a very efficient tool, but it should be adjusted to get quick information. We do not receive this important information in the stock market.

In the future market, the heat map, the DoM, the time and sales list, the spread tape, the limit market profile and a specially filtered limit footprint chart are among my favorites. With the appropriate settings and filtering, these views enable very quick market information to identify trend reversals properly.

Exchanges have existed for over 600 years and during this period many millions of traders have searched for concrete model processes. Even with the start of computer technology, innumerable programs and indicators were developed to research these patterns. So far, no special samples have been identified in the price that were able to provide a reliable price forecast. This fact alone prompted me to look for other ways that have not yet been explored.

That was the reason why I took a closer look at the algorithms of the big players. So far we have been able to identify some patterns that have always been similar, but we still need a lot of time to get closer to these algorithms. The results so far are much more efficient than working with indicators in the Forex market. The big players determine the market, use the limit orders for their entries and exits and need market orders to push the market in their desired direction. In order to fill their limit orders, they are always looking for the volume that can be most efficiently found in the stops of retail traders. With the help of the iceberg orders, the big players are able to add further limit orders unnoticed and thus collect or submit ask and bid. Interestingly, the average of iceberg orders is between 10 to 20 lots and not, as we previously thought, with an extremely high number of lots. Of course, there are also extreme absorptions, but they only come about because a big player makes volume available to himself. The iceberg orders were examined very extensively by different analysts, and it turned out that iceberg orders accounted for 20-50% of the total turnover. Many small iceberg orders at different price levels make it difficult to precisely identify absorption and continue to help big players dominate the market undetected.

Using algorithms, big players are able to completely remove sell limit orders from the market and at the same time push the price up with market buy orders. With this, you manage to move the market significantly with few market buy orders. This process is a permanent interplay and the algorithms are programmed exactly on it. Only now do I realize how extremely complex these algorithms are programmed. This process is very efficient and I would like to use a very simple example to illustrate this procedure.



For the example described here, we assume that an accumulation of a big player has taken place at a lower price level than 1.10050, where he has collected a larger number of ask. After that, the price went up.

Point A
We are now at price level 1.10050 and the big player wants to push the price higher. While the price moved up from 1.09995, the big player algorithms ensured that the price levels 1.10050 to 1.10100 were filled with iceberg orders. As we know, larger limit orders are treated preferentially at CME. This ensures that the big player is the first in the queue at these levels. Of course, it cannot be prevented that there are still a few smaller orders from other market participants in between. The algorithms ensure that there are a number of different limit orders in the DoM, in our case between 25 and 55 lots. This is inconspicuous and nobody is suspicious. Behind it are larger iceberg orders, which can be added at any time. Now you have to ask yourself why the big player places a higher number of sell limit orders at precisely these price levels if he wants to push the price higher. Let's take a closer look at that.

Point B
The price is still at level 1.10050 and initially the big player hedges the price down by placing two larger iceberg orders at price levels 1.10045 and 1.10040. If a larger participant enters the market at this moment and invests a large number of market sell orders, the iceberg orders would absorb these market orders. Let us once again state that the big player has collected a large number of ask at a lower price level and would like to push the price higher in order to make it profitable. Therefore, the absorption of further questions at these two price levels would not be a disadvantage.

Point C
The big player suspects the first decisive stops of short traders from price level 1.10090. The algorithms ensure that all limit orders are deleted first.

Point D
At the same time, the algorithms now ensure that market buy orders are invested in order to overcome the remaining limit sell orders. The big player is thus able to go through a total of 9 price levels with just 38 lots. If these limit sell orders had not previously been placed in the market, he would have needed around 380 lots to go through these 9 price levels.

Point E
Now the first short trader stops are triggered and a chain reaction begins. Each stop triggers another stop and the price moves up. As a result of this strong upward price movement, further buyers are entering the market who are hoping for a further upward movement. The more long traders come into the market, in an upward movement, the less profitable it becomes for the big player. These long traders must therefore be switched off regularly.

Point F
The big player has already assigned price sell levels 1,10090 - 1,10040 with limit sell orders (iceberg orders). The big player absorbs the stops of the short traders (buy market orders) that are now triggered with his limit sell orders. We can now see that hardly stops were triggered at price level 1.10125 and the big player no longer suspects any more stops at the higher price levels. Starting at price level 1.10130, there are larger iceberg orders that are intended to prevent an upward price trend. The big player has now absorbed around 250 Lot Market Buy orders.

Point G
Here we see the price hedge of the big player again to hedge the ramping down price. In addition, he needs these iceberg orders to delete them at the crucial moment, when he wants to push the course down again.

Point H
The larger iceberg orders at levels 1.10130 and 1.10135 initially remain in the market in order to prevent a further price trend. The market is now realizing that a push up is impossible and the number of buyers is drastically reduced.

Point I
Now the big player wants to push the price down again to switch off the long traders and at the same time sell off his 250 lots of dollars at a lower price level. The quickest way to do this is to trigger the long trader stops.

Point J
First, he deletes his limit buy orders previously placed on the market so that he can push the price down with just a few market sell orders.

Point K
After the algorithms delete limit buy orders, they start investing some market sell orders. The big player suspects that the long trader's first stops should be at price level 1,10075. The price is now going down.

Point L
The first stops are triggered at price level 1,10075 and a chain reaction begins again. We now see large iceberg orders on the Limit Buy page that absorb these stops. First the big player gets out of the dollar with 250 lots, the absorption afterwards ensures a purchase of the euro. Thus, the big player can buy the euro again at a lower price level. At price level 1,10030, stronger iceberg orders are on the market again, which prevent a further drop in prices. All other market sell orders are now absorbed at this level. Then the price is pushed up again and the stops of the short traders help the big player to get the price up faster.

This described process of a pullback, within an upward movement, is of course much faster in reality and the algorithms are coordinated with one another in a thousandth of a second. At the same time, they coordinated to market buy / market sell orders and limit sell orders / limit buy orders. In principle, the process is always the same and a crucial point is that retail traders always place their stop above the last high or below the last low. The algorithms also use Fibonacci Zones, Moving Average, RSI and MACD to identify stops, as many retail traders use them. Of course, the big players have been able to gain a lot of experience in the past few decades in order to identify exactly large stop zones.

The procedure I have described is actually much more complicated and much more precisely coordinated. This is only a trading algorithm. There are also many other algorithms that, for example, search the market for hidden stops and report the results to the main computer. Pinging and snipping are used. The different approaches were taken over in part by the high-frequency traders. You can find more information here:

MAD World

Of course, artificial resistance zones are also created in the course of the price in order to entice retail traders to make investments that they would not otherwise have made. The obvious resistance zones that we find in the market did not come about by accident, but were deliberately initiated by the big players in order to make it easier to stop out the retail traders.

With this approach alone, it should be clear to everyone at the latest that news or meetings do not move the course or influence it dramatically. News and meetings are used by the big players to steer their project in the decisive direction, as there is a higher volatility at this time. However, an accumulation or distribution must have taken place beforehand, where the big player has collected a higher number of ask or bid. If no accumulation or distribution has taken place before, the price in an equilibrium only moves back and forth very much. It is therefore important to monitor these collection campaigns with the Limit Profile.

As we know, the big players are informed about everything before the news is published. They know the market like no one else and can therefore best estimate how a market will react to this information. Accumulation and distribution phases are then coordinated beforehand. The price trend is in principle only a reaction of the big players to the current situation in the market. If the big players have collected bids in a distribution phase and the majority of retail traders are also short-oriented, the big players will reorient themselves in the short term. They will sell their collected bid to retail traders and drive the price up. This is exactly what happened in EURUSD on February 19 and 20.

Volume always attracts liquidity!

The big players collect the individual stops of the retail traders with their limit orders. It is a permanent process in the market. If a price moves higher, we can assume that the majority of retail traders are short and vice versa. For this reason, a long-term price forecast is not possible because we never know from the outset how the majority of traders orient themselves in the long term. The price is only the result of volume and liquidity. The volume (stops of retail traders) automatically attracts liquidity. It is therefore absolutely logical and understandable that there can be no clear patterns within the price. Likewise, there are no clear patterns in the area of bid and ask. But there are clear patterns in the area of algorithms that are responsible for the correspondence between liquidity and volume. This is exactly why my views are geared towards examining this correspondence of the algorithms in more detail.



It is not only important to be as close to the price as possible, you also have to be able to look deeper into the price. Bid and ask do not move the market, it is the limit orders and especially the iceberg orders that are responsible for absorption at different price levels. First of all, it is important to identify the basic algorithms in order to recognize how the big players work in detail. The next step is to program your own algorithms to decrypt the big player algorithms. The big player algorithms change because they are optimized or adapted by the programmers, but the basic sequence and procedure is always similar. Within these basic sequences there are clearly recognizable patterns that are always similar, but due to the market conditions, pick up or release a different number of lots. From this identification, derivations can be created that show us exactly how the big players proceed. The software I work with offers excellent information, but they do not show the decisive limit orders or iceberg orders that are responsible for the market movement. But the data is there for it, you just have to decrypt it correctly and display it accordingly in the DoM or the time and sales list.

We will program these algorithms independently of the platform manufacturer, to be independent. There are already a number of ideas that are sure to kick off a larger project. When I started trading, I never thought it would be so complicated in the background. But we must never forget that the big players win $ 400 million every day in the Forex market. This figure alone should prove that an EMA, RSI or MACD is not able to trade this market profitably. We smaller retail traders don't have the money to move the market, but we have our creativity to develop algorithms that help us better understand the big player algorithms. There is no one in the market that follows this approach, even the high-frequency traders operate on a completely different principle and are not active in the forex market due to the restrictions. A market advantage is only an advantage if no other market participant takes this path. However, I am convinced that this project will take a few more years. If I consider that my returns have already doubled due to the stock market data, I have no problem extending this project to years, provided there is a regular improvement in the area of returns.

Our future approach brings another big advantage. The strategies of the big players change at regular intervals and it sometimes takes years to decode these strategies exactly. If we can decipher the strategies of the big players, we will be able to identify their changes much faster and adapt our market behavior accordingly. A good example of this is the company's own liquidity, which the big players are increasingly making available to shorten the tedious process of collecting in the equilibrium. To discover that, we didn't have to program complicated algorithms. Of course, I cannot know today whether the strategy I have planned will be successful in the long term, but I know that many strategies, countless traders, have so far not led to a concrete result. For me, that's a good reason not to follow these strategies. This increases the likelihood of becoming successful with our approach. We will never reach the holy grail with it either, but that has never been the goal. It is enough if you can follow the decisive movement sequences of the big players thanks to the specially programmed algorithms. And since this is a strategy that few trading participants will use, the big player will not even notice it. We focus exclusively on the traces that the big players leave us. And luckily, the tracks are so big that the big players will never be able to cover their tracks. That alone is an excellent perspective for the future.

I wish you a successful weekend and a great start to trading on Monday.

best regards
Michael

The Forex volume is wrong



Hello dear subscribers,


In recent years there have been more and more trainers and companies who have jumped on the “Volume Trader” train to make a lot of money. Then programmers came onto the market that enabled footprint charts and volume profiles in the forex market. Young traders who have not worked with charts like this before were impressed and saw this as an opportunity to improve their trading opportunities. When I first saw a footprint chart and a volume profile, I also thought that these representations are a guarantee of success. I can assure you that the opposite is true, because the volume is of no use to us in the Forex market. There is only the possibility for institutional traders to get a correct volume.

If you add up the number of lots, ask and bid, the volume results. The volume is the total turnover of market buy orders and market sell orders. With the volume, we can see at which price levels there has been a major battle between buyers and sellers, that's all. We cannot tell from the volume whether the buyer or seller side was stronger. For this you have to be able to distinguish between bid and ask. There is no bid and ask depicted in the Forex market, so we should ask ourselves the question of how to generate volume at all? The volume in the forex market is generated via the ticks. Let's first look at what a tick is exactly.

In principle, a tick is a trading transaction, whereby it does not matter whether only 1 lot or 100 lots are traded in this trading transaction. To make ticks visible, there is the possibility to work with a tick chart. A tickchart is a time-independent chart, in which you determine after how many trades a period has ended. A new candle is drawn in a 64 tick chart after 64 trades. This has the advantage that more candles are drawn at high volatility and fewer candles are created at lower volatility. A disadvantage, candle formations are not identifiable, ou shouldn't work with that anyway. It is striking that the volume in a tick chart is approximately the same, making it more difficult to analyze volume spikes. Here you can find a detailed article about the calculation of the Forex volume:

Volume in forex



Here we see a tick chart in the Euro FX from the future market. The yellow line denotes 1 lot within a trade. The average number of trades is larger than one lot, but the chart was created 1.5 hours after the London Open. As a rule, the number of lots within a trade is significantly lower.



At Point A we see a 10,000 tick chart, which means that a new candle is automatically formed after 10,000 trades. Ask and bid is invested within the individual candles, which then leads to the total volume (point B). At point C, I divided the volume by the number of ticks. This results in the diagram at Point D. Basically, the number of lots must always be equal to or greater than the trading transactions. Because a trade always contains at least one lot. In our calculation, a trade has an average of 1.46 lots, although no general derivation can be drawn from it, since the values fluctuate massively.



Now we compare the volume Forex / Future, each in an H4 chart. First of all, there are certain deviations in the H4 candles, but this has to do with the respective stock exchange opening times. Overall, it is striking that the volume in the forex chart is not comparable to the volume in the future chart. So there seems to be a different calculation. We now want to take a closer look at this.



First, let's refer to the numbers that we know are correct.

Point A
In Forex EURUSD we know that about $ 2 trillion in sales are traded each day. However, these values fluctuate. One lot is worth $ 100,000, which means around 20 million lots are traded per day. In recent years, an average of 92,160 ticks per day have been achieved in EURUSD. According to my broker's information, these values relate exclusively to the sales of this broker. Overall, the result would mean that an average of 217 lots would be traded per trade. That is a value that I strongly doubt. Therefore, we want to take a closer look at these ticks in the Forex market in order to find the most realistic value possible.

Point B
In the future market, the values are clear, from the stock market data. An average of $ 18 billion is traded per day, which is the average lots (144,000) multiplied by the lot value of $ 125,000. 98,630 ticks have been reached on average per day in recent years. This means that a trade deal averaged 1.46 lots. This number is logical and understandable for me.

Point C
The forex market is approximately 100 times larger than the future market, with daily fluctuations being completely normal. In this context, the ratio of lots per day is understandable in both markets. At first glance, the lot / tick / pip ratio is understandable, which, however, is not correct in my opinion. I came to the conclusion that the number of ticks is similar in both markets. In my view, the number in the Forex market cannot be correct, for the following reasons. The Forex market is much more volatile, because the smallest movement is expected in pipettes . If the price changes by one pip, the price has to go through ten different levels. In the future market, the price has to go through only two stages at the same time. This fact automatically means that a significantly higher number of ticks would have to be generated in the forex market than in the future market.



Yesterday evening I called up an M1 chart in the futures and forex markets to compare the movements. The volatility was very low at that point. Let's watch the video first




In 3 minutes there were a total of six movements in the future chart and over 70 movements in the forex chart. This means that with low volatility, the price in the Forex market has moved 12 times more often than the Future market. A higher volatility could cause significantly larger movement differences.



If we calculated the 12 times higher movement in the Forex market (Point A) for the whole day, we would get a result of 1,183,560 ticks (Point B). That would mean that in the Forex market, an average of almost 17 lots would come into the market per trade. Even if we calculated in the image below with a movement that was twice as high (point C), the average per trade would still be over 8 lots (point D).



In mid-March I shared an article where I once calculated a profit and loss calculation of the different market participants in the Forex. Here you can find the article:

Who is our biggest competitor in trading?

According to this, around 100 big players, 10,000 institutional traders and around 1 million retail traders could trade in EURUSD per day. We want to calculate with these numbers first.



First of all, I reduced the number of market participants in the future market by 100 times compared to the forex market. As a result, a big player would trade 150,000 lots a day, an institutional trader would buy 201 lots, and a retail trader would trade an average of one lot. (Point A&B). Now I have tried to apply the same ratio in the Forex market. (Point C&D).



The result from Point C & D would be very interesting, because 13,700,000 ticks per day would have to be achieved in order to represent the same proportionality as in the future market. It is difficult to assess whether this number is actually correct. The fact is, however, that the volume values displayed in the MT4 are definitely wrong. The big players are able to provide volume data from the Forex market through the company CLS, exclusively for institutional traders. However, this volume of data is only updated every hour. You can find the corresponding contribution here:

Real volume in forex

Companies keep appearing in the market that offer synthetic volumes in the Forex market to interested parties. This volume has nothing to do with the actual volume in the Forex market. Even if the companies obtained their data from the Big Players, they would only be able to update the volume data once an hour. In addition, the big players prohibit users from making this volume data available to other trading participants, because they want to earn money from their volume data. Even an aggregation of the future data with the forex data would not be a solution, since on the one hand the forex market is 100 times larger and the two markets are linked by fluctuating swaps. Even if a company succeeded in generating an approximation of realistic volume data from the Forex market, it would have no advantage at all.



The volume is nothing more than a summary of ask and bid. However, no bid and ask is passed on in the forex market, but this is a crucial point that a trader needs. The market sell orders (bid) run in the limit buy orders and the market buy orders (ask) run in the limit sell orders. This means that ask and bid do not fight against each other and are not able to influence each other. The decisive factor is whether liquidity lets these market orders through or absorbs and stops them. As we know, the big players primarily work with liquidity. Therefore, liquidity is responsible for the actual market movement. You can find the corresponding article here:

Which is stronger, market orders or limit orders?

So we have to be able to see to what extent the limit orders absorb or let through the market orders. But exactly this information is definitely not available in the Forex market. No matter how we turn it, the volume information in the Forex market will always be wrong, unless we get it directly from the big players. The only solution is to work with stock market data, since all information is displayed correctly there. Thus, incorrect volume data from the Forex is not a help, but rather a guarantee of losing a lot of money.

In August of last year, I provided a volume indicator that was calculated from the price and was very close to the stock market volume. But even being close to it is in principle too imprecise, especially in the stock exchange area, and this is crucial. Here you can find a detailed article:

Amazing discovery in volume

In the Forex market we do not receive a specific volume (number of lots) or a specific number of trades. Therefore there can be no DoM and no time & sales list. It is also impossible to display a footprint chart, a volume profile, deleted lots in the DoM or an imbalance in the bid and ask. To do this, the largest banks would have to be ready to publish their data. And that is exactly what will never happen in the Forex market. And yet there are companies that offer footprint charts or volume profiles for the Forex market. You should always be careful when a provider offers a free forex product that normally costs money. Either he wants to develop his product with the help of the users so that he can sell it later, or he draws the commercial data of the free users from his product and markets it. Unfortunately nothing is free of costs in this world, even death costs us the life.

Data that is not available in the forex market cannot be displayed. Nevertheless, some people claim that it is still possible. The advantage of these people is that nobody can prove their lies. For this we only need common sense.

Let's say there is someone who would be able to create a correct footprint chart or volume profile for the Forex market. How long would it take for the biggest big players to fight back and take action? The biggest banks get 60% of their bank profits from the Forex market, I don't think they would put up with that. Since no big player has so far defended itself, no one seems to found the correct data. Accordingly, all footprint charts or volume profiles from the Forex market are wrong. And that will not change in the future. Whoever trades on these charts will lose.

In the stock market I would focus exclusively on the heat map, the DoM and the times and sales list and in the forex market on the currency strength and the price to identify the key candle in the Stophunting. We have to combine this data to optimize our chances of winning. The holy grail exists, but the secret is in our head but we have to find that first.

Wish you a successful trading week

best regards
Micha

Nice article Bionics,
I have read your posts carefully, they never cease to amaze me. Speaking of currency strength specifically, could you please expand the information a little more, I think I suppose that it does not refer to the most common currency strength meters

Currency strength in forex

Hello jusiur,

I'm happy if this blog helps you and you get important information from it. Indeed, currency strength is a special representation in forex that is not available in this way in the future market. In order to display the currency strength display in the future market, synthetic currency pairs would first have to be generated in order to generate the individual strength of individual currencies. In terms of programming, this would be possible, but the artificially created currency pairs lead to data problems that would slow down a stock exchange platform considerably. This could be solved with special servers, but the main problem lies in the trading hours. If a particular currency was not yet opened, the entire display would return incorrect values. Trading times are significantly longer in the Forex market and almost every possible currency pair exists.

The Forex market has a lot of advantages over the future market, in addition to the currency strength, the ATR values and price movements have a clear advantage. If the price in the future market moves 2 ticks, there are 10 movements in the forex market. A more accurate ATR can be determined more precisely from 10 data than from 2 data. The same applies to the strength values that I generate with a ZigZag indicator. Pullbacks can be quickly determined from this. The forex market is the leading wolf, with EURUSD alone producing almost 3 times as much daily turnover as added together the 10 largest exchanges in the world. Nevertheless, there is a crucial disadvantage in Forex, volume, liquidity, the DoM and the time and sales list are not published.

And that's exactly what we need the stock market data for. Each market has its advantages and disadvantages, the art is to use a combination of both data to reduce the disadvantages and increase the advantages. I use the data from the future and forex market at the same time to generate the fastest information for me. In principle, the information can be compared with a speedometer. Some speedometers only start to display at 100 miles, which means that if the market is slow, the speedometer does not show this. Every forex trader is interested in finding a speedometer that shows the speed from 1 mile. With the stock exchange data I am already able to measure speeds from 0.1 miles, so the focus of my work was on the identification of algorithms. Nevertheless, there are important data in the forex market that are not available in the future market.

I will gladly comply with your request and in the next 10 days will create a detailed report about the forex charts I use. As usual, I will post my used indicators with a template and video. However, I ask for your understanding that this may take a few more days because I still have some projects to complete.

I wish you a successful trading week

Lovely wishes
Micha