The Equilibrium, a key to success!

Hi Micha

I agree with you that passive limit orders move the market and I also agree the Algo is selective in which limit orders it chooses to open.
For example if the market is rising and hits a deep pool of liquidity and plans a bearish move, if you place a a limit Sell order in the area of thin liquidity, perhaps say at the top edge of the pool, there is only a 50% the Algo will step up to open the order. If now we change that limit sell order to a Buy limit order and place it at the say spot, it will almost always open up the losing position.
That is what I see on a live chart trading around liquidity pools and it really does feel like your small retail order goes to the back of the queue and not to be touched, unless it suits the market makers. My stats say 2 to 1, it will only open a order that suits them.
This is why I no longer use passive limit orders and stops but choose to sit on my chart while a position is opened. One trick I do see the Algo perform a lot on M1 chart is to produce a wide ranging candle of say 8 pips, hold movement for 2-3 seconds then create a tiny gap up and move about half a pip. It gives the sense price is moving bullish. It then holds for another 2-3 seconds allowing time for those traders to jump in with market buy orders - Then goes strongly bearish.
Time & Time again.

So placing passive Limit orders on a chart gives only a moderate advantage to the retail trader unless they are can't be on the charts at the time, in my opinion.

Cheers Rick

Entry limit orders


Hello RickM,

First of all a warm welcome to our blog and thank you for your excellent execution. In addition to your in-depth knowledge, I find a characteristic of you that is particularly worth mentioning. You are always very friendly and help a lot of traders with your very informative market view, without being overbearing. First of all, thank you very much.

I can fully support what you write, as a scalper I rarely use limit orders as an entry, because it always has to be quick. If I recognize an entry signal, I want to go to the market immediately and must thus accept a higher spread. In the future market I would have the opportunity to precisely identify my place in the queue. An emulator is used to calculate how much volume is still in front of me before my limit orders are executed. Unfortunately, the stock market itself does not provide a queue display, so the queue display is only an approximate value, which in emulated form comes very close to reality. Since the Forex Market offers the best profit distribution, I only trade in this market. However, the future market offers the greatest chances of winning as volume and liquidity are made available. That's why I trade on the Forex market, but only on the basis of the future data.

The heat map is my overview map to see whether the dollar is currently being bought / sold or the euro is being bought / sold. In the time and sales list, I use the filter settings to display the current strength of the market buy orders, market sell orders, limit buy orders and limit sell orders. The heat map must be compared with the time and sales list at the same time. I only get my entry signals from the DoM, whereby special filter settings in spoofing help me.. But first the requirements in the heat map and the time and sales list have to be met in order to generate a decisive entry signal from the DoM. At the moment there is still too much data that I have to consider at the same time, so I am working on programming that summarizes the essential points. If you take a closer look at spoofing, you will find that in certain market situations the same patterns appear again and again, which bring a clear market advantage for a few seconds. I noticed that with these patterns I am always able to predict the market for a few seconds. As a swing trader, I submit myself more to chance, because I can never predict how the overall market will react to certain situations.

In the time and sales list we can often see massive market buy orders entering the market but the price is going down. This is understandable when you see that the big players massively fill up the limit sell orders to hold the market buy orders and at the same time delete the limit buy orders to get down with a small number of market sell orders. After, the stops of the long traders will be triggered. The market is bullish at the moment, but there is still a stophunting down. As you wrote correctly, the long traders are first switched off and at the same time the new traders are encouraged to take a short position. As soon as the price is pushed up again, the stops of the short traders help to accelerate the price upwards. This is partly brutal psychology, the market sees the price falling sharply and believes in a huge opportunity. In fact, those were just the stops of those who were wrong.

My DoM ad has nothing to do with a typical DoM ad because I mainly focus on spoofing. But I quickly recognize when several Limit Sell price levels are blocked and at the same time several Limit Buy price levels are opened. It's basically like a dam, you can stop the river or let it flow through. In the stock market, however, there are two directions. However, since the water (the price) can only ever run in one direction, the dam must be aligned precisely with it. And that is exactly what can be made visible with appropriate filtering in the DoM. However, programming and optimizing these filter settings will take a few more years.

I wish you a nice weekend and a successful start to the new trading week

best regards
Micha

Pattern search in the algorithms


Hello dear subscribers,


Since the beginning of February 2020, we have been working intensively on the algorithms of the big players, which are primarily responsible for a smooth process and optimal communication between the market and the limit orders. Limit orders are used to collect ask and bid in accumulation and distribution phases, to exit positions and to hold the price. Market orders are used to start the first stops of retail traders, to push a price into a certain zone and to make volume available to yourself.



The market sell orders run in the limit buy orders (point A) and the market buy orders run in the limit sell orders (point B). First of all, we should consider these two movements separately. At point C we see a footprint chart, on the left we see the market sell orders and on the right the market buy orders. 24 lot market sell orders and 129 lot market buy orders were traded in the largest volume range. But these two market orders have nothing to do with each other because they never meet in the market. Therefore, one should look at the movements separately.



Regardless of whether we analyze a bullish or bearish candle, the price always runs in ZigZag movements down or up. First and foremost, it is all about getting the necessary volume to achieve the respective goals of the big players. The herd plays a crucial role in this. The big players achieve the highest profits when the masses are oriented in exactly the opposite direction to their investments.



Limit orders actually move the market because they are mainly used by big players in the form of small iceberg orders. The background is that these iceberg orders are not displayed in the DoM and it is very difficult to specifically identify these invisible orders. The big players are thus able to disguise their actual intentions and thus have a decisive advantage. While most traders are looking for directions in the dark, the big players work with a night vision device. You see us, we don't see them. This is a crucial point that brings big players over $ 400 million in profit every day.

Upward movements should be calculated separately from downward movements. A footprint chart or a candle is the worst way to display these movements correctly. What is much more important in a downward movement is how the market sell orders meet the limit buy orders. Can the market sell orders break the limit buy orders or are they stopped? If market sell orders are held up, it means someone is buying Ask. Ask is used to buy the euro or to exit the dollar. It is difficult to predict a subsequent upward trend from this, as it could only be a partial exit. The price will continue to go down after the partial exit as the main positions are still in the market. So you have to keep an eye on the overall situation. The past course of the course only plays a subordinate role, since the big players are always oriented towards the current situation. The herd is always decisive, the big players must always take an opposite position. If the herd behavior suddenly changes, the big players must also adapt to the new situation. The big players are basically the herds slaves. The herd always determines the course of the course and not the big players. When the herd takes a short position, the big players push the price up and vice versa. Of course, the big players always win because they can use more money, but the herd sets the direction. And since you can never estimate how the herd of one million retail traders will react tomorrow or next week in EURUSD, long-term price forecasting is impossible. In contrast, assessing the big players is much easier. The identification of the algorithms help me to look into the future for a few seconds. The shorter I am in the market, the higher my probability of winning, but the less effective the costs are. Optimal profit management must be created from this.



A simple derivation can be created from the procedure of the big players and retail traders. The retail traders primarily use the market orders. The market orders are displayed exactly in the market. The position of the retail trader can be determined from this. The art now is to know that this is the wrong direction. To win, you have to take an opposite position at the right time. This is possible with the big player reaction. Stophunting is a crucial point to analyze a specific market behavior, so I recommend every trader to deal with it in more detail.

In the picture we see a situation where a big player has made volume available to himself, that he has also taken up with own limit sell orders. First the price was pushed down 40 pip and within one equilibrium the big player got out of the dollar. After that he started buying the euro and pushed the price back down to the price level where he gave himself liquidity. From this price level, the price then went up 70 pip. Through his own liquidity he made 40 pip profits with the dollar and 70 pip profits with the euro. With the euro that he bought in the Equilibrium, he was able to realize a profit of 110 pip. It only took him 28 hours to do this. The volatility was relatively low at this point and the decision to provide liquidity was absolutely right at this point as the market did not provide such volume at this price level.

I would like to come back to slide number 3 and go into the two different movements. Regardless of whether it is an upward or downward movement, it is primarily controlled by limit orders. The limit orders are significantly stronger than the market orders, here you find the report.

Which is stronger, market orders or limit orders?

No matter how many market orders come in, if a big player keeps adding new iceberg orders, the price will never be able to break through this price level.



We can compare this principle with a dam. The water is supposed to represent the market orders and the lock gate at point A are the limit orders. If the lock gate is closed, the water can run against it, but the lock gate will always stop the water. There are now two dams on the market, one for the upward course and one for the downward course. If the price is to go up, the lock gate on the limits sell orders must be opened and at the same time the lock gate on the limits buy orders must be closed so that the water cannot run back. The Big Player algorithms must simultaneously control the lock opening and the water flow in both directions. And exactly the algorithms of this controller I try to analyze with different stock market data. For this I use different filter settings in the DoM, the heat map and the time and sales list.

S

Last Friday around 14:30 CET, there was increased volatility due to meetings, which only caused a price jump of 25 pip. In the video below you can see this process again in more detail.



In the Forex Chart I have drawn two lines in the price history to show the price range of the equilibrium. Spoofing clearly shows that the price is within this range. In the two dams I described, both lock gates were closed and therefore kept the price within this range. In this range, one could see that more ask was collected. Around 16:00 CET there was a small stophunting. After this situation, the price was pushed up by 65 pip.



For about four months now I have been working intensively on the identification of algorithms and I wanted to know what volume of data I spent on it. From June 2019 to January 2020, I needed approximately 1 GB per day to download. By identifying the algorithms, the download data volume has increased sevenfold and the upload volume quadrupled. That is an extremely high value.



My charts for identifying the algorithms are updated regularly, with this version I'm going to start this week. In principle, it's all about getting faster and more accurate information. For this reason, this display must be regularly optimized.


Herd behavior in the market


Fast movements in the market are often reactions of the big players to the herd. This triggers stops that further accelerate the course. If these stops are absorbed by big players at individual price levels, one should be careful. That over 90% of retail traders lose clearly shows that the opposite of what most expect always happens. Unfortunately, many traders are fooled by strong price movements. They always get on at the end of the movement and are eventually stopped, even though the direction was correct. The stop placement should also be reconsidered. Those, who do not place their stops with the herd, have the greatest chance of survival. And where are stops placed? Always below the last low and above the last high.

Many years ago, my opposite trades were successful in the upward and downward movements. This was successful because no one else dared to do it at the time. The stock exchange wisdom: The Trend is your friend has contributed to the fact that only a few have taken a short position in an upward trend.

You are always most successful if you stay away from the herd. In the animal area too, the herd offers only supposed protection. A large herd with many watchful animals reduces the likelihood of the individual animal being caught by a predator because more animals can look for predators while others are at rest looking for food. The presence of many bodies in a group enables a reduction in individual predator risk by simple dilution. The more gazelles in a flock, the greater the likelihood not to be caught by the lion. But a herd of gazelles is easier to spot by lions than a single animal. The gazelle could probably survive longer if it were not in the herd. Therefore separate yourself from the herd and act where few people act. The big players would not be so successful if traders developed more individually and did not develop joint herd strategies in groups.

If 3000 traders pursue the same strategy at the same time, the big players know that statistically 30% of them trade in EURUSD. 1000 traders use similar stop zones, which are safe zones for the big players in order to achieve fast volume. In addition, it is logical that the more participants use a particular strategy, the more watered down that strategy is. In some cases there are specific instructions in the forums about signals, stopping, entry and exit.

The Forex market is the largest market in the world with daily sales of over $ 6 trillion. Forex Factory is the largest platform worldwide where 17% of all retail traders meet. Of course, the big players know the market like no other, but they also have to be able to react to new situations. For this reason, there are analysts and research teams at every big player who occasionally look around the Forex Factory platforms. In EURUSD, 900,000 retail traders lose around $ 90 million a day. Forex Factory has 700,000 members, which is an interesting size for the big players. It is important to find out what retail traders think, and it is particularly interesting that they publish their strategies.

Let's turn the tables, is there actually a platform, where we retail traders can follow an exchange of big players? A platform where the big players talk exactly about Stophunting, iceberg orders, algorithms, accumulation and distribution? No, unfortunately there is no such thing. We should ask ourselves why there will never be such a platform?

There are 1000 funny conspiracy theories in the market, today I also would like to put one up.

700,000 retail traders mean a maximum daily profit of $ 70 million for the big players. You buy an experienced retail trader and work with him to develop a very simple strategy that can be easily traded by any beginner. This strategy is published on FF and captivates a mass of beginners. First of all, the big players ensure that this strategy works in part, in order to get more masses excited about this strategy. Of course there will be some enthusiastic traders who suddenly make huge profits with the new strategy. This will attract more beginners who will deal with this strategy. The more successful a system is, the more masses it will attract. For the big players, there is only one point. They want to gather a mass of traders at a certain time, at a certain price level in order to get their volume through targeted stophunting. A supposedly successful system could ensure that many retail traders are at certain price levels at the same time. The big player can now easily skim these price levels. The experienced trader who publishes this strategy, get money for the losses of the retail traders. This only costs the big players money in the event of success and at the same time saves the big player a lot of money because their algorithms do not have to constantly look for hidden stops.

Of course, my conspiracy theory is absolute nonsense, but one should still think about it. So far, the big players had to run after the retail traders to get their volume. With this strategy, retail traders voluntarily come into the lion's den. Actually a great idea, but unfortunately not for the retail traders who follow this strategy.

Conclusion:

Basically we find insanely great contributions and ideas at FF. There are excellent professionals with an incredible amount of knowledge and great theories. From this very good information, everyone should create their own market image and create their own, individual setup. This setup should be tailored to the personal characteristics of each trader. Everyone reacts differently in certain situations, a setup must take this into account. I would distance myself from concrete systems that specify everything in detail. Unfortunately, most traders want it to be very simple, but the market is just the opposite of simple.

Theory and practice are two different worlds that meet, this applies to all professions and also to the profession of trader. A trader needs practical experience and this experience can only be gained in trading, ideally with real money. But that could lead to massive losses in the beginning. If I had to start over without knowledge, I would do the following.

I would execute 300 trades a day in an M1 chart in the demo account without indicators. Each trade would only take 10-30 seconds. At first, this won't make any sense, but after a week, interesting experience will emerge. Once I made my 300 trades I will start with a rough analysis. There are detailed reports in MT 4. Here you can find the reports.

https://www.mql5.com/de/articles/1383

I would execute about 300 trades per day in about 5-6 hours, 1 hour to analyze the trades and 2 hours to study the opinions of interesting traders at Forex Factory. The art is to take up the ideas without wanting to implement them directly. After three months, I would have made around 20,000 trades and at the same time built up an enormous wealth of experience. In addition, I would have read about 12,000 book pages in FF during this time. The resulting learning effect is significantly higher than with a given system.

From this experience you should now create your own setup and start with a small real money account. Of course, you should expect to make losses at the beginning, but the most important thing for a trader is that he has his own opinion about the market. Best is an opinion that differs from other opinions, because the herd's opinion is incorrect, otherwise over 90% would not lose regularly. The most successful entrepreneurs in the world have always gone their own way, why should that be different in the trading area?

I wish you a successful trading week

Lovely wishes
Micha

Large market buy orders in EURUSD



Hello dear subscribers,


Last evening around 18:10 CET, 100 lots came into the market 11 times in a row in the future market. While this is not uncommon, but these were market orders.



This type of market order is typical about central banks or from larger institutional traders. At first, I suspected that it was a normal currency exchange that was handled by a large bank. In my headmap I could not see that the market buy orders were simultaneously absorbed with limit sell orders. So I could assume that the dollar was sold in this case. Since the executing bank had not bought this dollar itself, it became clear to me that the executing bank was rather predicting an upward exchange rate for the next trading day. These 1200 Lot Market Buy Orders were taken up by different market participants and had to be brought into profit first. I wrote to a friend on WhatsApp that I expect Tuesday's price to rise sharply.



During the night, the price then went down 30 pip and was pushed up again in the Asian market. When I hit the market this morning, I realized that I could expect stronger bullish moves that day. First I wait for the London open and after the reset, I entered the market at the Daily open. My stop was 2.5 pip. The trend reversal took place exactly in the area of my key candle and my target was at point D. My stop pulled on breakeven and I let the trade run. After that, I concentrated on my main business, scalping, during the rest of the day.



My target was reached around 14:10 CET. After deducting the costs, 52 pip was reached with the random trade in 260 minutes. That was only 0.2 pip per minute, but without risk. The subsequent, stronger movement upwards would have been much more efficient with 0.75 pip. But you can never predict that exactly. Around 15:30 CET, large market orders suddenly came again into the market.



We recognize in the equilibrium that 100 Lot Market Sell Orders entered the market 12 times in succession. That it was again a currency exchange in the same size was very unlikely for me. So I had to part with my assumption of the day bevor.

In my opinion, there was not enough volume the day before to buy the corresponding number of ask with limit orders. However, there was liquidity and therefore a larger institutional trader placed 1200 lot market buy orders on the market. Today's market sell orders at 15:30 CET were therefore an exit from the euro.

If such a large number of market buy orders enter the market, it can basically only be a dollar sale or a euro purchase. If the euro is bought, the medium-term move is likely to be bullish. It only becomes dangerous if the large market buy orders are an exit from the dollar. This situation would initially be neutral for me, because at this point the large position is closed. That means the price could move up and down afterwards.

The big institutional trader left the euro at 15:30 CET, which means he didn't believe the price would continue to move higher. However, it cannot be concluded from this that the price must now continue to go down. The larger institutional trader entered the euro yesterday with 1200 lots and today exited the euro with 1200 lots. The big institutional trader is now out of the market in my opinion, but the 1200 Lot Market Sell Orders were inevitably taken up by Limit Buy Order.



In my limit profile you can see that there is a high number of questions in the market in the upper area. That could mean a further upward trend after a small downward trend. However, it will be crucial tomorrow how the retailers use their positions, and the big players will react accordingly. The Asian market will give us an answer by tomorrow.



If my guess was correct and a larger institutional trader got in at Point A with 1200 Lot and got out at Point B, he could have made a pretty good profit in $ 720,000 in 20 hours. Although I could not achieve this profit in the same period, I am grateful to the larger institutional trader for showing me with his traces where the course is going today. It is precisely for this reason that it is important to scan the market with different modules in order to identify the traces of the big players. If the 1200 lot had been invested through limit buy orders, identification would not have been so easy. It is interesting, my assumption of currency exchange was wrong, but the direction was correct.

If you look closely at the forex chart, you will see that these traces could not be identified. A good reason to change it now.

I wish you a nice trading week

best regards
Micha

Outstanding breakdown, M.

Micha:

Pardon if this has been asked/answered previously, WHAT BROKER/PLATFORM are you using?

Thanks.

Hello TooSlow,

I mainly trade in the Forex market and use different brokers, all of which are listed on Forex Factory. For the future market you need a corresponding data feed and software that translates this stock market data accordingly.

The code of conduct for traders in this forum states: VIII. No commercial agendas

Members may not use Forex Factory to promote a product or service, neither for themselves nor for anyone else. This includes products or services that are planned for the future.

I've mentioned casually the software I work with in this blog, but I only make my money by trading and not by advertising a specific product. For this reason, I do not want to permanently mention my personal platform selection. I would like to stay in this forum in future and write to my private blog.

I therefore ask for your understanding

Lovely wishes
Michael

New experiment with its own liquidity


Hello Lemercenaire,

I absolutely agree with you that this downward price trend initially seems unusual, however, 1200 lot market buy orders were placed on the market within a few minutes. This is a bit unusual. These brand buy orders were also taken up by limit sell orders. It could only be a larger market player. In the Asian market, the price was then pushed down 30 pip to bring this 1200 lot into profit. The larger market participant who brought the 1200 Lot Market buy orders must first take this risk. With the big players it is not uncommon that the positions sometimes run 30-40 pip into the minus. The big player who placed the large market buy orders in the market knew that they were taken up by limit sell orders. Therefore, he had to expect a downward movement.

Two different big players may also have worked together. One provided the liquidity and was able to gain 30 pip, the second provided the volume and was able to gain 60 pip the next day. I could imagine that the big player who brought the market buy orders to the market had significantly more money than the big player who placed the limit sell orders. Finally, the price on the low had to be pushed up 30 pip again in order to be breakeven again. After that, further market buy orders had to be invested in order to push the price up 60 pip into profit. The big players have lost a lot of time due to the corona crisis and may try to make up for this lost time through further experiments. In the past few months, they have started to give themselves liquidity to avoid the accumulation and distribution phases in the Equilibrium. If two big players work together and give themselves liquidity and volume, this could be a new form of strategy that may be tried.

Thank you again for your great statement, because it took me the idea, that two big players could have provided each other with volume and liquidity. We will take a closer look at this over the next few months and will quickly find out whether this is an interesting alternative for the big players. Fortunately, we can identify that immediately.

I wish you a great trading day

best regards
Michael

Hi Micha, great post as usual. If I could just give you my opinion on that move and why i took a trade as well.

Looking at that move on EURUSD yesterday which I did Buy, I saw nothing unusual about that move.
There was massive flow of orders high in density which cleared out a large liquidity pool and was pre planned to be withdrawn at a turning point soon after.
This pool of passive limit orders must of been quite large otherwise the Big Player would not have been able to BUY so many large orders to obtain there fill.
I would say that big player was surprised they were able to load up - very surprised.
I also can't see two big players being involved here either, as the price mechanics that occurred didn't indicate their wasn't enough density of orders on the charts.
The move up was then just ordinary but steady except for the final 1/3 of the move which was the signal for that player to get out. I got out too early myself.
Over all I would say business as usual with great density at the top and bottom, and one big player making their money with no direction for future days forecast.

Cheers Rick

Liquidity pool

Hi Rick,

Thank you for your great market assessment, it is quite possible that your theory is absolutely correct. I described this situation as unusual because no such actions have taken place within the past year. My software runs 12-14 hours a day in Euro FX and these patterns have only occurred a few times in the past few days. For me it is important to understand every reaction in the market. Unfortunately, this will never be possible because there are too many different participants and interests. Nevertheless, we should both be happy that we can think about such topics. Many traders only see the candles and do not even notice what is actually happening in this market. A long-term forecast is also not so relevant for me, because as a scalper I am often only interested in the next 30-90 seconds. I regard my longer-running trades as just a random additional income. But they also have to be planned in advance. And for that I have to understand the market correctly.

I wish you a successful trading day

best regards
Michael

Evaluation of the big player experiments



Hello dear subscribers,



Twelve major big players influence 85% of the Forex market. That's why I've been focusing on these big players for years to better understand how they work. These big players don't work together , but they instantly see indirectly, what another big player is up to. This automatically results in synergies, which many market participants incorrectly interpret as agreements between the big players. It is not a big power that is up against retail traders, the big players have a similar approach and can immediately see what another big player is up to. In my view, no platform for conspiracy theories. At the beginning of February we noticed that the big players are increasingly making their own liquidity available. Up until now, the big players always had to collect in an equilibrium ask or bid in order to push the course in the corresponding direction. The moment a big player himself makes liquidity available, he initially saves a lot of time, but at the same time has two open positions, which he has to bring to profit. There have been some experiments on this since the beginning of February, which I also reported in detail on my blog. You can find the information here.

Own liquidity for the big players




Here we see a typical situation where a big player provides himself with liquidity. We recognize that the market buy orders are absorbed exactly. These market orders are cumulative market orders that are typically triggered by stops. The first green circle may well be some stops of short trader. If other short traders had subsequently entered the market at this price level, they would very likely have placed their stop above this price level. A big player would never use cumulative market orders to push a price up. Small market orders are used for this and the limit sell orders are deleted at the same time so that he can push the price up with little volume. Therefore, you can not assume that the green circles have been created to push the course massively upwards. This exact absorption can only take place if someone knows exactly that a certain size of market buy orders will come into the market at a certain point in time, at a certain price level. And only someone who executes these orders can know that.



A few days ago, massive market buy orders suddenly entered the market that at first glance were not absorbed by the same big player. At first, we thought it was a big currency exchange. We had to quickly revise this opinion, since the next day, at a 60 pip higher price level, 1200 lot market sell orders were processed. The next idea I had was that two big players coordinated with each other. But larger volumes are easier to identify by the exchange regulator and the big players will not be so stupid to take such a risk. So how does a big player manage to place large market orders in the market and absorb them at the same time without being noticed? One possibility would be that he works with two different accounts and the algorithms are precisely tailored to these two accounts.

Yesterday around 3:00 p.m., massive market buy orders entered the market again. Then the price went down 100 pip. First of all, it is quite unusual for a big player to place such a large number of market orders on the market. To do this, we first have to consider the different types of orders.

Limit orders

With a limit order, the participant not only specifies the number of orders to be bought or sold, but also sets a price limit. This limit is the amount for which the participant is willing to buy or sell the specified orders. If the participant sets too low a limit for a buy order or too high a limit for a sell order, the order will not be matched. A limit order can be seen as a measure to reduce the likelihood of surprising, undesirable execution prices (price risk). A limit order is issued regularly if the intention is to buy or sell at a specified price, if possible at a better price. In contrast to a market order, an investor can never count on the fact that his order is actually taken into account in the market at the price he desires when a limit order is placed. He therefore runs the risk of going empty-handed or remaining on his inventory.

Market order

A market order is an order to buy or sell immediately at the best available price. It is executed based on the limit orders that are already in the order book. This means that market orders depend on the market liquidity to be settled. Since market orders are executed immediately, the market order corresponds to the best limit order available in the order book. In other words, when you create a market buy order, it corresponds to the best limit sell orders at the current price. However, if the cheapest limit sell order available is not enough to meet your entire market order, your order will automatically match the following limit sell orders until it is finally closed. This process is known as slippage and is the reason why you pay higher prices and higher fees for market orders compared to limit orders. Market orders come in handy in situations where getting your order done quickly is more important than getting a certain price. This means that you should only use market orders if you are in a hurry and willing to pay higher prices and fees

Iceberg orders

The iceberg orders are orders that are hidden behind the limit orders and disguise the actual size in the DoM. The average size of iceberg orders in the Euro FX is between 10-20 lots. Iceberg orders are used to achieve large price jumps with small market orders, to keep the price in equilibrium, to collect or get out unnoticed or to hold a price. At first glance, it seems to be very disadvantageous to work with market orders. Entry via limit orders is significantly cheaper and with the help of iceberg orders, the market does not know what the big player is up to. But the market orders also have unbeatable advantages in certain situations, which we will now take a closer look at.

Whenever I cannot understand exactly how big players operate, I always start with a concrete analysis to better understand the market. I started by comparing three different situations. This comparison results in a big player profitability, which has brought a very interesting result. Let's take a closer look at that.



In the past, the big players collected Ask or Bid in an equilibrium and then pushed the course in the corresponding direction. Let's start with that.

At price level 1.1000, the Big Player collects 500 lot bids via limit sell orders (point A). Then he pushes the price down 60 ticks, whereby we have calculated 500 Lot Market Sell Orders (Point B). At price level 1.09700, he exits the dollar with limit buy orders. Then he collects 500 Lot Ask (Point C). Now he pushes the price up by 120 ticks and needs about 1000 Lot Market Buy Orders (Point D). At price level 1.10300, he exits the euro with 1500 lot limit sell orders. At the same time, he buys 500 lot bids. (Point E). With 500 Lot Market Sell Orders, he pushes the price down 60 ticks (Point F). Now he comes back to the price level of 1.1000 and sells his 1000 lot dollars with limit buy orders (point G).



Point A
Here I have described the concrete process that took place in these three price movements.

Point B
The letters refer to the labels on the previous slide.

Point C
Here we see the resulting profits for the big player.

Of course, this calculation is to be seen purely hypothetically, since many other things must be taken into account in the actual course of the course. A price does not just run upwards, but is pushed down by the big player in the course of it in order to switch off the long traders and at the same time get new volume through stops of the new short traders. For this reason, I want to keep the calculation as simple as possible, using the same starting conditions for all three calculations.



In principle, we see here almost the same process, with the only difference that the big player makes himself available liquidity in the beginning. First he pushes the price down and gets out of his dollar position. Then he pushes the course up at point D and then gets out of his euro positions. Then the price is pushed back to the price level of 1.1000. We have a situation here where the big player only provides liquidity once.



The resulting calculations can be found here explicitly.



Here we have a slightly different situation, but the price developments in tick are the same. First of all, the big player again makes liquidity available and pushes the price down. There he gets out of his dollar position and pushes the price down to Point E. He gets out of the euro by making himself available liquidity. Then the price is pushed up 60 ticks again, where it finally gets out of his 3000 Lot Ask with iceberg orders.

Let us now take a closer look at this overall situation. At point A, the market sees a large number of market buy orders. Many market participants will assume that the price will now go up. The big player pushes the price down and uses the stops of the long traders to reach his goals faster. At the lower low, he gets out of his dollar position via iceberg orders, collects 500 Lot Ask from the short traders and then pushes the price up. At Point E, he immediately leaves the euro with 2500 lots by making himself available liquidity. The market now only shows 2500 Lot Market Buy orders. Traders see these large orders and know exactly what happened a few hours ago when large market buy orders came into the market. You take a short position and the big player uses the stops to push the market further up. The other traders who were initially waiting now see that the price is going up and start with a long position. Because the price is slowly going up, more long traders come in. The big player is now taking advantage of the situation and is selling his 3000 lot to the long traders who hope for a strong price increase.



The resulting calculations from slide 7 can be found here explicitly.



Now we come to the overall calculation.

Normal procedure

The normal procedure (trading in equilibrium) requires a total volume of 7000 lots. Since the big player does not have its own volume available, the required market volume is also 7000 lots. The time required is 15 hours, with 467 lots being traded per hour. In total, the big player wins an amount of $ 1,312,500, so the profit per lot is $ 188. The hourly profit is $ 87,500.

Entry with own liquidity

With this procedure, a total of 10,000 lots are traded, less own liquidity of 2,000 lots, resulting in a required market volume of 8,000 lots. 370 lots are traded per hour in 27 hours and the total profit is $ 1,875,000. The profit per lot is $ 234 and the profit per hour is $ 69,444.

Entry and exit with own liquidity

A total of 14,000 lots are traded here, less 7000 lots of own liquidity, resulting in a required market volume of 7000 lots. In 23 hours, 609 lots are traded per hour and the profit is $ 2,812,500. That gives a win per lot of $ 402 and an hourly win of $ 122,283.
The problem of a big player is not his capital, because he has enough of it. The problem is the volume on the market that does not allow him to get the positions he wants. The key point in our comparison is the volume that the big player needs from the market. At Point A & C this market volume is comparable, at Point B more volume are required.

Point C is twice as efficient as Point B. The profit per hour at Point C is 40% higher than normal trading in equilibrium (Point A). The same market volume is required in both cases, although the total volume doubles. In 15 hours, the big player makes $ 1,312,500 from Equilibrium trading and $ 1,834,000 from Point C. This is twice as efficient as Point B. The procedure at Point C becomes more effective the more often the big player makes himself available liquidity for the exit. He can play this game as often as he likes within a long upward or downward trend and thus achieves significantly higher efficiency.

So we can clearly see that the use of market orders by the big players is a very interesting alternative that we could possibly see more often in the future. With this approach, the big players can confuse the market even more. This means they are indirectly able to compensate for weak volumes and at the same time save a lot of money because they no longer have to collect in the equilibrium. When collecting in the Equilibrium, the price has to be kept within a range, that costs a lot of time and money, which is partly eliminated by the procedure of Point C.

There are even more efficient approaches, but I don't want to publish them here in order not to unnecessarily support the big players. I'm curious how long it will take them to figure it out. This will probably not happen, however, because the big players have been on the market for many decades and I am surprised that the expensive analysts and software developers are program such strategies. But they will probably not change anything until they are forced to do it. Just like Goldman Sachs, which has reduced their daily income by 50% in recent years.

It doesn't really matter which strategies the big players pursue, whoever is deeply involved in this market will find out relatively quickly and thus has an enormous market advantage. The big players only change their strategies when their profits drop dramatically. Why should you change something that is still working? But we can already see from the experiments that have been carried out in the past few months that the big players have lost considerable revenue. The retail traders' approach is getting better and, at the same time, it is becoming increasingly difficult to take money from them. It is a kind of upgrade that is emerging in this market and I am convinced that with the new technology, that is available to retail traders today, the big players have to move quite a bit in order to continue to make good profits in the future.

We retail traders are on the right track, but we have to learn a lot every day and say goodbye to old habits. The market will be much heavier in the future and if you miss the opportunity now, you won't have a chance in a few years.

I wish you a successful trading week

Lovely wishes
Micha

Currency strength dashboard and Stophunting chart



Hello dear subscribers,


A few days ago I was asked to speak again about my Forex charts, explicitly about the currency strength. I promised to provide a detailed report on the forex charts I use. Of course, today you will receive the indicators I used, with a profile template, links for an exact explanation and two videos for a better presentation.

First of all, I would like to give you a rough overview of the strategy I use. I started my training as a financial service provider for banks, stocks and investment funds in 1987. In 2006 I had my first experience with the MT4 under Windows XP, for which a fee was still charged. From 2010 I focused almost exclusively on the Forex market and registered as a professional trader according to the ESMA regulation. I am among the 4% of professional Forex traders in Europe who can trade up to 400 with a leverage, and at the same time I have extremely good protection in the event of an uncontrolled outbreak. First of all, I worked exclusively with Forex data (supply and demand) for many years by trading the short movements within a equilibrium. The basis for this was initially the psychology and method of the big players, which I have been dealing with for many years.

The tick charts were responsible for the fact that I had a closer look at the stock market data and found that this data has a similar structure. This led to some interesting projects in the past year. I compared different providers of stock market data, got closer to high-frequency trading and the big players and looked for suitable software that could be used to translate the stock market data according to my specifications. In recent years, I also completed my Oracle Certified Master in Java and programmed some auxiliary indicators for the MT4. You can download the most important ones today. I am currently using my programming knowledge to program C # filter settings for my stock exchange software. These filter settings help me identify algorithms.

A year ago, I met a friend who had worked for the world's largest radio frequency dealer for many years. Through him I got to know a completely new world that has nothing to do with an MT4 chart. The buy and sell offers are displayed on special screens every second. The trading platform does not correspond to our well-known principle of price-time priority. The basis is pauses in trading between 10-50 milliseconds and thus create uniform starting conditions. Just as there is always a fixed volume value in the tick chart, the pauses of 10-50 milliseconds are fixed there. A kind of microequilibrium. With this I recognized again how important the equilibrium is for a successful trade. The focus on the equilibrium is interesting because it shows the uncertainty of the market. From an equilibrium, it can only run up or down. The behavior of these big players is so brutal and merciless that I wanted to find out more about them. With the help of the stock exchange data, I got to know the relationships between the decisive algorithms.

The pure candles or price information gives us traders a wrong picture of the market, because a strong bullish candle does not necessarily mean that someone is buying the euro to push the price higher. Once a big player sells their dollars after a downtrend, a strong bullish candle can also emerge. However, this is not evident from the pure candlestick representation in the Forex. A price does not change because a moving average has been exceeded, an RSI is overbought or a fibozone has been reached, but because market orders fulfill the limit orders. The price is always the result of volume and liquidity, but this information is not available in Forex. The big players determine the market and pursue a specific goal and this can only be recognized if you know what they are up to. Many years ago I thought that I could use the candlestick chart to determine trends and resistance zones. Our brain is programmed to automatically identify patterns in random movements. We always identify random patterns. By carefully analyzing the futures data with my prop software, I came to the conclusion that there are actually no trends and no real resistance zones. The resistance zones we see are initiated by the big players to deceive us, and supposed trends are there to mislead retail traders. In fact, the big players don't pay attention to resistance zones at all, because they create these zones themselves.

Every market has its advantages and disadvantages. I was looking for similarities between forex data and futures data. The art is to use a combination of both dates to reduce the drawbacks and increase the benefits. I use the data from the future and forex market at the same time to get the fastest information. The future market offers the greatest chance of winning, the forex market the best profit distribution. Therefore, I act in the Forex market exclusively on the basis of the future data. I have already described this procedure in great detail in this blog.

The forex market has many advantages over the future market. The price movements are 5 times larger, which automatically increases the volatility. Therefore, the Forex market is much more sensitive, which means that the currency strength, the ATR, my developed Bionic candle and the strength of the different price movements provide more precise data. For this reason, I can not do without this data either. However, please note that my decisions to enter and exit are made solely on the basis of stock market data.



Albert Einstein once said: Only a genius will controlled the chaos. This will be clear at the latest when we look for a specific screw in our untidy screw box that we urgently need. After hours of searching, we get into the car and drive to the hardware store to buy the screw. A week later, we find in our chaos,exactly the screw we would have needed. If we think about, how much time we have spent looking for certain things, in our lives, we should have learned from it. The time and money factor plays a significantly larger role in the stock market. That was precisely the reason why I created a work environment, to save time and make more money with this benefit.



In order to save time in the trade, my optimal work environment was created over the past 10 years. Does a trader really need eight screens to be successful? No, because success has nothing to do with the number of screens. When I started in the industry over ten years ago, I only had two screens. First and foremost, I work with eight screens to save the tedious switching of charts. In addition, I work on different projects that also require a certain screen area. My eight screens result in a total area of approximately 2.5 m², with 25% of the area being used for the forex market and 75% of the area for the future market.


Point A
My main screen contains the essential elements to identify the big player algorithms. In addition to the heat map and a special limit profile, I also use two special footprint charts for the limit orders, with a filtered out imbalance. The decisive factor is a special DoM with different filter settings in spoofing as well as different time and sales lists to identify the respective strength of the market orders and limit orders.

Point B
Only relevant limit orders are displayed in this chat in order to monitor the respective collection campaigns in an accumulation or distribution phase.

Point C
Only triggered stops that were recorded by the corresponding limit orders are monitored here. This is a crucial aid in identifying the exits of the big players.

Point D
Here we see my trading screen in the Forex market, next to it a daily limit profile from the stock market to monitor absorption at certain price levels.

Point E
On this screen there is a limit profile in the M5, several time and sales lists that have been filtered differently and a range chart.

Point F
In addition to the cumulative delta, there is a display of the open interest, this data is only available in the Russian market. We also see another limit profile in H1.

Point G
Here we see my dashboard from the Forex market, which we will deal with today.

Point H
Here we see a chart with Bionic candles to measure the respective movement strength and to identify the key candle for the Stophunting. I will go into that in more detail today.

I only make my trading decision based on the information that my main screen gives me. However, I also get important information from the Forex market, which I keep an eye on at all times.



Here you have a rough overview of the screens from point A to F again, but it should be noted that these charts are spread over approximately 2 m² of screen space.
I have already dealt with the individual representations of these charts very specifically in my blog. Since I, as a scalper, complete around 20-30 trades per day, I need a very large amount of different information. The faster this information comes in, the better.

Here you have a rough overview of the screens from point A to F, but it should be noted that these charts are spread over approximately 2 m² of screen space. I have already dealt with the individual representations of these charts very specifically in my blog. Since I, as a scalper, complete around 20-30 trades per day, I need a very large amount of different information. The faster this information comes in, the better. On average, my main trades run between 30-60 seconds, although different trades can sometimes run for 1-2 hours. The main trades are aimed exclusively at identifying the small breakouts within a candle and taking them with you. This procedure requires a very high level of concentration and is incredibly exhausting. That's why I need all the important information at a glance. My entries and exits are derived exclusively from the identified algorithms, whereby at this moment I do not pay attention to the candles at all, but only act from the DoM. A very crucial aspect is two different tones that acoustically show me the current market situation. I pay less attention to bid and ask, but more to the sizes in the form of best ask and best bid. I always have the current volatility in my ears. I will go into this in more detail in another article.

So that you first get an impression of the dashboard, I have prepared a short video for you.






My dashboard contains a total of 24 different charts, which are represented by 19 different indicators. Interestingly, these indicators only require approximately 100 MB of RAM during operation. The value naturally increases in higher volatility phases. On the other hand, my software needs up to 10 GB of RAM to translate the stock exchange data. Since I have already described most of the indicators within my blog, you will find a link under my explanation. There you will find further information, some with videos. My dashboard is aimed exclusively at the EURUSD, but you have the possibility to use it to analyze the 28 most important currency pairs. You have to spend a little time for this, I have already created the templates for you.

Point A
Indicator for important meetings and publication of figures that can be filtered by priority and currency.

Point B
The daily range can be set for each currency pair.

Point C
Here the daily range was divided into three different time zones. Red = USA, green = Asia, blue = Europe. You can change the times individually.

Point D
An overview in the daily chart, with the Bionic candle and the respective trend strength. We will take a closer look at this chart view in the Stophunting area later.

Point E
An oscillator in the M5 that shows the strength of the up and down movements. You can find detailed information here:

EURUSD Trader positioning in MT4

Point F
The same oscillator in the M1 that shows the strength of the up and down movements. For me, however, this runs in a tick chart.

Point G
This indicator shows the investment of 1 lot at the respective open in the different time units.

Bionic time is money indicator

Point H
If you had invested in the Daily open, 1 lot, this indicator shows how the profit / loss at the high, low and current price would have developed.

Bionic Time is Money High Low

Point I
Here I get different information about the price, the spread and the time.

Point J
The ATR in M1 and M5, red = average of the last 1000 candles, yellow = average of the last 100 candles, green = average of the last 10 candles, white = current candle.

Point K
This is about the percentage distribution of bullish and bearish movements. The indicator is used to identify possible reversals earlier. The calculation is relatively easy because the simplest things are often the most successful. There is an upper and a lower level. The upper level shows all bullish movements and the lower level shows all bearish movements. Both levels have a range of 100%. Every movement within a candle is displayed in percent, no matter how big that candle is. That brings even faster information. The indicator now measures the relationship between the main movement and the withdrawal within the bionic candle. So you can look into the candle even faster and deeper.

Bionic percentage balance indicator 1.2

Supplement to the Bionic Percentage Balance Indicator


Point L
An indicator of currency strength that I modified a little. Green shows the euro strength and red shows the dollar strength in 7 decisive currency pairs, within nine different time units.

Currency strength in the forex market

Point M
These are two indicators that show the currency strength. The upper indicator is for the medium-term area, the lower one for the very short-term area. Green stands for the euro, red for the dollar. M1 is my preferred time unit, for the short term area. The dashed white line is the zero line. If a currency is above the white line, it is considered strong, if it is below the line, it is considered weak. However, the top indicator also contains other currencies that have been made invisible. Of course you can compare all major currencies.

The lower indicator is an interesting strength indicator that can react faster than the price chart. Here the euro is compared to the dollar. The currency strength indicator is a kind of currency basket in which two different currency strengths are compared, in this case the euro and the dollar. This indicator reacts very quickly to currency fluctuations and is therefore a nice confirmation for the upper indicator. I made a very interesting observation that this indicator sometimes reacts faster than the price. The following situation: The red line of the dollar and the green line of the euro both fall slowly. So we are in balance. Suddenly the green line shoots up. This means that the euro is much stronger against the dollar. A bullish candle is created a few seconds later. I once tried to trade on it for fun. It worked a couple of times, but I strongly warn against it. This type of display takes some getting used to. If the green line is up and the red line is down, it means that we have a strength in the euro and a weakness in the dollar. That speaks for rising prices. If the red line is above and the green line is below, it means that we have strength in the dollar and weakness in the euro. That speaks for falling courses. Two different indicators are required for this display.



Since many of you also deal with other currency pairs, I provide you with the other 6 most important currencies indicators. This allows you to create the currency strength of 28 currency pairs.

The next chart is about Stophunting. Let's start with a video.



In the video, the numbers above the ZigZag indicator are missing, of course they are included in the download at the end of my post.



In recent years I have developed a presentation that helps me identify the key candle for stophunting. For this I work with a chart that contains 6 different auxiliary indicators. The Bionic candle and the trend strength are very interesting. You can find complete explanations in my blog. Please click on the individual links.

The bionic chart

EURUSD Trader positioning in MT4

How to follow big players with Forex data.

Key candles in Stophunting

Key candle Stophunting II



Since the creation of these charts using templates would be too complicated, I created two complete profiles for you. At point A you will find the indicators Stophunting and at point B you will find the indicators for the dashboard. First you have to insert the indicators in your MT 4. Now there are two profiles at Point C Bionic stophunting and at Point D Bionic Dashboard. You have to put these profiles in the profile folder of the MT4. Then you can call up the individual charts via the profile folder. But first you should close the MT4 and then restart it.



When you access the dashboard for the first time, the MADash indicator may not be displayed. Go to the settings of the indicator and press ok, then the display should appear. As soon as all indicators are running, please press the button (Point B). This removes all frames and you should see the illustration, as on my slide number 4. If you then click on the individual charts, you can optimally center the charts. This is a bit strange at the beginning but you will get along quickly. I would also like to note that I have set up the dashboard to a screen size of HD 1920 x 1080, since many of you are not working with 4K. If your screen resolution is smaller or larger, you have to adjust the charts. There could possibly be problems due to different MT4 versions. Therefore I ask for leniency. It took a lot of time and nerves to create this dashboard, but the information often helped me.

Of course, I would like to mention that most of the indicators were developed by excellent programmers, many of whom are members of FF. Thank you again for that.

When the charts are running, I recommend that you adapt them individually to your needs. First of all, you need to know each indicator exactly in order to get crucial information from it. So check out my reports (links) about it. The dashboard then develops further individually. I always remove the indicators that I have paid little attention to in the course of a week. So you develop an optimal dashboard over time. If you work with different currency pairs, you can save different dashboards for individual currency pairs via the profile. They can then be called up relatively quickly.

I would be very happy if the information helps you and if you are satisfied, I look forward to your feedback.

I wish you a nice weekend.

Greetings Michael

Michael, it never ceases to amaze me, the sheer volume of priceless information you supply here, on your thread. It genuinely boggles the mind!

Have a great weekend, buddy.

Priceless information


Hello lemercenaire,

First of all I would like to thank you, and everyone else who liked my post. As you know, this blog was created as a kind of diary years ago to document my personal development. Every trader has different thoughts about trading and it is not always easy to understand each other's thoughts exactly. This is because people have different approaches to solve challenges(problems). When I read my blog in retrospect, I noticed that I was often wrong and interpreted things differently than I do today. It also shows me that a development process has taken place and that was exactly the goal. Thanks to everyone who supports this blog.

It is not the criticism because someone disagreed with me. It is often their questions that give me the material to think about it more specifically. To explain my thoughts, I often use pictorial language and try to make comparisons with everyday things in life. This in turn helps me to advance further developments. When you write things down, you have to think about them longer than when you explain them. However, I am not so arrogant to believe that my view reflects the correct presentation of the market. This truth is just my opinion and if you all benefit from it, it will be a pleasure to keep this blog alive. I'm not a better trader just because I put my creative thoughts into practice, I only compete with myself and that's exactly what is my personal secret to success.

I question my actions every day and know that I am still far from the goal. Nevertheless, I get closer to this goal every day and the distance to the Big Boys is getting smaller and smaller. But the big players with their professional technology, their thousands of programmers and analysts will always lead the way and dominate the market. It will be impossible to catch up with them, but every millimeter that we come closer get brings us decisive trading advantages. These benefits, only come from more information, as the other 5 million retail traders have.

When you start trading as a beginner, it's all about losing as little money as possible. As a professional, it's all about losing less money than the other professionals. We often see traders making insanely high profits and we ask ourselves what we are doing wrong. We are not doing anything wrong. Earning profits is easy, the trick is to keep profits long-term. What we see is an illusory world, they are shown the profits, but never the losses. It's like on Facebook or Instagram. We see great cars, beautiful people, parties, vacations, life in wealth but not the truth behind these things.

Steve Jobs changed the world with his ideas and died in 2011 at the age of 56. After that, a letter is said to have appeared that he wrote before his death. Here are the most important passages.

I have reached the peak of success in the business world. In the eyes of people, my life is a single success story. But apart from my work, I have had little joy in my life. Ultimately, my wealth is only a factor in life that I've got used to. The moment I lie in a bed and look back at my life so far, I understand that all the appreciation and wealth that I was so proud of have lost value in the face of my impending death. I can't take the wealth I've accumulated over the course of my life with me. What I can take with me, however, are memories that are based on love and were created with love. Maybe you can afford a chauffeur who will drive the car for you. Or you can afford employees who will earn the money for you. But nobody will be able to endure all your illnesses for you. You have to do it all by yourself. Material values and things that we have lost can be found again. But there is one thing, if it is lost, it cannot be found - and that is life.

I don't know if this letter was actually written by Steve Jobs, but everyone can learn something from it.

I would like to thank all subscribers once again; for your questions, for your criticism, for your ideas, for your support and for your praise.

Thanks a lot for this

best regards
Michael

I have never come across the Jobs letter before. Whether or not it is genuine, the thoughts expressed are sobering ones for sure.

Ah well, it was a nice thought. Snopes proved the letter a hoax circulated via FB from a blog. The above is an ammended edited version also. The original was a polemic designed to push some conversion to God.

Doesn't take away from the idea, at least in the part posted above. However for me, the late, very great Warren Zevon said it just as well when - as he was dying from cancer - he was asked if he had anything meaningful to leave as a thought on life...he replied, "Enjoy every sandwich".

Oh and for the record and to keep those of us like myself who cherish detail happy, Jobs' actual last words were, "Oh wow. Oh wow. Oh wow." Guess we'll all have to wait our turn to see if we have the same reaction.

As a further aside, his last words to his estranged daughter were, "You smell like a toilet".

Oh well indeed, lol.

Addendum to the Post "Dasboard"


Hello dear subscribers,


In the Forex Factory forum, the number of Forex traders is significantly larger than the future traders. I am 100% on the side of the Forex traders, because I trade almost exclusively in Forex. The only difference, I use the stock market data to get in and out. And it is precisely this aspect that makes some explanations seem very complicated here. This is because stock market data go deep into the market. The price is always the result of volume and liquidity, the candle the result of volume, liquidity and time. In the Forex market, we only get the effect with the price and the time, the cause of liquidity and volume remains hidden from us. In principle, stock market data is an unbeatable forex indicator that comes closest to the propagated holy grail (which will never exist). The stock market data accurately represent the market and many professionals appreciate that. Those who recognize the benefits can benefit enormously from them. Unfortunately, this is a lot of work and requires a complete rethink.




On Friday, I made my crucial Forex charts available to you in the form of a profile with detailed explanations.

Currency strength dashboard and Stophunting chart

I noticed that the dashboard was downloaded more often than the chart stophunting. This could be because some subscribers are already working with it. I would like to highlight my Chart Stophunting once again. With this procedure you can identify the key candle to determine the specific turning points in the chart. The links in my post show you concrete examples. Therefore I strongly recommend that you also pay attention to this representation.

I wish you a successful trade next week.

best regards
Michael

Fast and furious



Hello dear subscriber,

When I opened my blog at Forex Factory 28 months ago, I chose the name Bionics. Bionics is based on the assumption that living nature develops optimized structures and processes from which humans can learn from their evolutionary course. The earth is almost 4.5 billion years old and during this time nature has developed incredible things that people already benefit from today. A well-known example of this is Leonardo da Vinci's idea of transferring bird flight to flying machines. An example from modern life is the Velcro inspired by Velcro or think of dragonflies and the helicopter. The lotus effect was also brought into our lives by nature, things that clean themselves because no dirt sticks to them. Bionics are research and development approaches that pursue a technical application interest and use knowledge from the analysis of living systems in the search for problem solutions, inventions and innovations and transfer this knowledge to technical systems. The idea of the transfer from biology to technology is the central element of bionics. Anyone looking for a new innovation should steal from nature.

Nature has already developed everything in 4.5 billion years, we humans have not yet discovered it. In nature we find vaccines or cures for diseases that we do not know yet. We will know in the next 1000 years whether nature can be transferred to stock exchange prices. In any case, certain natural laws apply from which we can learn. For many years I have been trading relatively risk-free, short movements within an equilibrium (accumulation and distribution phases) where the big players have collected bid or ask. In these phases, the big players are tame like a sleeping lion. Due to changing market conditions, the big players began to make liquidity available to themselves. This enables them to save the accumulation and distribution phases and at the same time to earn money faster. You can find a report here.

Evaluation of the big player experiments

From 2018, I developed and implemented various ideas in Forex Factory in order to achieve trading advantages. Below I have listed the 16 most important ideas.



Point A
The first project to be carried out involved measuring the strength of different trends using the zigzag indicator. This information can be used to identify clear pullbacks and immediately recognize the direction in which the retail traders have positioned themselves.

Point B
I had the idea of the bionics candle for a long time, it is a candle that does not use the Open and thus a 25% information saving. The wicks have been eliminated and the pullbacks can be seen at a glance.

Point C
With the help of the zigzag indicator you can draw supply and demand zones on the chart. In combination with the bionic candle and the trend strength, this tool is a great help to identify possible turning points.

Point D
This indicator divides the bullish and bearish movements in percentages, so that you are able to show the strength of a candle.

Point E
For many years I have been working with different dashboards that give me important information at a glance. In my last post you will find my current dashboard to download.

Currency strength dashboard and Stophunting chart

Point F
The Bionic Power Indicator is a kind of delta that shows the strength, from bullish and bearish movements, of a candle.

Point G
In the field of money management, the pip achieved and the risk factor per minute is a crucial point in order to achieve efficient profits.

Point H
With the identification of the key candle, it is easier to understand the stophunting of the big players.

Point I
I have found that the volume information of the individual brokers is wrong, so I have developed a volume indicator that is calculated solely from the price and comes very close to the actual volume from the future market.

Point J
The prices of the Forex and Future markets arise almost exactly at the same time. This gave rise to the idea of using the exchange data as crucial information for the forex market.

Point K
The market orders are displayed in the stock market, the limit orders are not. This gave rise to the idea of making limit orders visible in the chart.

Point L
The iceberg orders are behind the limit orders, with a certain filtering I tried to make these iceberg orders visible in the chart.

Point M
In fact, market orders move the market, which is what many volume traders rely on. This assumption is wrong, however, because limit orders actually move the market.

Point N
The big players have carried out many experiments in recent years, including making liquidity available to themselves. I did extensive research on this.

Point O
Through different filter settings I managed to show the strength of the market orders and the strength of the limit orders in the chart.

Point P
The algorithms control the market orders and limit orders. With the help of different modules, I try to identify these algorithms.

The ideas and projects described here are detailed in this blog. All associated indicators can be downloaded free of charge, many contributions are underlaid with videos. My trading approach uses only proprietary approaches, because in my view the market is much more complex than many market participants think. A sustainable strategy has not been developed in the past 600 years, so I use my creativity to develop my own trading advantages. I am strongly oriented towards the big players, which influence 85% of the market. Today I would like to present you another creative idea with which I am already working very successfully and with which no one has yet worked. However, this idea sounds completely crazy at first.



You sit intently in front of your trading screen and wait for the right opportunity to get started. Suddenly our eyes register an opportunity, the nerves send the information to our brain, which in turn controls our hands to make the corresponding trade. We press the Buy button and our computer sends the order over the Internet to our broker, who opens this order for us. We are now in the market, a strong bullish candle has shot up, but we entered the market far too late. Now we are seeing a big player push the price down and the price is getting closer to our stop loss. What should we do? Give the price some air and expand the stop loss or get out now because we missed the entry? We get out and a second later, the price rises sharply again. If we stay in it, the price may be pushed into our extended stop and we are annoyed that we did not exit directly. A situation that every beginner has experienced before, for some it is even a recurring Deja Vu. What just happened here?

Well, we reacted correctly, but unfortunately much too slowly. One reason for this could be a much too high latency that many traders have to deal with on a daily basis. In some cases, retail traders work with latencies of 100-200ms, which bring a large trading disadvantage. Good ping times are 20-30ms, which can usually only be achieved with fiber optic cable. The big players and high-frequency traders have long been working with microwaves that are theoretically faster than the light and reach latencies of 5-8ms. These are worlds that we retail traders will never reach because the costs of this technology would consume enormous amounts. In principle, however, the big players have no decisive advantage because there is a factor that cannot be accelerated even with a latency of 1 ms. This factor is limited by our sensory stimuli.

We humans perceive our environment with 5 senses, I mean the ability to see, hear, smell, feel and taste. In science, this means whole sensory systems. With the help of the external sensory organs - eyes, ears, mouth, nose and skin - visual, acoustic, gustatory, olfactory and haptic stimuli are registered, which are then processed in the brain. Many millions of sensations are registered every day, most of which are only perceived unconsciously.
Which of these 5 senses could theoretically be used for trading? Tasting and smelling would probably be difficult and would fall out. Three senses remain: seeing, feeling and hearing. What sense do we mainly use for trading? The correct answer: the sense of sight, with the help of our eyes. We will now take a closer look at whether this is a good decision.

The sense of sight: Visual stimuli such as images, colors or shapes are the most important for human senses. The sense of sight provides around 80 percent of all information from the environment that we process in the brain. It has the highest absorption capacity of all senses, followed by hearing and touch. The diverse content, messages and associations that are associated with an image can be transported very quickly. Our visual perception is subject to weak cognitive control. This enables key emotional stimuli to be used that automatically force our attention. Advertising benefits considerably from this.

The sense of touch: Haptic stimuli such as shapes, materials and surfaces can strongly influence product and brand perception. In combination with the sense of sight, haptic stimuli ultimately decide to buy a product in a car or furniture store. Haptic senses also help to make the right decision in the fruit and vegetable market. 10,000 receptors sit alone on the skin surface of one hand and wait for signals. In addition, human well-being is created through touch. Compared to seeing, hearing, smelling or tasting, the sense of touch is rather low perception. We rely more on our eyes.

The sense of hearing: Acoustic stimuli include sounds, melodies and rhythms that are perceived through our sense of hearing. The sense of hearing is the most differentiated of all five senses. It is far more sensitive, precise and also more powerful than the eye. Words are processed much faster than pictures. Around 6-10 words can be processed at the same time that an image can be processed by the brain. Our hearing is directly connected to moods. Different tones lead to a different, emotional effect on the recipient and thus determine the behavior. Music can make us cry, the voice of people we love has a calming effect.

What is interesting is the different speed of reaction to different stimuli. People react fastest to tactile and acoustic stimuli, followed by visual stimuli. Tactile stimuli can sometimes be received faster than acoustic stimuli, but the challenge lies in the fact that tactile stimuli cannot be clearly differentiated. This means that our sense of sight is the slowest to react to external stimuli. The sense of sight, from the point of view of the speed of reaction, is therefore rather disadvantageous for action.

From a physical point of view, what our senses identify as simultaneous has not always happened simultaneously. We still perceive optical stimulations that do not follow each other for more than 20-40ms as a single stimulus. The television and cinema industry is based on this. From around 14 to 16 frames per second, the human brain perceives successive images as moving images. Current frame rates are between 24 and 48 frames per second (24-48 Hz). Our sense of touch reacts much more sensitively with 10-20ms. Our sense of hearing cannot temporally resolve two acoustic stimuli that are 3-5ms apart, these are experienced as one sound event. If you output the tones in one ear via headphones, from a difference of approx, 2ms they are no longer felt in the middle of the head, but laterally offset.

First a stimulus must be perceived, then there is a reaction time to implement the stimulus. If you should respond to a stimulus as quickly as possible (e.g. press a button) in a reaction test, you need at least 100ms (0.1s), but usually longer. Intensive training can increase your reaction speed. In the optical range you can improve from 360ms to 240ms and in the acoustic range from 180ms to 100ms. Both hands can be equally powerful. It is interesting that our reactions take place preferably in intervals of approximately 30-40 ms. This means that we are only able to decide over 25-30 decision points per second.

So we first perceive a certain stimulus (candle begins to rise) and need a certain reaction time to implement this stimulus (we want to buy). We press the buy button and now my order must be sent to the broker. The latency is crucial for this. Now let’s look at that in theory.



At point A we see the total theoretical time it takes us to trade, divided between our three different senses. With the help of our eyes, we are only barely half a second later in the trade, while we could halve this time via sounds.

At point B we see the times that result when we train our reaction time. In the ideal case, we could be in the market four times faster using headphones, than with our untrained eyes. In the example, I assumed very good latency (20ms), which can be achieved via an optical fiber connection. With a poorer internet connection or a catastrophic broker, these times can increase significantly.

Identification with sounds or with our sense of touch beats our sense of sight by a long way. Basically, the question should be asked why we should make a trade decision in the future with the reaction time of our eyes. I have been using the acoustic stimuli with great success for some time. I would like to show you an example. I recorded a video using two different tones for bid and ask. If you watch the video, you will initially have problems to tell the different tones apart. This is completely normal at the beginning, because the senses first have to get used to it.




In addition to the visual effect in the video, you could hear two different tones that give us specific information about what's going on in the market. The lighter tone was used for the ask, the deeper tone for the bid. I only filtered cumulative market sell orders and cumulative market buy orders from 2 lots, as long as they were created within 1/1000 second. We see the price going up and at the same time, strong market sell orders are entering the market. In the example, we can perceive a rapid sequence of different tones. For this you should work with special tones that are able to react quickly. With these tones you are able to identify different information much faster than with the eyes. The current example was very extreme since I have shown almost all incoming bid and ask. I myself do not work with bid and ask, but with a special filtering in the area of limit orders. When working with bid and ask, you can hear the current volatility in the background. So you can also deal with other things and automatically hear, when more orders come into the market.

I found the first test results with different tones to be very helpful, especially since I selected tones that didn't bother me. With the right filter setting, I was able to capture certain situations much faster and thus achieved a significantly better performance. However, I still used my eyesight too much, which still limits my reaction times. But it gets better every day.



I developed a strategy from this idea. I got the idea because I was allowed to fly a helicopter myself 13 years ago. Of course, an experienced pilot was sitting next to me, who could intervene at any time. First, the pilot took control to take the helicopter up in the air. A helicopter is controlled with three different taxes. The joystick, or cyclic, is used in hover to move the helicopter to the left, right, front or back. In forward flight, the Cyclic initiates the curves or the ascent and descent. With the pedals, the helicopter can be turned around the vertical axis, and with the Collective, the pilot controls the climb and descent in hover, and together with the Cyclic, the speed in forward flight. With each helicopter, the joystick is operated with the right hand and the collective with the left. The feet are used to control the tail rotor via the pedals. Due to the instability of a helicopter, the Cyclic must not be released in flight unless the helicopter is equipped with an automatic stabilization system.

When we were in the air, I took control. It didn't work at first because my feet and hands had to balance 3 dimensions at the same time and I was constantly thinking about which properties are assigned to the Collective and Cyclic in combination with the pedals. The pilot recommended switching off my head and only flying with the feeling. After a few minutes, I was able to fly the helicopter. It was a little more difficult later to keep the helicopter in the air, but I succeeded a few times. These experiences gave me the idea of receiving and implementing information from trading in a completely new form.

The goal is to completely relieve the sense of sight and to concentrate exclusively on the sense of hearing and touch. The sense of hearing and touch should receive different information from the DoM and the time and sales list in order to make faster decisions. First and foremost, these are the individually filtered algorithms that are intended to address the sense of hearing and touch in different ways. I have developed some ideas that I would like to implement this year. However, this is still a big challenge because it places certain demands on my technology.

Conclusion:

Big players and high-frequency traders are investing millions of dollars to use microwaves to reduce latencies from 15ms to 8ms, but this is of little benefit due to the limited sensory stimuli (sense of sight). What is the use of a tuned vehicle that can reach 200 miles if the road is damaged and such a speed does not allow it? A change from optical stimuli to acoustic stimuli brings significantly greater advantages.

Our sense of hearing reacts 4 times faster and our sense of touch reacts 2 times faster than our eyes. However, we only act with our sense of sight. We can see three-dimensional charts with our eyes, but the response time will always be too slow. That is why I would like to concentrate on sense of touch and hearing in the future. I need 2 different information from the DoM and 2 different information from the times and sales list, which should affect my sense of touch and hearing. Our two brains react differently to signals, and this property can be used extremely well. This would make it theoretically possible to process a simultaneous, four-dimensional information architecture. What is decisive is what type of information we receive and how it specifically affects our senses. By using the sense of touch and hearing, trades could be implemented a total of 3 times faster than with the eyes. However, this procedure also requires special training, since at the same time the sense of sight must be shut down completely.

At first that sounds completely crazy, but when people talked about walking on the moon in the 1950s, they were also declared crazy. Maybe one day trading will take place with special suits that send information to our fastest senses. But that is still a long way off. First of all, we use the opportunities that we have to achieve smaller trading advantages. It is enough if you manage to identify Bid and Ask using special headphones.

Resounding success is always a step from the visible known to the hidden unknown. This idea may be the first step in a new future. We will see.

I wish you a successful trading week

best regards
Michael

Currency strength dashboard and Stophunting chart


Hello dear subscribers,

First of all, I am pleased that the interest, in the provided dashboard from the Forex market, was so great.

Currency strength dashboard and Stophunting chart

I am aware that the structure of my dashboard contains 24 different charts and is therefore not easy to create. Nevertheless, I hope that you will get important information from it. The indicator that hides the frame creates significantly more space, which means that the charts can be displayed more clearly.

I wish you continued success.

Lovely wishes
Michael

Iceberg orders are much smaller than we suspect


Hello dear subscribers,

An iceberg order is a limited buy or sell order on a stock exchange, where the total volume is not visible in the open order book. You can see only a small fraction of it. In addition to the total number of Lots, the iceberg order defines the peak number of Lots that corresponds to the visible part of the order. After they have been fulfilled, another order with the same peak volume automatically advances 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. Four weeks ago I briefly discussed iceberg orders.

20% of the total volume are iceberg orders

Result: Around 20% of the total trading volume is accounted for by iceberg orders, which can increase 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.

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



In this investigation, it emerged that about 20% of the total trading volume was generated by iceberg orders. There have been several studies in recent years, depending on the market situation and market environment, up to 52% of the total trading volume was achieved by iceberg orders. The iceberg orders are therefore used more often than initially assumed and these are increasingly smaller orders. Iceberg orders are primarily used to absorb the stops of retail traders. However, stops have the peculiarity of being at different price levels, which is why the big players are forced to occupy several price levels with their iceberg orders in order to absorb the decisive volume of the stops. Iceberg orders are used to hide interest in certain price levels.

As a rule, iceberg orders can only be identified after they have been executed. At the moment this is important information, but I am pursuing the approach of identifying iceberg orders at different price levels before they are executed. I will deal with this in more detail in my next post.

Best regards
Michael