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Liquidity and Structure

  • #81
  • Nov 23, 2022 8:40pm Nov 23, 2022 8:40pm
Quoting Inthebox
watching level {image}
got hit by news spike.
watching yesterday high.
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ITB - Seeing Orderliness amongst 'Randomness'
  • #82
  • Nov 23, 2022 8:46pm Nov 23, 2022 8:46pm
Quoting Inthebox
{quote} got hit by news spike. watching yesterday high. {image}
Most Fed members hint slow down.
i got hit too
PA
  • #83
  • Nov 23, 2022 10:42pm Nov 23, 2022 10:42pm
Can it retest 108 again?
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PA
  • #84
  • Nov 23, 2022 11:34pm Nov 23, 2022 11:34pm
expecting a bounce
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ITB - Seeing Orderliness amongst 'Randomness'
  • #85
  • Nov 24, 2022 12:37am Nov 24, 2022 12:37am
Quoting Inthebox
{quote} got hit by news spike. watching yesterday high. {image}
done
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ITB - Seeing Orderliness amongst 'Randomness'
  • #86
  • Nov 24, 2022 12:45am Nov 24, 2022 12:45am
Should we turn this thread to live trading thread or just continue discuss LQ and structure?
i mean sharing view from chart , not signal other to follow trade.
PA
  • #87
  • Nov 24, 2022 1:00am Nov 24, 2022 1:00am
my view here.
first provide a chart with level zone of interest.
those who can interpret will know which side to take.
in a way it is live focusing on the level, yet no entry signal provided.
entry up to individuals and can differ quite a lot.
ITB - Seeing Orderliness amongst 'Randomness'
  • #88
  • Nov 24, 2022 1:28am Nov 24, 2022 1:28am
so what does the basic pattern for trade entry looks like?
be aware that the pattern can take a variety of forms.
no one pattern fits all.
pattern alone is not enough.
one also has to know what is the surrounding terrain looks like before attacking.
the other thing is what is the time of the day for safer trading.
time comes before price pattern.
not forgetting that capital preservation supersedes all.
SL and TP.
ITB - Seeing Orderliness amongst 'Randomness'
  • #89
  • Nov 24, 2022 1:54am Nov 24, 2022 1:54am
Hi LeongPuiy,

First of all, I did not have the time to go through this thread in detail, but I have to just agree with posts of ryuryu.

As was already stated, if we wanted to identify liquidity, we need to define what it really is. Because without proper definition, it will quickly drives us away from what liquidity could really be. The generally accepted definition is: "ability to trade large quantities quickly, at low cost, and without moving the price".

In the definition I highlighted those parts, that we can measure or estimate using market data, in general referred as liquidity dimensions. We split them into these dimensions because no measure can capture all of these dimensions at the same time (to a limited extent, the order-book slope can as far as I know). Anyway, the literature defines three groups of measures: price impact, trading cost and trading activity. The first two, addresing the liquidity dimensions above, the third one, not so much, but can be also a good proxy to any of the estimators described later.

In order to measure any of the dimensions, we either need trades-and-quotes (TAQ) data or limit order book data (LOB), or ideally both... The simplest measure of trading costs is quoted spread, which drawback is, that it defines the trading costs for small enough market orders -- orders not moving the price. Measure, that does not bring this drawback to the table (but has others ofc) is effective spread, for which to measure, you already need the average execution price of a market order and the mid-price preceding this trade. Third measure, which in contrast to the previous trading costs measures, measure price impact is the realized spread, for which you also need to know the aggressor tag of the market order. The LOB slope is an interesting measure, but its main drawback can be the frequent limit order cancelation. There are several others liquidity measures that uses TAQ and LOB, you can find them in the academic literature, e.g. price impact measure of Hautsch and Huang (2012).

Those were the measures of the liquidity dimensions. But, luckily, we have estimators of them (called as liquidity proxies). How good or bad these estimators are at FX markets can be seen, e.g. in Karnaukh et al. (2015). As a critique to this type of literature, it is still questionable, what level of shared information between these measures and proxies is enough for our application of, mainly, intra-day trading. There is literally tens of those proxies defined and used across the literature. Why? Because the researchers have the same problem as traders -- not having the access, computational capacity, nor money to work with LOB or TAQ data. To name a few proxies, usually exhibiting higher level of shared information with the measures are Amihud (2002), Roll (1984), or more recent DSpread by Chung and Zhang (2014). Further I omit the trading activity measures and their relation to liquidity, so you can explore it yourself=)

This is the liquidity, now you can also think of what it is not and filter the majority of posts in this thread.

Enough of academia talk, there was this trading legend, Paul Rotter, who did something very similar -- he checked the price impact of his order, found out the "true" liquidity and jumped in if his condiitons of liquidity were met. What he did was very similar to an approach combining LOB slope with effective spread. Reportedly, he made a fortune. Why? Mby just because he knew what liquidity really is... https://www.tradingheroes.com/paul-r...-myth-the-man/


References:
Amihud, Y., 2002. Illiquidity and stock returns: cross-section and time-series effects. Journal of financial markets, 5(1), pp.31-56.
Chung, K.H. and Zhang, H., 2014. A simple approximation of intraday spreads using daily data. Journal of Financial Markets, 17, pp.94-120.
Hautsch, N. and Huang, R., 2012. The market impact of a limit order. Journal of Economic Dynamics and Control, 36(4), pp.501-522.
Karnaukh, N., Ranaldo, A. and Söderlind, P., 2015. Understanding FX liquidity. The Review of Financial Studies, 28(11), pp.3073-3108.
Roll, R., 1984. A simple implicit measure of the effective bid‐ask spread in an efficient market. The Journal of finance, 39(4), pp.1127-1139.
  • #90
  • Nov 24, 2022 2:19am Nov 24, 2022 2:19am
Quoting danos
Hi LeongPuiy, First of all, I did not have the time to go through this thread in detail, but I have to just agree with posts of ryuryu. As was already stated, if we wanted to identify liquidity, we need to define what it really is. Because without proper definition, it will quickly drives us away from what liquidity could really be. The generally accepted definition is: "ability to trade large quantities quickly, at low cost, and without moving the price". In the definition I highlighted those parts, that we can measure or estimate using market...
I appreciate your value sharing,
i will try to do my research
PA
  • #91
  • Nov 24, 2022 2:25am Nov 24, 2022 2:25am
Quoting LeongPuiy
Still watching and waiting this happen. {image}
For this post, i apologise for it,
cause those line i mark as liquidity by the material teaching from internet,
it might be or might not be.
but for sure is, LQ is not just that simple like possible stop hunt place.
And i definitely wrong at structure sign, GU hvnt really show sign yet for drop yet, internal pullback n sideway then eventually broke upside.
PA
  • #92
  • Nov 24, 2022 2:33am Nov 24, 2022 2:33am
Quoting Inthebox
so what does the basic pattern for trade entry looks like? be aware that the pattern can take a variety of forms. no one pattern fits all. pattern alone is not enough. one also has to know what is the surrounding terrain looks like before attacking. the other thing is what is the time of the day for safer trading. time comes before price pattern. not forgetting that capital preservation supersedes all. SL and TP.
I have redo my analysis and define structure at big tf and smaller tf again, to check what am i missing.
my few trade went nicely then reverse to ate my stop recently.
something i did wrong.
need to improve it.
i currently seeing GU may pullback to 2020. From smaller tf strucuture.
i may wrong, took trade and tight stop 2130
PA
  • #93
  • Nov 24, 2022 2:50am Nov 24, 2022 2:50am
retest back of trend line and asian high, which has been broken.
upward momentum appears to be strong.
however may soon encounter resistance.
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ITB - Seeing Orderliness amongst 'Randomness'
  • #94
  • Nov 24, 2022 2:53am Nov 24, 2022 2:53am
Quoting LeongPuiy
{quote} I have redo my analysis and define structure at big tf and smaller tf again, to check what am i missing. my few trade went nicely then reverse to ate my stop recently. something i did wrong. need to improve it. i currently seeing GU may pullback to 2020. From smaller tf strucuture. i may wrong, took trade and tight stop 2130
Why do you blame yourself, your analysis may have been spot on.

The name of the game is for the small time bankers to set traps for retail traders, who in turn full for trades set by big banks, who in turn fall for traps set by the biggest players in the game.

Every single move has a trap somewhere, analysis will not save you so calm down, drink a coffee and chill out knowing you are just a victim like everyone else except for the top 5.
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Trading thin liquidity at the boundary of the charts
  • #95
  • Nov 24, 2022 2:58am Nov 24, 2022 2:58am
Quoting RickM
{quote} Why do you blame yourself, your analysis may have been spot on. The name of the game is for the small time bankers to set traps for retail traders, who in turn full for trades set by big banks, who in turn fall for traps set by the biggest players in the game. Every single move has a trap somewhere, analysis will not save you so calm down, drink a coffee and chill out knowing you are just a victim like everyone else except for the top 5. {image}
Hmm..
i blame myself being greedy.
sometime i hv nice profit but decide to hold full risk and end up market reverse.
i still trying to learn and improve, but still stuck at the same circle.
PA
  • #96
  • Nov 24, 2022 3:03am Nov 24, 2022 3:03am
trading the wrong pair today? lol.
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ITB - Seeing Orderliness amongst 'Randomness'
  • #97
  • Nov 24, 2022 3:05am Nov 24, 2022 3:05am
Quoting Inthebox
retest back of trend line and asian high, which has been broken. upward momentum appears to be strong. however may soon encounter resistance. {image} {image}
2143 was the daily OB top, if it didnt hold , next maybe at least 218x or higher.
i follow smaller tf structure and set a tight stop, overall counter trend is still risky for me. Still survive, and watching, is it just sweep daily high or it want higher.
PA
  • #98
  • Nov 24, 2022 3:08am Nov 24, 2022 3:08am
Quoting Inthebox
trading the wrong pair today? lol. {image}
Watching .
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PA
  • #99
  • Nov 24, 2022 3:10am Nov 24, 2022 3:10am
Quoting LeongPuiy
{quote} 2143 was the daily OB top, if it didnt hold , next maybe at least 218x or higher. i follow smaller tf structure and set a tight stop, overall counter trend is still risky for me. Still survive, and watching, is it just sweep daily high or it want higher.
will see new york session but it's bank holiday.
i take 1st partial profit around 15 pips and put to BE plus.
saved a lot of heartache.
ITB - Seeing Orderliness amongst 'Randomness'
  • #100
  • Nov 24, 2022 3:22am Nov 24, 2022 3:22am
Quoting LeongPuiy
{quote} Watching . {image}
itching hand m1 scalp short the asian high level.
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ITB - Seeing Orderliness amongst 'Randomness'
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