questions from a future quant | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

The Birth of a Quant Trader 107 replies

Statistical mean of the market [quant corner] 191 replies

Quant trading & QuantLib 6 replies

SAS for quant analysis 0 replies

Quant Corner 12 replies

Attachments: questions from a future quant
Exit Attachments

questions from a future quant

  • #21
  • Jul 6, 2005 3:58pm Jul 6, 2005 3:58pm
Quoting ivenger
..pressure, wind speed etc. are correlated, but different components of weather. When you do a numerical prediction of temperature at time t for example - you wish to know all those parameters of the system at time (t-1) (pressure X, wind speed Y etc.). In order to make the prediction you compare them to the historical weather data and see that in some past point (or several different points) in the past (k-1) the pressure was X, the wind speed Y and the cold front was Z km. away and you KNOW that at time k the temperature back then was 25 degrees. You predict that this time the temperature also will be the same. Of course, usually you are not basing your prediction on just one time point in the past, but on several of them and check the variance of the temperatures...

...In trading data we have the price (which is compared to the temperature) and the only other parameter I know of which is continuous is volume.
this describes exactly the approach i am singing about.

as for the data we have in trading, i know of three (that i am willing to list here) catagories that are continuous...

price
volume
range
Relax and be happy.
  • #22
  • Jul 6, 2005 4:47pm Jul 6, 2005 4:47pm
By range you mean the range a currency passes thorugh some period of time?

Then this is just the function of the price change. i.e. of the integral of the price - - hence range is just another indicator just like MA.
  • #23
  • Jul 6, 2005 5:18pm Jul 6, 2005 5:18pm
Quoting ivenger
By range you mean the range a currency passes thorugh some period of time?

Then this is just the function of the price change. i.e. of the integral of the price - - hence range is just another indicator just like MA.
well i guess you could make that argument. but range is special because it tells you about the volatility, or the "level of action". so i guess the argument is, is volatility just another way of looking at price? or can it be considered indpendent of price?
Relax and be happy.
  • #24
  • Jul 6, 2005 5:26pm Jul 6, 2005 5:26pm
Quoting merlin
well i guess you could make that argument. but range is special because it tells you about the volatility, or the "level of action". so i guess the argument is, is volatility just another way of looking at price? or can it be considered indpendent of price?
Yes, I think Volatily is just some property of the price. The fact that this is a very imortant indicator is beside the point right now. But it's not based upon any additional data.
  • #25
  • Jul 7, 2005 5:49pm Jul 7, 2005 5:49pm
Quoting ivenger
Yes, I think Volatily is just some property of the price. The fact that this is a very imortant indicator is beside the point right now. But it's not based upon any additional data.
ya know, i was thinking about this and you are absolutely right. volatility is just another way of looking at price. and with that line of thinking, volatility is my favorite indicator.
Relax and be happy.
  • #26
  • Edited 3:15am Jul 8, 2005 3:02am | Edited 3:15am
Experience has taught me not to trust any one set of information, but use as many as possible to confirm your primary hunches. So I studied and continue to study patterns. There are certainly "often repeated ones" and there has to be more than coincendence for their occurance. I also use fibonacci retracements because the market seem to pay some attention to them. I use candlesticks, because they add to the preceding, offering another layer of confirmation. In the beginning, I used stochastics and macd, as they were easy to understand, but now I seldom put them on my charts. I use CCI, Aroon, and RSI, because they all help confirm overbought/oversold conditions, however I have learned that when the market has a lot of momentum, extreme overbought/oversold conditions are common, so alone, they are not to be trusted.

Trendlines and moving averages are very helpful, as most of the time the market tends to use them as limits. Otherwise, there would be none. But again, combine these limits with indicators and chart trends. And don't forget to test your hunches by looking at different time intervals. Certainly, options have a lot more to do with weekly and monthly charts, indicators and patterns, but it really helps to know that the 2 hour chart says "sell," when your 15 minute chart says "buy."

The more you know about all of the above, the more consistent your results will be. And if you are going to day trade, you have got to know them like the back of your hand.

There is a "personality" to the markets. You always need to be aware that there is someone out there competing against you to take your money. That is why stochastics and macds often do "fake out" moves. Market manipulators know that beginners will be "suckered" into positions on the first cross of the macd or stochastic. They will also be "suckered" by first time crosses over trendlines or Ma's. They will make the market go up or down to, but not quite 68% (I am assuming you know fibs) or just over it, to see if you are willing to put your money on the line, and then they will take the market against you. If you have a stop near a ma or trendline or fib number, be certain it will be taken out. You may as well just hand them your money. Stops are the bread and butter of market manipulators.

You have got to be very wary. There IS a large market out there that feeds off of many small traders who are struggling to lean how to trade. I have had to learn not only the common patterns, but the common tricks which are used against most traders. That is what I call "market personality." It exists, and it exists to take your money. So I have learned tricks to fool the market maker, just like he/she has tricks to fool small traders. Don't ask me what these are, because they ARE my "secret family recipe."

I hope this has been helpful.

Patrick
  • #27
  • Jul 8, 2005 2:40pm Jul 8, 2005 2:40pm
Quoting Patrick_Rhodes
Experience has taught me not to trust any one set of information, but use as many as possible to confirm your primary hunches. So I studied and continue to study patterns. There are certainly "often repeated ones" and there has to be more than coincendence for their occurance. I also use fibonacci retracements because the market seem to pay some attention to them. I use candlesticks, because they add to the preceding, offering another layer of confirmation. In the beginning, I used stochastics and macd, as they were easy to understand, but now I seldom put them on my charts. I use CCI, Aroon, and RSI, because they all help confirm overbought/oversold conditions, however I have learned that when the market has a lot of momentum, extreme overbought/oversold conditions are common, so alone, they are not to be trusted.

Trendlines and moving averages are very helpful, as most of the time the market tends to use them as limits. Otherwise, there would be none. But again, combine these limits with indicators and chart trends. And don't forget to test your hunches by looking at different time intervals. Certainly, options have a lot more to do with weekly and monthly charts, indicators and patterns, but it really helps to know that the 2 hour chart says "sell," when your 15 minute chart says "buy."

The more you know about all of the above, the more consistent your results will be. And if you are going to day trade, you have got to know them like the back of your hand.

There is a "personality" to the markets. You always need to be aware that there is someone out there competing against you to take your money. That is why stochastics and macds often do "fake out" moves. Market manipulators know that beginners will be "suckered" into positions on the first cross of the macd or stochastic. They will also be "suckered" by first time crosses over trendlines or Ma's. They will make the market go up or down to, but not quite 68% (I am assuming you know fibs) or just over it, to see if you are willing to put your money on the line, and then they will take the market against you. If you have a stop near a ma or trendline or fib number, be certain it will be taken out. You may as well just hand them your money. Stops are the bread and butter of market manipulators.

You have got to be very wary. There IS a large market out there that feeds off of many small traders who are struggling to lean how to trade. I have had to learn not only the common patterns, but the common tricks which are used against most traders. That is what I call "market personality." It exists, and it exists to take your money. So I have learned tricks to fool the market maker, just like he/she has tricks to fool small traders. Don't ask me what these are, because they ARE my "secret family recipe."

I hope this has been helpful.

Patrick
It has been extremely helpful, thank you. I enjoy reading all of your posts and responses, you have a lot to offer. Thanks again for everything.
Steven
  • #28
  • Edited 8:16pm Jul 8, 2005 6:01pm | Edited 8:16pm
Quoting merlin
gotcha. the "subset" of patterns i am looking are patterns caused by events. i find that when a pattern is caused by a event it is rooted in crowd psychology and will persist over time (ie it is predictable). i do trade 123 formations, and those are not caused by events (they are just patterns floating out there), so i cant really say this is the only subset i look at. but in the past few months i have completely dedicated my research to patterns caused by events.

most indicators to me are an attempt to find an algorithm that predicts the market. usually indicators give you no more than a different shade of sunglasses which to look at price. personally, i do not believe there is an algorithm out there that predicts the market, putting me in the "believer" category of the efficient market hypothesis.

i disagree that "oversold" is a pattern. oversold is a statement made by an indicator based on that indicators algorithm. also, patterns are found intermittently in the data, whereas oscillator indicators look at uninterrupted data over a prior period.
From reading this post and subsequent posts I'd say that your application of terminology is the lense or "sunglasses" through which you see the markets. All of the discussion here has simply been different applications of terminology to the same basic processes of pattern identification and subsequent application for forecasting probability. Taking general terms such as "event", "pattern", "movement", and redefining them as subsets to help you look at market action in meaninful ways. I don't say this in a negative context any more than the market wizard that first used the sunglasses metaphor. He was actually validating the use of whatever lenses help us to see what we need to see in order to make decisions. He was trying to get us to see that ultimately the lenses are only an aid to understanding and harnessing our own market psychology.

Regardless of how seemingly unique or sophisticated -- the process is fundamentally the same when looking for patterns. The only difference I can see is in how you define the events that you are using to disseminate market behavior.

First a definition for "event". According to Webster an event is "an occurance". This is appropriately broad because the word "event" does not have intrinsic subsets within its meaning. Any subset you may use to further define "event" is a subset of the word that, for effective communication purposes, requires a more specific label unless you first agree on a subset definition for the purpose of discussion.

In trading there are two primary types of events:

1. Technical
2. Funadmental

Technical events include price changes, time periods, and any defineable movement in indicators, lenses, or filters, applied to price, time, and/or volume. This includes all events such as the occurance of conditions like overbought, divergent, oversold, crossing of averages, etc. Notably anything that qualifies as a technical occurrence also qualifies as a technical event.

Fundamental occurrences (or events) are things such as financial reports, news events such as disasters, bumper crops, large purchases or sales, devaluations, droughts, famines, takeovers, bank failures, stop or limit clusters, option barriers, and any other occurances that are not derived as a direct result of measuring price, time, and relative movement.

Interestingly "volume" is a kind of hybrid indicator because it has a direct correlation with fundamental information. A 20 billion dollar volume event is a fundamental piece of market information because it is directly tied to a specific quantity of money or goods being bought and/or sold and therefore represents an event that is clearly fundamental in nature. It is however also a technical event because it is pure quantity and, without alteration, may be mathmatically manipulated with other technical data to technically identify patterns of accumulation and/or distribution.

Pattern: This word describes any occurance that may be used to measure and/or label other events, either quantatively, qualitatively, or both, for purposes of recognition of similarities and/or differences. Ultimately in trading pattern recognition is used to determine probability of reccurrence. Therefore "oversold" may not enter into your definition of "pattern" but in effect is still an occurrence that recurrs and therefore qualifies not only as an event but also as a pattern.

Having said all that for purposes of clarity it appears to me that you are looking at fundamental events that produce measureable and somewhat reliable recurrences of price behavior at isolated intervals. It also appears that you are using the word "event" only when connected with fundamental occurrences but not with technical occurrences. It also appears that your measurement of price activity associated with these "events" must be measured in much shorter time frames so as to isolate price activity that may be associated with the "event" and eliminate price activity that is just noise and therefore unassociated with the "event".

I hate to have to be so detailed with definitions but it seems that we are using some words very differently so I figured it was necessary to get that out of the way first to avoid semantic misunderstandings.

What I see in the application of the weather paradigm is that weather is mostly about fundamental analysis using mostly quantative instruments. Since weather is not subject to psychology in any known or measurable way nor is there any immediate correlation to the decisions of government or financial decision makers and since weather conditions do not react to crop failure or major terrorist events by suddenly moving its rain to a different country -- it seems like the paradigm breaks down in some significant ways.

The weather may fool us but it never lies. The market may fool us too but the market is rife with lies.

FT
  • #29
  • Jul 9, 2005 9:34am Jul 9, 2005 9:34am
When I mentioned chart patterns, I was not talking about the most basic, like head & shoulders, pennents, triangles, etc, although these are essential basics. I assume every serious trader knows and understands these.

If you want to know of what I was speaking, look at James 16 posts in "chart thread." It is a prime and good example of patterns which are used by successful professional traders.

I suggest you copy all of his charts and study them. If you have the time and interest, train a fuzzy logic-fractal program to recognize these and other patterns in multiple time frames, and feed off of them. If I were younger and less experienced, that is what I would do.

Patrick

PS, my only addition to James' charts is to recommend using candlesticks. But this is just a matter of personal preference and comfort. I started out with OHLC bars, and moved to candlesticks after about 10 years of trading, and would never go back. Candles just seem to give me a better sense of how the market is reacting on a bar, by bar basis.
  • #30
  • Jul 11, 2005 5:41pm Jul 11, 2005 5:41pm
Quoting Patrick_Rhodes
Market manipulators know that beginners will be "suckered" into positions on the first cross of the macd or stochastic. They will also be "suckered" by first time crosses over trendlines or Ma's...

You have got to be very wary. There IS a large market out there that feeds off of many small traders who are struggling to lean how to trade.
i once thought this too. but then it dawned on me one day that small traders, especially those learning to trade, are a VERY small % of the volume out there. id guess that the percentage of volume is less than 0.01%. so, where is the reward for taking small traders money? there is no reward!!! and so there is no motive for large traders to "trick" and "fool" the retail traders out there. just my 2 cents, of course
Relax and be happy.
  • #31
  • Jul 11, 2005 5:56pm Jul 11, 2005 5:56pm
Quoting fijitrader
From reading this post and subsequent posts I'd say that your application of terminology is the lense or "sunglasses" through which you see the markets. All of the discussion here has simply been different applications of terminology to the same basic processes of pattern identification and subsequent application for forecasting probability. Taking general terms such as "event", "pattern", "movement", and redefining them as subsets to help you look at market action in meaninful ways. I don't say this in a negative context any more than the market wizard that first used the sunglasses metaphor. He was actually validating the use of whatever lenses help us to see what we need to see in order to make decisions. He was trying to get us to see that ultimately the lenses are only an aid to understanding and harnessing our own market psychology.
who was the market wizard who made the sunglasses metaphor? i cant find it now. i will have to reread that interview to comment on the true meaning of his comments. i was under the impression that he meant people think too highly of indicators, like they have some magic or something.

Quoting fijitrader
Regardless of how seemingly unique or sophisticated -- the process is fundamentally the same when looking for patterns. The only difference I can see is in how you define the events that you are using to disseminate market behavior.

First a definition for "event". According to Webster an event is "an occurance". This is appropriately broad because the word "event" does not have intrinsic subsets within its meaning. Any subset you may use to further define "event" is a subset of the word that, for effective communication purposes, requires a more specific label unless you first agree on a subset definition for the purpose of discussion.

In trading there are two primary types of events:

1. Technical
2. Funadmental

Technical events include price changes, time periods, and any defineable movement in indicators, lenses, or filters, applied to price, time, and/or volume. This includes all events such as the occurance of conditions like overbought, divergent, oversold, crossing of averages, etc. Notably anything that qualifies as a technical occurrence also qualifies as a technical event.

Fundamental occurrences (or events) are things such as financial reports, news events such as disasters, bumper crops, large purchases or sales, devaluations, droughts, famines, takeovers, bank failures, stop or limit clusters, option barriers, and any other occurances that are not derived as a direct result of measuring price, time, and relative movement.

Interestingly "volume" is a kind of hybrid indicator because it has a direct correlation with fundamental information. A 20 billion dollar volume event is a fundamental piece of market information because it is directly tied to a specific quantity of money or goods being bought and/or sold and therefore represents an event that is clearly fundamental in nature. It is however also a technical event because it is pure quantity and, without alteration, may be mathmatically manipulated with other technical data to technically identify patterns of accumulation and/or distribution.

Pattern: This word describes any occurance that may be used to measure and/or label other events, either quantatively, qualitatively, or both, for purposes of recognition of similarities and/or differences. Ultimately in trading pattern recognition is used to determine probability of reccurrence. Therefore "oversold" may not enter into your definition of "pattern" but in effect is still an occurrence that recurrs and therefore qualifies not only as an event but also as a pattern.
whoa! nice breakdown!! my only comment here is that if volume is a hybrid indicator, then so is every other indicator. you said "directly tied to a specific quantity of money or goods being bought and/or sold and therefore represents an event that is clearly fundamental in nature." cant that be said of a moving average as well?

Quoting fijitrader
Having said all that for purposes of clarity it appears to me that you are looking at fundamental events that produce measureable and somewhat reliable recurrences of price behavior at isolated intervals. It also appears that you are using the word "event" only when connected with fundamental occurrences but not with technical occurrences. It also appears that your measurement of price activity associated with these "events" must be measured in much shorter time frames so as to isolate price activity that may be associated with the "event" and eliminate price activity that is just noise and therefore unassociated with the "event".
i couldnt have said it better myself and yes, short time frames are used to isolate activity.

Quoting fijitrader
I hate to have to be so detailed with definitions but it seems that we are using some words very differently so I figured it was necessary to get that out of the way first to avoid semantic misunderstandings.
we love you for it fiji!

Quoting fijitrader
What I see in the application of the weather paradigm is that weather is mostly about fundamental analysis using mostly quantative instruments. Since weather is not subject to psychology in any known or measurable way nor is there any immediate correlation to the decisions of government or financial decision makers and since weather conditions do not react to crop failure or major terrorist events by suddenly moving its rain to a different country -- it seems like the paradigm breaks down in some significant ways.
i dont get what you are saying here. are you saying that predicting weather is a different animal that predicting price? because of the psychology behind price? do you think the techniques used to predict weahter can be used to predict price?

Quoting fijitrader
The weather may fool us but it never lies. The market may fool us too but the market is rife with lies.
hmmm...interesting comment. what lies is the market rife with?
Relax and be happy.
  • #32
  • Edited 11:40pm Jul 14, 2005 11:12pm | Edited 11:40pm
Quote
QUOTE=merlin]who was the market wizard who made the sunglasses metaphor? i cant find it now. i will have to reread that interview to comment on the true meaning of his comments. i was under the impression that he meant people think too highly of indicators, like they have some magic or something.

Please don't ask me to go rifling through those books when my inlaws are here. <grin> In the best of my recollection he was doing both.

1. He was saying that people do get too hung up on indicators but he was not invalidating the indicators but telling people to think of them as a filter or lense that we use to look at subsets of market activity.

2. He was also saying that (he used elliot wave primarily) it doesn't matter what lense you look through so much as it is important to realize that market sense is the real value that develops as we look through our pet lenses. He believes that people trade successfully not because of the indicators they use but that trading ability comes from trading and not from indicators. He was definitely an advocate of indicators but not in the way people tend to marry the darn things.

Quote
whoa! nice breakdown!! my only comment here is that if volume is a hybrid indicator, then so is every other indicator. you said "directly tied to a specific quantity of money or goods being bought and/or sold and therefore represents an event that is clearly fundamental in nature." cant that be said of a moving average as well?

Fundamentals are specific quantifiable economic realities that try to deal with the principles of supply and demand. With accurate volume figures you can calculate exactly how much money was spent in a given time frame. We may use that information for tech anal but it is also a given quantity of real money that was spent. For example: We may also use the "committment of traders report" which has precise quantities of real money that have been spent or committed. This is cleary unfiltered fundamental information. A moving average is just price movement. It does not tell us specific quantities of real cash or goods. Volume does. A moving average is a derivative of financial activity whereas volume has no filters added.



Quote
i dont get what you are saying here. are you saying that predicting weather is a different animal that predicting price? because of the psychology behind price? do you think the techniques used to predict weahter can be used to predict price?

Any valid means of measuring one thing may be adapted either metaphorically or directly to measure another but I see potential pitfalls or at least rabbit trails that could lead to erroneous conclusions. because weather measurement essentially parallels fundamental analysis in the markets but my point was that weather is not affected by fear or greed and it is from those two things that much money is made or lost.

Quote
What lies is the market rife with?

False, incomplete, or misleading, information. For large traders who handle the big money there is a lot of poker playing which involves bluffing, faking, allowing people to draw the wrong conclusions -- even helping them to. I'm not jaded or bitter about this or anything nor does my knowledge of it cause me to make paranoid decisions. It is just a fact of how the game is played. Every time I become directionally biased about a trade I am in danger of believing a lie because my trading is about probability of success not about direction. If I put too much emphasis on direction I can become untrue to my trading strategy. Again I look at this in a very basic way. To me every time we beleive something to a greater degree than is appropriate for the evidence we have we are engaging in a form of self deception. How detrimental the deception is to us depends on a combination of how correct or incorrect our unsubstantiated belief is AND how much we have invested in the belief.

FT
  • #33
  • Edited 11:43pm Jul 14, 2005 11:38pm | Edited 11:43pm
Quoting merlin
i once thought this too. but then it dawned on me one day that small traders, especially those learning to trade, are a VERY small % of the volume out there. id guess that the percentage of volume is less than 0.01%. so, where is the reward for taking small traders money? there is no reward!!! and so there is no motive for large traders to "trick" and "fool" the retail traders out there. just my 2 cents, of course
Right Merlin. A lot of the market manipulation stories are a throwback to futures and equities trading where floor traders, especially in years gone by, have played all kinds of games where contract sizes were relatively large and volumes and liquidity was relatively (relative to forex) low. Manipulation and stop hunting were practically a tradition.

However in Forex a number of MM's can handle 10 million dollar position sizes from the point and click menu -- at least during any of the three major sessions. This makes the single contract positions, especailly mini's a bit absurd to go after individually.

With small mm's though it probably pays to go after the small traders even on an individual basis because they make such obvious mistakes. However you don't have to go after them individually you could just write an algorithm that spots stop clusters and when liquidity is low, even for a few seconds, and a stop cluster is nearby, the algorithm would just start quoting prices in that direction until the cluster was either hit or volume picked up and took the market the other way before the cluster was hit. MM's are allowed to quote prices based on supply and demand. That stop cluster represents demand for either buying or selling. If current buying and selling is a bit thin, or at least thinner than the volume that cluster would create, what do you think is going to happen? As unethical is this may seem I don't know of any regulation in the forex market that prevents it. If anyone does please speak up.

FT
  • #34
  • Jul 23, 2005 4:09pm Jul 23, 2005 4:09pm
Quoting fijitrader
Please don't ask me to go rifling through those books when my inlaws are here. <grin> In the best of my recollection he was doing both.

1. He was saying that people do get too hung up on indicators but he was not invalidating the indicators but telling people to think of them as a filter or lense that we use to look at subsets of market activity.

2. He was also saying that (he used elliot wave primarily) it doesn't matter what lense you look through so much as it is important to realize that market sense is the real value that develops as we look through our pet lenses. He believes that people trade successfully not because of the indicators they use but that trading ability comes from trading and not from indicators. He was definitely an advocate of indicators but not in the way people tend to marry the darn things.
you let your inlaws visit?? LOL. not me

do you even remember which book it is in? im really interested in finding the quote now, because i may be remembering something that i didnt read. i am rereading NMWs right now, maybe i will run across it in there..

Quoting fijitrader
Fundamentals are specific quantifiable economic realities that try to deal with the principles of supply and demand. With accurate volume figures you can calculate exactly how much money was spent in a given time frame. We may use that information for tech anal but it is also a given quantity of real money that was spent. For example: We may also use the "committment of traders report" which has precise quantities of real money that have been spent or committed. This is cleary unfiltered fundamental information. A moving average is just price movement. It does not tell us specific quantities of real cash or goods. Volume does. A moving average is a derivative of financial activity whereas volume has no filters added.
good argument.

this is a bit unrelated, but last night i was thinking about how to make a mechanical system based on fundamental analysis. for instance, its incredibly easy to make money with a mechanical system if you know what kind of market to expect. some systems work well in bull markets, some in bear markets. what if you decided, maybe at the begining of the month, that fundamentals point to a higher dollar by the end of the month. you would take that fundamental analysis based decision, and implement your dollar bullish mechanical strategy. if the dollar ends up going down, chances are you wouldnt enter many trades because your mechanical system would only buy when prices are rising. if you were right about the market direction just about 60% of the time, this could significantly increase return.

you may wonder why a quant like myself is considering using fundamental decisions for trading. well, over the years, i feel like i am now predicting market direction fairly accurately. not so well that i could trade outright fundamentals, but enough so i could improve the returns of my mechanical systems.

Quoting fijitrader
False, incomplete, or misleading, information. For large traders who handle the big money there is a lot of poker playing which involves bluffing, faking, allowing people to draw the wrong conclusions -- even helping them to.
i agree this happens in many many markets. but i dont think it does in Forex. thats one of the reasons i love Forex so much. the market is just too big for any person's bluff or faking to affect the price (other than the central banks). wouldnt you agree?
Relax and be happy.
  • #35
  • Jul 24, 2005 6:50am Jul 24, 2005 6:50am
Quote
do you even remember which book it is in? im really interested in finding the quote now, because i may be remembering something that i didnt read. i am rereading NMWs right now, maybe i will run across it in there..
I'll try to dig it up. It shouldn't take me that long. Give me a couple days and I'll see what I can do. I'm sure we read the same thing because we both remember the topic ... just a little different interpretation of what we read.


Quote
what if you decided, maybe at the begining of the month, that fundamentals point to a higher dollar by the end of the month. you would take that fundamental analysis based decision, and implement your dollar bullish mechanical strategy. if the dollar ends up going down, chances are you wouldnt enter many trades because your mechanical system would only buy when prices are rising. if you were right about the market direction just about 60% of the time, this could significantly increase return.
There are easier fundamentals to get hold of as well. Banks trade short term fundamentals all the time. Like when a large buy or sell is going down it is always known at least by the bank that is handling it and often that information is shared among colleagues that are not likely to play against it. However such information is not often shared widely because exits are not that easy if too many junp on the same train. Banks like to be in and out catching some free pips before the buy or sell is completed so they have no exit risk. On another note I'm evaluating a system that is right about market direction in the 70 percent range. So far it appears to have some merit.

Quote
you may wonder why a quant like myself is considering using fundamental decisions for trading. well, over the years, i feel like i am now predicting market direction fairly accurately. not so well that i could trade outright fundamentals, but enough so i could improve the returns of my mechanical systems.
I recall the many of the MW's in Schwagers books thought that the best way to trade was using a combination of fundamental and technical analysis.

Quote
i agree this happens in many many markets. but i dont think it does in Forex. thats one of the reasons i love Forex so much. the market is just too big for any person's bluff or faking to affect the price (other than the central banks). wouldnt you agree?
I was thinking of bank traders, large institutional traders, governments... all of them big players in one elaborate poker game. You don't think Greenspan tells it all just like it is when he speaks do you? He is a trader just like the guys in the pits. Sure he doesn't pull the trigger but you can be sure he is one of the largest money manipulators (traders) in the world though he probably doesn't buy or sell a single contract. What about those dudes with BOJ? Big time manipulators. I agree that such manipulation is possibly nothing more than postponing the inevitable and it probably reveal more than they want it to when the play with the markets perception. Last year all the EUROzone layer had to do was discuss how many billion it would take to stall the EURO and it stalled without them having to spend the money. However when individual traders putting on trades of less than 10m I'm pretty sure there are not many times when it does any more than make a small blip. I believe I've seen action within a specific MM where one of their larger professional clients dumps a large amount and it temporarily skews their prices as they buffer the trade and create a mini trend they can fade against the suckers that see a candle pop and jump in for a quick scalp and suddenly the move has reversed, scalping the would be scalpers. No manipulation in Forex? Perhaps we are talking about two different things. You did use the central banks as an example but I don't think it takes a central bank to play with the market. However I would agree that such actions are rather temporary. There have been times I've seen sudden 50 pip moves and a rather rapid return to equilibrim and called my mm to see what it was about. In every case I've been able to find some large trader who had bought or sold... usually a fund trader or someone who had large size. Sometimes a hedge fund. Sometimes I've actually seen this sort of thing tip the market in a direction and a decent intraday trend developed out of it. Sometimes all it takes is word to get round and it is some very respected trader who has entered or exited a position, word gets around, people think he must know something, and along with their own suspicions, to trigger a chain reaction.

I agree though that Forex is a lot harder to move round than most people think except during extremely low liquidity.

FT
  • #36
  • Jul 25, 2005 7:39am Jul 25, 2005 7:39am
"Close but normally it isn't front running but piggy backing."

This Fiji guy really know his stuff...I never thought that way...Huh,some guys really
have license to "print" money.
Btw,how do they get jobs as traders at large banks and stuff? I think it`s much easier to make
money that way,than as individual,little trader.
For me,the real traders are men who trade thier own small accounts until they reach millions.
(maybe because I`m hoping to be one of them).
  • #37
  • Jul 27, 2005 3:32pm Jul 27, 2005 3:32pm
Quoting fijitrader
There are easier fundamentals to get hold of as well. Banks trade short term fundamentals all the time. Like when a large buy or sell is going down it is always known at least by the bank that is handling it and often that information is shared among colleagues that are not likely to play against it. However such information is not often shared widely because exits are not that easy if too many junp on the same train. Banks like to be in and out catching some free pips before the buy or sell is completed so they have no exit risk. On another note I'm evaluating a system that is right about market direction in the 70 percent range. So far it appears to have some merit.
yeah, some of these bank traders make millions "front running" (putting their order in front of the big order). here in the US markets that is illegal and unethical, but in forex it is perfectly legal and widely accepted.

Quoting fijitrader
I recall the many of the MW's in Schwagers books thought that the best way to trade was using a combination of fundamental and technical analysis.
true, but im talking about half fundamental and half quantitative (as apposed to technical). i havent heard many people talk about that. if you picture an automated strategy as a robot that you set free to operate on its own, this approach i am talking about is like using certain robots when im fundamentally bullish, and using other robots when i am fundamentally bearish. as opposed to using technicals to support my fundamental view and vica versa.

Quoting fijitrader
I was thinking of bank traders, large institutional traders, governments... all of them big players in one elaborate poker game. You don't think Greenspan tells it all just like it is when he speaks do you? He is a trader just like the guys in the pits. Sure he doesn't pull the trigger but you can be sure he is one of the largest money manipulators (traders) in the world though he probably doesn't buy or sell a single contract. What about those dudes with BOJ? Big time manipulators. I agree that such manipulation is possibly nothing more than postponing the inevitable and it probably reveal more than they want it to when the play with the markets perception. Last year all the EUROzone layer had to do was discuss how many billion it would take to stall the EURO and it stalled without them having to spend the money. However when individual traders putting on trades of less than 10m I'm pretty sure there are not many times when it does any more than make a small blip. I believe I've seen action within a specific MM where one of their larger professional clients dumps a large amount and it temporarily skews their prices as they buffer the trade and create a mini trend they can fade against the suckers that see a candle pop and jump in for a quick scalp and suddenly the move has reversed, scalping the would be scalpers. No manipulation in Forex? Perhaps we are talking about two different things. You did use the central banks as an example but I don't think it takes a central bank to play with the market. However I would agree that such actions are rather temporary. There have been times I've seen sudden 50 pip moves and a rather rapid return to equilibrim and called my mm to see what it was about. In every case I've been able to find some large trader who had bought or sold... usually a fund trader or someone who had large size. Sometimes a hedge fund. Sometimes I've actually seen this sort of thing tip the market in a direction and a decent intraday trend developed out of it. Sometimes all it takes is word to get round and it is some very respected trader who has entered or exited a position, word gets around, people think he must know something, and along with their own suspicions, to trigger a chain reaction.
LOL. i guess your right, greenspan is a trader. but he is considered part of the central bank so i had them covered. i know what your saying about manipulation causing sustained trends, like when people jump on board a rumor about a big trader being long etc. remember Bruce Kovner from market wizards? the forex guy? well he talks about this exact situations, where he says he actually causes 2 and 3 day trends. but he is the biggest forex trader in the world (outside central banks) so there are not hundreds of guys like that that we have to worry about.

Quoting fijitrader
I agree though that Forex is a lot harder to move round than most people think except during extremely low liquidity.
even with low liquidity i dont think she's moveable....unless you are bruce or alan.
Relax and be happy.
  • #38
  • Jul 27, 2005 5:32pm Jul 27, 2005 5:32pm
Quoting merlin
yeah, some of these bank traders make millions "front running" (putting their order in front of the big order). here in the US markets that is illegal and unethical, but in forex it is perfectly legal and widely accepted.

What happend here? This thread has become mixed up. I already answered this post of Merlins (which is now listed as the most recent post. My response is missing but Alex has a small quote (from my response to merlins post) posted just before Merlin's post (which is now the most recent post). My post is missing.

FT
  • #39
  • Aug 3, 2005 8:44pm Aug 3, 2005 8:44pm
LOL

sorry man, i tried to "split" the thread to get rid of the "moving the market" garbage. i guess it got a little mixed up
Relax and be happy.
  • #40
  • Last Post: Apr 5, 2010 3:43pm Apr 5, 2010 3:43pm
very good is combine , trend line-change of polarity and divergenc- 62 fib.
Attached Image (click to enlarge)
Click to Enlarge Name: 4.gif Size: 19 KB
one secret in the forex. im belive.
0 traders viewing now