What moves the market? | Forex Factory

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What moves the market?

  • #1
  • First Post: Mar 21, 2007 3:16am Mar 21, 2007 3:16am
Yesterday (Tue 20th Mar 2007, 9-20am GMT) I was confidently long on Cable at about 1.9470 with a decent stop loss at 1.9430 when suddenly (10 minutes before the news) a major sell off triggered my stop loss and I had to sit and endure the rapid and much anticipated good news hike. Of course it then proceeded to move up consistently, but once confidence is knocked it is difficult to get back into a trade even though you are convinced of the direction.

This is not a gripe about being stopped out, I should have allowed at least 10 pips more (newbie failing) - simply a question as to a) why did the price drop significantly before rapidly rising on the news at 9-30? and b) who moved the market? Was it major brokers flushing out amateurs like myself or banks and other institutions manipulating the situation for maximum profit.

Any thoughts?
  • #2
  • Mar 21, 2007 3:55am Mar 21, 2007 3:55am
Quoting goonergonebad
Yesterday (Tue 20th Mar 2007, 9-20am GMT) I was confidently long on Cable at about 1.9470 with a decent stop loss at 1.9430 when suddenly (10 minutes before the news) a major sell off triggered my stop loss and I had to sit and endure the rapid and much anticipated good news hike. Of course it then proceeded to move up consistently, but once confidence is knocked it is difficult to get back into a trade even though you are convinced of the direction.

This is not a gripe about being stopped out, I should have allowed at least 10 pips more (newbie failing) - simply a question as to a) why did the price drop significantly before rapidly rising on the news at 9-30? and b) who moved the market? Was it major brokers flushing out amateurs like myself or banks and other institutions manipulating the situation for maximum profit.

Any thoughts?
That frequently happens before big announcements. Many people sitting in positions don't want to take on the event risk so they cover. Liquidity starts to dry up around this time too, so even small ($20-50m) trades can cause big movement. Depending on what the psoition structure looks like price will spike up or down regardless what the future direction of the actual news turns out to be.
  • #3
  • Mar 21, 2007 3:58am Mar 21, 2007 3:58am
Quoting Darkstar
That frequently happens before big announcements. Many people sitting in positions don't want to take on the event risk so they cover. Liquidity starts to dry up around this time too, so even small ($20-50m) trades can cause big movement. Depending on what the psoition structure looks like price will spike up or down regardless what the future direction of the actual news turns out to be.
Very good answer! I totally agree.
  • #4
  • Mar 21, 2007 4:01am Mar 21, 2007 4:01am
Most of the move today was from the news from China:

Quote
The dollar fell sharply against the yen on Tuesday, erasing earlier gains, after a magazine reported that China would stop stockpiling foreign exchange reserves. The Emerging Markets magazine quoted Chinese central bank Governor Zhou Xiaochuan as saying "many people say that foreign exchange reserves in China are (already) large enough."
Later this year look for China to start selling US dollars. China's reserves amount to more than $1 trillion.
  • #5
  • Mar 21, 2007 4:16am Mar 21, 2007 4:16am
I wonder if there's any way to know when China might be expecting to do this. Would be good to know before hand. But, I guess, that would be called wishful (or hopeful) thinking?
  • #6
  • Mar 21, 2007 4:37am Mar 21, 2007 4:37am
Quoting Darkstar
That frequently happens before big announcements. Many people sitting in positions don't want to take on the event risk so they cover. Liquidity starts to dry up around this time too, so even small ($20-50m) trades can cause big movement. Depending on what the psoition structure looks like price will spike up or down regardless what the future direction of the actual news turns out to be.
Thanks Darkstar - that explains what happened - I think I'll heed overwhelming newbie trader advice and avoid trading the news in future
  • #7
  • Mar 21, 2007 7:33am Mar 21, 2007 7:33am
The other thing that happens is that big money scales into positions. Their big concern when coming into a position is moving it against themself with their buying/selling. One method that is utilized by big houses is to try to push it the other way for a short period.

So, in the case you described, some very large players may have wanted to be long, so they'll begin by selling off the GBP. If the market is thin, they'll get some good bang for their buck and they'll start accumulating when others start liquidating, particularly if a short-term TA point is breached. Yesterday, the price was pushed down to just under the existing day's low. A lot of folks who were long would put their stops there. Some may even have reversed, providing liquidity for the move back up as their new stops get taken out.

This happens all the time and it's the danger of living on short time frames.
  • #8
  • Mar 21, 2007 8:04am Mar 21, 2007 8:04am
Best response yet. Avoid the news. Newstrading is just not the way to go and a fad that's once again disappearing. It's risky, not very profitable, inhibits good trading education, and limits you in a market that has very easy entry possibilities.

Quoting goonergonebad
Thanks Darkstar - that explains what happened - I think I'll heed overwhelming newbie trader advice and avoid trading the news in future
  • #9
  • Mar 21, 2007 10:29am Mar 21, 2007 10:29am
Quoting Dopey
... a short-term TA point is breached...
Excuse me, I am just trying to educate myself. What is a TA point?
I saw this term in as copule of other palces.
  • #10
  • Mar 21, 2007 3:14pm Mar 21, 2007 3:14pm
Quoting Dopey
The other thing that happens is that big money scales into positions. Their big concern when coming into a position is moving it against themself with their buying/selling. One method that is utilized by big houses is to try to push it the other way for a short period.

So, in the case you described, some very large players may have wanted to be long, so they'll begin by selling off the GBP. If the market is thin, they'll get some good bang for their buck and they'll start accumulating when others start liquidating, particularly if a short-term TA point is breached. Yesterday, the price was pushed down to just under the existing day's low. A lot of folks who were long would put their stops there. Some may even have reversed, providing liquidity for the move back up as their new stops get taken out.

This happens all the time and it's the danger of living on short time frames.
Another logical explanation, thanks...
  • #11
  • Mar 21, 2007 3:31pm Mar 21, 2007 3:31pm
Quoting irusoh
Excuse me, I am just trying to educate myself. What is a TA point?
I saw this term in as copule of other palces.
TA = Technical Analysis
  • #12
  • Mar 21, 2007 3:41pm Mar 21, 2007 3:41pm
Quoting Dopey
The other thing that happens is that big money scales into positions. Their big concern when coming into a position is moving it against themself with their buying/selling. One method that is utilized by big houses is to try to push it the other way for a short period.

So, in the case you described, some very large players may have wanted to be long, so they'll begin by selling off the GBP. If the market is thin, they'll get some good bang for their buck and they'll start accumulating when others start liquidating, particularly if a short-term TA point is breached. Yesterday, the price was pushed down to just under the existing day's low. A lot of folks who were long would put their stops there. Some may even have reversed, providing liquidity for the move back up as their new stops get taken out.

This happens all the time and it's the danger of living on short time frames.
Keep in mind that its said that the forex mrkt is too big to be manipulated, however this post reminded me of this VERY insightful video of Jim Cramer on youtube about manipulating futures/equities:

Inserted Video
  • #13
  • Mar 21, 2007 7:39pm Mar 21, 2007 7:39pm
Quote
December 15, 2006

BEIJING, CHINA -- Sources with a U.S. Delegation in Beijing have told The Hal Turner Show the Chinese government has informed visiting Bush Administration officials they intend to dump One TRILLION U.S. Dollars from China's Currency Reserves and convert those funds into Euros!

China was allegedly asked to withhold the announcement until Bullion Markets closed for the weekend to prevent an instant spike in gold and silver prices. This delay will give the world the weekend to consider appropriate actions rather than have a knee-jerk reaction which could see the U.S. Dollar totally collapse in value Monday.

According to this Senior source, China told the U.S. delegation they no longer have faith in U.S. Currency for several reasons:

1) The Federal Reserve Bank ceased publishing "M3" data in March, making it nearly impossible for anyone to know how much cash is being printed. China said this act made it impossible to tell how much a Dollar is worth.

2) The U.S. Dollar has lost upwards of thirty percent (30%) of its value against other foreign currencies in the recent past, meaning China has lost almost $300 Billion simply by holding U.S. Dollars in its reserves.

3) The U.S. has no plans whatsoever to reduce deficit spending or ability pay down any of its existing debt without printing money to pay it off.

For these reasons China has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China reportedly told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts."

Early this week, in an unusual move, the Bush administration sent virtually the entire economic "A-team" to visit China for a "strategic economic dialogue" in Beijing Dec. 14 and 15.
Intervention and threats by the US prevented the selloff last December. Invading Iran would allow the US to control China's oil distributor and would mean that we now control most of the world oil.
  • #14
  • Mar 22, 2007 2:58am Mar 22, 2007 2:58am
Quoting richx7
Intervention and threats by the US prevented the selloff last December. Invading Iran would allow the US to control China's oil distributor and would mean that we now control most of the world oil.
This is a worrying post.

It would seem a bit draconian (even for Bush) to plunge the US into another messy conflict purely to apply pressure on China by controlling oil supply. Does China really have this much clout? Surely, the US could threaten embargos on Chinese goods etc. and pile pressure on European lackies to follow suit in lieu of threats against their own US financially related investment issues. I would hope it is just China playing hardball to negotiate on other related and unrelated matters.

However, if this scenario is right and the $ tumbled in value, in the short term would this cause the collapse of the FX market?
  • #15
  • Mar 22, 2007 5:24pm Mar 22, 2007 5:24pm
According to insider news:

Generals who opposed the Iran invasion have been replaced.

The joint chiefs of staff has been made powerless to handle war policy.

The military have been told to prepare for the invasion within the next few weeks.

The Constitution says only Congress can declare war http://www.nytimes.com/2007/01/29/op...rssnyt&emc=rss Bush has the votes to override any vetoes.

Only time will tell if this is true.
  • #16
  • Last Post: Edited 8:57pm Mar 23, 2007 8:46pm | Edited 8:57pm
Most of the US warships are now in the mid east - 4 of 8 carriers are in the Gulf now. Bases are reportedly on lock down and all are confined to their bases awaiting orders. Iran captured 15 UK soldiers today and are holding war games thru next week in coastal waters.
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