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Identifying Market Swings - Medium and Long Term Trading

  • #281
  • Feb 21, 2010 3:37pm Feb 21, 2010 3:37pm
Quoting silverheat
for every possibility there is one expert talking about it on tv ... they have their view, however they came to their conclusion it doesn't matter, as all their models are just that, models based on assumptions based on statistical data, you can't blame them, so think on your own, you just need common sense, no mathematical predictions, no listening to experts, no signal providers, no cable update thread, ...a good book is fooled by randomness, after reading that you'll smile about all those expert opinions and move on
in fact those experts...
in fact those experts are only necessary to give justification for the people who do not think

Well said, Silverheat!

I believe that most people just want to be told what and how to trade so they don't have to take responsibility and can blame someone else when it doesn't work out.

I heard something interesting on CNBC last week when the FOMC raised the discount rate. There was a debate going on about whether the Fed signaled this in advance, but the markets were still surprised.

And the journalist said something to the effect of how it was unfair that the FOMC "shocked" the markets and caused some investors to lose money. There was a former central bank employee who worked for an institution who came up with a brilliant response. He basically said that if an investor doesn't understand the Fed and the economic market forces that move the markets then he/she has no business investing and deserves to lose money.

Brilliant!
-Razorjack
  • #282
  • Edited 11:02pm Feb 21, 2010 9:42pm | Edited 11:02pm
Quoting Razorjack
Frankly, I believed in both a and b. Fundies are useless and experts are more than what they seem until your thread came along.

This is the same thing as listening to someone else's technical analysis, you can't trade or profit from it unless you have the entire picture. Fundamental analysis doesn't mean listening to someone else's predictions, it means understanding the economic fundamentals and making informed decisions based on facts not opinions.

So I listen to a lot of these experts on TV, but I only listen to the facts...
This is too simplistic a view, it's good for making an analogy but doesn't even come close to the real world.

For 1 seller, you can have 100 buyers or vice versa.

Razorjack, I dint mean one on one selling or buying. Like the example of the exchange floor dealer, he deals with multiple clients for buying/selling, in case of a tumbling Citibank share prices. Too Many to one. One buyer to multiple sellers.

The question really is why 1.5141, the exact figure when we cud take it to say, 1.5150 , a nice little round number. Banks, HF , corporations taking a hedge cud be the reason.

Now, what I meant was fundamentally:

Dubai Crisis -> Risk Aversion -> USD being favoured -> Hey, no buyers above 1.5141 in the order book -> SCORE!!
  • #283
  • Feb 21, 2010 10:47pm Feb 21, 2010 10:47pm
Quoting Razorjack
So is everybody in on the commodities?

I was actually a week early, as I mentioned before I tend to jump the gun a bit when I can see these reversals coming.

But as you can see in the charts that we have our short term reversals into the medium term trends as we've been anticipating for weeks.

So what have you learned?

I hope this demonstrates to everyone that market reversals can be identified and anticipated in advance before they happen!

Hope you're all making good pips off these trades......



Hello Razor, I hope you are doing well.
I would like to re-afirm a believe I have.
When the market is ready to reverse like AUDUSD, USDCAD, AUDJPY in these days, some professionals "shake the market" in order to trigger the amateaur's SL. So for example AUDUSD started to go down on Feb 17, if some amateurs saw the reversal and went short with a tight SL. Then did some pros raised the price, until these litle orders are trigged? Then the price goes down and there is where the pros make the real profit and the amateurs get frustrated.

What is your opinion ?

Can the pros see the pending orders at IB level to see where the amateur SL's are?

Thank you
  • #284
  • Feb 22, 2010 1:02am Feb 22, 2010 1:02am
Quoting vicky_ag
This is too simplistic a view, it's good for making an analogy but doesn't even come close to the real world.

For 1 seller, you can have 100 buyers or vice versa.

Razorjack, I dint mean one on one selling or buying. Like the example of the exchange floor dealer, he deals with multiple clients for buying/selling, in case of a tumbling Citibank share prices. Too Many to one. One buyer to multiple sellers.

The question really is why 1.5141, the exact figure when we cud take it to say, 1.5150 , a nice little...
Because 1.5150 would be too obvious....
you'll have to know when the obvious is too obvious at times, and when the obvious is fine to take at other times...lol
Biggest joker
  • #285
  • Feb 22, 2010 2:03am Feb 22, 2010 2:03am
Quoting rac
Hello Razor, I hope you are doing well.
I would like to re-afirm a believe I have.
When the market is ready to reverse like AUDUSD, USDCAD, AUDJPY in these days, some professionals "shake the market" in order to trigger the amateaur's SL. So for example AUDUSD started to go down on Feb 17, if some amateurs saw the reversal and went short with a tight SL. Then did some pros raised the price, until these litle orders are trigged? Then the price goes down and there is where the pros make the real profit and the amateurs get frustrated.

What...
Yes, this known as running the stops, it clears the order books and let's the pros get in at a better price. This why price doesn't stop immediately on a major support or resistance level.

There is also another important reason. When prices reach important level, it may not move anywhere because the amount of buying and selling is close to equal. A reversal from downtrend to uptrend can not happen until all the selling has been absorbed by the buyers and this can be done by running the stops, shakeouts, testing for supply, etc.

This is why it's important to watch your risks and money management and placing your stops well away from these areas.
-Razorjack
  • #286
  • Feb 22, 2010 2:41am Feb 22, 2010 2:41am
Quoting vicky_ag
[color=blue]
Now, what I meant was fundamentally:

Dubai Crisis -> Risk Aversion -> USD being favoured -> Hey, no buyers above 1.5141 in the order book -> SCORE!!
Ok, but where do the fundamentals come into the picture here? And also this is short term trading, I trade a much longer time frame.

Let me show you how I played the Dubai Crisis.

First of all I didn't know there would be a debt crisis in Dubai, instead I knew that the markets had been making a bull run for 9 straight months with no retrace. The AUDUSD in particular made a huge run, the appreciation of a currency, reduces inflation and makes it more difficult for the central bank to continue rate hikes as the economy can not support a currency that is too strong.

The 1st leg of the bull run reaches exhaustion and all that is needed is a trigger / bad news to initiate the correction. And this is what we saw with the Dubai debt crisis.

IMO, using order flow data requires that you make fast changes when the order flow changes. This to me is short term trading.
-Razorjack
  • #287
  • Feb 22, 2010 5:31am Feb 22, 2010 5:31am
Quoting Razorjack
Ok, but where do the fundamentals come into the picture here? And also this is short term trading, I trade a much longer time frame.

Let me show you how I played the Dubai Crisis.

First of all I didn't know there would be a debt crisis in Dubai, instead I knew that the markets had been making a bull run for 9 straight months with no retrace. The AUDUSD in particular made a huge run, the appreciation of a currency, reduces inflation and makes it more difficult for the central bank to continue rate hikes as the economy can not support a currency...
Fundametals came in picture as soon as "Dubai Crisis -> Risk Aversion -> USD being favoured -> Hey, no buyers above 1.5141 in the order book -> SCORE!!" part.

Oh well, I thought it did make sense trying to fit order flow (aka short term trading as described) which could show no buyers after a level and fundamentals to make sense of a market movement. Guess, I was wrong.
  • #288
  • Feb 22, 2010 5:38am Feb 22, 2010 5:38am
Quoting silverheat
for every possibility there is one expert talking about it on tv ... they have their view, however they came to their conclusion it doesn't matter, as all their models are just that, models based on assumptions based on statistical data, you can't blame them, so think on your own, you just need common sense, no mathematical predictions, no listening to experts, no signal providers, no cable update thread, ...a good book is fooled by randomness, after reading that you'll smile about all those expert opinions and move on
in fact those experts...
That makes two. Taleb fans , I mean.

The whole rant on the experts on TV was a way of explaining my doubts on fundamentals. They seem to talk a lot of fundamentals but a simple line, TL will tell you the markets direction.

I have been reading this thread and I should say Razorjack has cleared my doubts to an extent.
  • #289
  • Feb 22, 2010 6:07am Feb 22, 2010 6:07am
Quoting vicky_ag
Fundametals came in picture as soon as "Dubai Crisis -> Risk Aversion -> USD being favoured -> Hey, no buyers above 1.5141 in the order book -> SCORE!!" part.

Oh well, I thought it did make sense trying to fit order flow (aka short term trading as described) which could show no buyers after a level and fundamentals to make sense of a market movement. Guess, I was wrong.
This doesn't mean that you were wrong. What you were doing was trading order flows and using NEWS to confirm. News and fundamentals are not the same thing. News is something that will take effect over the short term (days to weeks) while the fundamentals work on a much longer time frame (months to years).

Also you can not forecast movements in advance by reading the news.

In order to forecast movements you need to truly understand the fundamental economic forces moving the markets like interest rates, inflation, etc, which way the money flows during risk aversion, which different ways it can flow in times of risk appetite, etc.
-Razorjack
  • #290
  • Feb 22, 2010 8:00am Feb 22, 2010 8:00am
Quoting Razorjack
Yes, this known as running the stops, it clears the order books and let's the pros get in at a better price. This why price doesn't stop immediately on a major support or resistance level.

There is also another important reason. When prices reach important level, it may not move anywhere because the amount of buying and selling is close to equal. A reversal from downtrend to uptrend can not happen until all the selling has been absorbed by the buyers and this can be done by running the stops, shakeouts, testing for supply, etc.

This is why...
Thank you,
What do you recommed to learn about risk and money management.

I believe you won't take a short position (AUDUSD) at this time because latelly you mentioned that you preffer to take a long position for AUD, however if you have to go short, would you use a SL, if you do, where would you put it?
I just realize that I believe that I can see pending orders or at least volume, .9014 has 110,000 but I don't know what this mean.


Another question is how do you get get reliable support and resistance levels?

I use fibo, in this case the 61.8 level is at .9042 so one option is putting a SL above this level, another option for me is use round numbers and put a SL above .9100.

Your opinions is appreciated.
  • #291
  • Feb 22, 2010 9:59am Feb 22, 2010 9:59am
Quoting rac
Thank you,
What do you recommed to learn about risk and money management.

I believe you won't take a short position (AUDUSD) at this time because latelly you mentioned that you preffer to take a long position for AUD, however if you have to go short, would you use a SL, if you do, where would you put it?
I just realize that I believe that I can see pending orders or at least volume, .9014 has 110,000 but I don't know what this mean.


Another question is how do you get get reliable support and resistance levels?

I use fibo, in this...
What do you recommed to learn about risk and money management.

Dr. Van Tharp has some good stuff about money management.

I believe you won't take a short position (AUDUSD) at this time because latelly you mentioned that you preffer to take a long position for AUD, however if you have to go short, would you use a SL, if you do, where would you put it?

Actually I am taking short position in AUDUSD, but I'm not riding it all the way down because of the negative interest swap ratio.

Yes, I always use SL. Where to put the SL depends on my trading plan. If I plan to just trade the short term swing then I'll have a bit more aggressive stop. In the current conditions about ½ ATR above the 61.8% fib, about 0.91 .

If I were planning to ride a longer term trend then I would put my stop above the last swing high at around 0.94.

I just realize that I believe that I can see pending orders or at least volume, .9014 has 110,000 but I don't know what this mean.

What are you using to get this information?

Last week most of the volume for futures contracts was around 0.8990. This means that alot of contracts changed hands at around this price.

Next thing you need to do is to start thinking like an institutional trader or one of the big boys in order to determine the relevancy of this level. I'll put up a post about this.

Another question is how do you get get reliable support and resistance levels?

I use fibo, in this case the 61.8 level is at .9042 so one option is putting a SL above this level, another option for me is use round numbers and put a SL above .9100.

Fibs are good provided you draw them correctly. Round numbers are also very good. I also use trend lines and swing highs and swing lows. I also look at areas of price congestion.
-Razorjack
  • #292
  • Feb 22, 2010 10:17am Feb 22, 2010 10:17am
I suggest that we do a little exercise to get everyone thinking like the big boys, i.e. banks, institutions, hedge funds, market makers, etc.

In order to do this, I will need participation from others to keep the discussion going.

First, let's start with supply and demand. When there's more demand than supply, prices go up. When there's more supply than demand, then prices go down. Simple, right?

Wrong! It's not quite this simple. But in this example we'll use it in this simple form.

To get a better understanding we need to look at how the big boys trade. Let's suppose that you were managing a $500 million account and you wanted to take a long position in particular pair. You decide to take a long position of 100 lots, when the market is very quiet.

Remember that a large position like this will create a lot of demand.

So do you throw all of your orders in at one time? What would happen to the price if you buy the entire position all at once?

That's right, for every lot that you buy, you push the price up against yourself until finally you get a very bad average price for your entire position.

So what do you do? When and how can you put on your position without pushing the price up against yourself?
-Razorjack
  • #293
  • Feb 22, 2010 10:46am Feb 22, 2010 10:46am
Quoting Razorjack
So what do you do? When and how can you put on your position without pushing the price up against yourself?
I think you have to divide that to parts (e.g. 5x20 lots) and always wait some time after each trade :]
First you buy 20 lots and if the market reaction will be higher price, you should wait while the price will come back again thanks to scalpers and other extreme short term traders and then you can continue... is that right?
Edit: The overall result will be a ranging period...

Btw. it looks like the short term uptrend on CAD/JPY is ending. You said it will change probably this week and it's here. So what does it mean?
Thx for your opinions (and exercises).
Don't touch, just look...
  • #294
  • Feb 22, 2010 11:04am Feb 22, 2010 11:04am
Quoting Aqw3R
I think you have to divide that to parts (e.g. 5x20 lots) and always wait some time after each trade :]
First you buy 20 lots and if the market reaction will be higher price, you should wait while the price will come back again thanks to scalpers and other extreme short term traders and then you can continue... is that right?
Edit: The overall result will be a ranging period...

Btw. it looks like the short term uptrend on CAD/JPY is ending. You said it will change probably this week and it's here. So what does it mean?
Thx for your opinions...
This is a good start, especially when the markets are quiet. You have to wait for the price to come to your levels and you can't put on too much too quickly. So it will take you several days, possibly weeks to put on the full position.

Now the next step, how about if the market was moving with a bit more volatility, when and how would you put on your position?

Btw. it looks like the short term uptrend on CAD/JPY is ending. You said it will change probably this week and it's here. So what does it mean?

I'm not sure what you're asking. If CADJPY turn around now, then I am first looking for it to break the established trend line from Jan 21, 2009 and then targeting 80 and if it picks up a lot of momentum, I'm looking at 77.

So back to the question:

How would you put on a large position in a moving market?
-Razorjack
  • #295
  • Feb 22, 2010 11:17am Feb 22, 2010 11:17am
Quoting Razorjack
This is a good start, especially when the markets are quiet. You have to wait for the price to come to your levels and you can't put on too much too quickly. So it will take you several days, possibly weeks to put on the full position.

Now the next step, how about if the market was moving with a bit more volatility, when and how would you put on your position?

Btw. it looks like the short term uptrend on CAD/JPY is ending. You said it will change probably this week and it's here. So what does it mean?

I'm not sure what you're...
if i wanted to buy id want to soak up tonnes of sells , under support or somewhere like that
  • #296
  • Feb 22, 2010 11:40am Feb 22, 2010 11:40am
I see the the pair turning down (from parabolic rise in last 14 days)..from top of channel more or less at 88/88.50.

Do we have this right razor?...you would be waiting til it comes down to 83.00 before looking to go short to 80...then 77?

wow....that is patience.

maybe I've mis understood.
  • #297
  • Feb 22, 2010 11:43am Feb 22, 2010 11:43am
Quoting TGpop
if i wanted to buy id want to soak up tonnes of sells , under support or somewhere like that
Yes, exactly. As a big player, you need to sell into rallies and buy into declines.

Ok, now the next step. Let's say you work with a syndicate that is large enough to move the market. And you start putting on your position.

1. How do you make sure the market doesn't take off until you have your full position on?

2. If you are buyer then when can you expect the market to move upwards?
-Razorjack
  • #298
  • Feb 22, 2010 11:46am Feb 22, 2010 11:46am
Quoting Razorjack
Yes, exactly. As a big player, you need to sell into rallies and buy into declines.

Ok, now the next step. Let's say you work with a syndicate that is large enough to move the market. And you start putting on your position.

1. How do you make sure the market doesn't take off until you have your full position on?

2. If you are buyer then when can you expect the market to move upwards?

not sure :/
  • #299
  • Edited 12:18pm Feb 22, 2010 12:08pm | Edited 12:18pm
Quote
1. How do you make sure the market doesn't take off until you have your full position on?
i'm selling, i'd push the price down, trying to get in more sellers

Quote
2. If you are buyer then when can you expect the market to move upwards?
when my selling causes a strong reaction as more buyers take advantage of my "testing"

edit: and or i run stops
Invincibility lies in the defence, the possibility of victory in the attack
  • #300
  • Feb 22, 2010 12:34pm Feb 22, 2010 12:34pm
Quoting Razorjack
What do you recommed to learn about risk and money management.

Dr. Van Tharp has some good stuff about money management.

I believe you won't take a short position (AUDUSD) at this time because latelly you mentioned that you preffer to take a long position for AUD, however if you have to go short, would you use a SL, if you do, where would you put it?

Actually I am taking short position in AUDUSD, but I'm not riding it all the way down because of the negative interest swap ratio.

Yes, I always...
Thinkorswim has that information available in their software, for example right now AUDUSD is at .8998 and I see
Volume Price

1320000 .9000
740000 .8999
750000 .8995
1210000 .8990

Is volume related to pending orders?
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