Understanding how the markets really work | Forex Factory

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Understanding how the markets really work

  • #1
  • First Post: Edited Nov 6, 2010 5:38pm Apr 27, 2010 5:51am | Edited Nov 6, 2010 5:38pm
I'll be posting charts for various markets - futures (including currencies), indices, interest rates, etc.

The analysis will be on intraday charts on lower timeframes.

Please post you analysis too.

Hopefully we can get some discussions going about REALLY understanding how the markets work. Order-flow, Amateurs v. Professionals, and so on...


UPDATE:

Our website has had a makeover and we plan to keep updating it regularly with teaching, lessons, analysis, articles, etc.

We will also try to keep this thread going as well with various bits and pieces.
  • #2
  • Apr 27, 2010 6:37am Apr 27, 2010 6:37am
Here is some initial analysis of the Emini S&P 500 future.

It's not forex (and the next few won't be either) but we'll get that.


p.s. it doesn't matter WHAT you're trading with this approach.
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  • #3
  • Apr 27, 2010 6:39am Apr 27, 2010 6:39am
Some further Emini analysis.

I'll get some forex done very soon - since this is FF
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  • #4
  • Apr 27, 2010 7:10am Apr 27, 2010 7:10am
Perfect example of traders getting trapped in the market and being forced out.
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  • #5
  • Apr 27, 2010 8:00am Apr 27, 2010 8:00am
fantastic job!
  • #6
  • Apr 27, 2010 10:07am Apr 27, 2010 10:07am
Quoting REALTrading
Some further Emini analysis.

I'll get some forex done very soon - since this is FF
Would this interpretation be approximately correct?


In the first chart, in a sideways candle (the spinning top), ask is twice bid volume. Normally, price'd zoom up if lots of people are buying the symbol; thus, price went down.
The third chart says that price wandered upward from a side triangle and into a resistance that is shown in the inset. The inset, in a lower TF, shows how price went approximately sideways over several candles and yet bid volume was up to twice that of ask volume. Normally, price'd drop fast if lots of people are selling the symbol; thus, price went up.

The second chart is a bit more complicated, as it highlights the entire approach to the turn at the spinning top.
1) the first candle had more bid than ask volume, both absolutely and inter-volumes-bars relatively
2) the next several candles had ask volume stabilizing and a still-volatile bid volume, so that the bid was the portion of price that was still wavering
3) the spinning top you call an "ultra-narrow-range bar" is where ask takes over, because ask completed its stabilization with a higher relative volume over the past nine or so candles and bid stayed more volatile and thus with a lower relative volume
4) ask volume takes over after the spinning top, getting a big kick in the next candle while bid volume fades absolutely and stably.


Thanks for the interesting charts.
.
  • #7
  • Apr 27, 2010 10:50am Apr 27, 2010 10:50am
A very actual topic.
Go ahead, bro, i am hooked.
The more experience the closer to the reality
  • #8
  • Apr 27, 2010 11:27am Apr 27, 2010 11:27am
Quoting ha-pattern
Would this interpretation be approximately correct?


In the first chart, in a sideways candle (the spinning top), ask is twice bid volume. Normally, price'd zoom up if lots of people are buying the symbol; thus, price went down.
Yes, traders were buying and buying and buying... but price was not rising. Sellers were absorbing all the buying that was taking place. When there were no more buyers left, the market started to fall, and those who bought started to panic and eventually were forced out of their positions - adding to the momentum-move down.


Quoting ha-pattern
The third chart says that price wandered upward from a side triangle and into a resistance that is shown in the inset. The inset, in a lower TF, shows how price went approximately sideways over several candles and yet bid volume was up to twice that of ask volume. Normally, price'd drop fast if lots of people are selling the symbol; thus, price went up.
Yes, similar to the first chart.


Quoting ha-pattern
The second chart is a bit more complicated, as it highlights the entire approach to the turn at the spinning top.
1) the first candle had more bid than ask volume, both absolutely and inter-volumes-bars relatively
2) the next several candles had ask volume stabilizing and a still-volatile bid volume, so that the bid was the portion of price that was still wavering
3) the spinning top you call an "ultra-narrow-range bar" is where ask takes over, because ask completed its stabilization with a higher relative volume over the past nine or so candles...

Although your wording is different to mine, and I can see a slightly different perspective, very good analysis. Thanks ha-pattern.
  • #9
  • Apr 27, 2010 11:33am Apr 27, 2010 11:33am
There is a bit more going on in this chart than I've marked-up.


With the formation of each new bar, ask yourself:

 

  1. What has happened?

  1. Who is long/short?

  1. Where are they long/short from?

  1. Are they feeling pleasure or pain?

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  • #10
  • Apr 27, 2010 12:16pm Apr 27, 2010 12:16pm
hi, great thread.

where do u get the bid and ask volume indicators? i use strategy runner!
  • #11
  • Apr 27, 2010 12:26pm Apr 27, 2010 12:26pm
Quoting Razorman
hi, great thread.

where do u get the bid and ask volume indicators? i use strategy runner!

They are taken from X_Study. A very basic chart package that comes with X_Trader.

Basic is good.
  • #12
  • Apr 27, 2010 1:29pm Apr 27, 2010 1:29pm
ahhh ok got it thanks! looks verry interesting tool never really saw that before
  • #13
  • Apr 27, 2010 2:40pm Apr 27, 2010 2:40pm
checked the website, a little too much hopes and dreams for me, anyway will stay tuned
  • #14
  • Apr 27, 2010 5:13pm Apr 27, 2010 5:13pm
bro what's your $100 service thing for?

cheers
  • #15
  • Apr 27, 2010 5:30pm Apr 27, 2010 5:30pm
Quoting Sim
bro what's your $100 service thing for?

cheers

Sim, sent you a PM. Let me know if you didn't get it as my 'Sent Items' is showing nothing sent. Cheers.
  • #16
  • Apr 27, 2010 5:38pm Apr 27, 2010 5:38pm
A – Traders are selling at the 1162.50 level for over 30-minutes; we can see from the long “shadows” on the bars (or, candles) of the chart that the sellers keep coming in.

B – The market falls, but not very far, before we see buyers coming in at B. The market then rallies a little…

C – …before coming back down to match the low made at B. The traders who shorted at A are hoping for a momentum-move down. However, the price drifts up as there is a lack of sellers to take the market lower.

D – Here, at point D, is “crunch-time” for the traders who sold at A; if the market does not turn downwards here they are going to start to panic as their positions start to going into the red…

E - …and sure enough, panic ensues, and a momentum move is triggered by the traders who sold at A getting forced out and new buyers jumping in long as price makes a new high [note: it is also a new high for the day since session Open].
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  • #17
  • Apr 27, 2010 6:06pm Apr 27, 2010 6:06pm
Quoting REALTrading
A – Traders are selling at the 1162.50 level for over 30-minutes; we can see from the long “shadows” on the bars (or, candles) of the chart that …
Where's the volume? I always felt that it was too difficult to make it on candles and their patterns (or language) alone, that you needed at least one extra idea of volume, trendlines, support/resistance lines, or other.
I do follow, though. Excellent.
  • #18
  • Apr 27, 2010 6:49pm Apr 27, 2010 6:49pm
Volume definitely helps one see the market - the order-flow - more clearly.

It's applicable to some markets more than others though.

Great to see you're getting something out of this.
  • #19
  • Apr 27, 2010 11:18pm Apr 27, 2010 11:18pm
At last! An orderflow thread that a dunce like me might almost be able to understand. No mention of DOM, IFR, barrier options, open interest, stoploss hunts, bear traps, market microstructure, ....... just good old price and volume.

Many thanks for sharing.
  • #20
  • Apr 28, 2010 5:10am Apr 28, 2010 5:10am
Glad you're finding it of value hanover.

Nothing complex, just being as objective as possible, figuring out what the 'typical' trader has seen, has done and may possibly do.

Cheers.
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