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Domino's Price and order flow trading

  • #1,121
  • Edited 12:05pm Oct 10, 2010 10:15am | Edited 12:05pm
Quoting domino
I see trends a bit different than most.. see both charts below this post.. notice as IRD converges and diverges look at how price trends and responds.. look how price is trapped by steady rates.. notice how raises lead to raises until it plateaus and price shrinks as it converges until it plateaus .. price cycling and risk aversion and risk app.. cycling with the rates..
Domino, not to be complaining you as you are helping me out here but decoding your posts is one of my major questions.

So, did you mean :

IRD affects the way the pair moves. Increasing IRD leads to the price moving up and decreasing leads to the price moving down..both time the movement is till the fair value (academically speaking) has been reached. Now IRD in itself moves with the macro-economic factors inflation etc.

Price cycles, interest rate cycles but risk app / aversion cycle too? I am skeptical about it...though this picture looks perfect for IRD ..isn't it true that in case of risk app we will have the market taking up carry trades and in risk aversion it is dumped like hot potatoes ?

What I mean is say there is an impending gap in AUD/CAD rates causing a rally...wouldn't a scenario like Dubai crisis cause a selling even with the IRD still intact ? Or a sudden ban by Chinese on imports ?

Quote
when the pairs dropped to 8800 so funds stayed the same we were dropping...
Ok even with the price falling to 8800 the IRD was still intact..thats why no reconsideration sell ??

I analyzed the chart once again ...if we were to follow ...HL, HH, HL and break of previous HH to buy we would have been safe..but with one trade at around 9400...the next one coming at 89/90

Still not getting the point about Price was not in sync till the red line..though as it is explained in terms of the prop psych terms..so we can skip that.

Also, you were looking at pair reaching parity, why was that??

And why were you looking at EU for long? Isn't the IRD too close to take the trade?

Lastly, the diff between EU and A/C was the fact that , you look for a uptrend to be forming near the red line which happened in A/C but not EU. But then what is the max price movement you would still hold the trade? Like say the real uptrend happens 200-400 pips away from the yellow line, does it still count??

Quote
its reconsider a buy re look at fundamentals line... best example of this is the EURO.. when the EURO dropped under 40... this psych zone was broken and breaking the psych zone without a buy being triggered is a big NO sign re-evaluate the EURO and im not gonna lie I was bullish on the euro around that time.. I didnt have a trade active but i was looking to buy into that drop... but I saw the EURO bust through that zone with force.. and I had to take another look.. and then I believe around 34 we went short to 1.21 youll have to look back in this...
If there is no HH and break of it there is a need to relook at the trade. But then let me evaluate E/U to look at the trade you are talking about and understand it, ask questions.

Quote
there is no trade open yet price has to move up through these zones.. there are buy zones we dont buy as its dropping thats my biggest thing..
if you look at this thread youll see how I see two different types of support too
here
http://www.forexfactory.com/showpost...0&postcount=10
here
http://www.forexfactory.com/showpost...5&postcount=12
here
http://www.forexfactory.com/showpost...2&postcount=17

in post 17 im just talking about how they are built.. the psych zones and how the...
Domino, are you sure about no trades being triggered ? Cause I think there might have been one trade triggered from the looks of your chart in the posts you mentioned. I mean by the time price reached the red line you must have 1 trade triggered.

Well, would love to read the book on how big banks fade the move....but wasn't LTCM the hedge fund gone under cause of the Russian rouble trouble ? Dint find any specific trader names though.

One question about the supply and demand zones....a break on the HH will act as a demand zone (for AUD in case of A/C) and LL break as supply (for AUD and demand for CAD). Is that not??

Quote
price drops unto these zones... for example falls into this audcad trade its an inside capitulation outside accumulation style psychological trade.. once in the zone we watch the support zones and make the buys on the break.. and sync with fundies.. these are usually very powerful and lead to outside wave patterns and V shaped reversals. we buy on breaks always.. nothing is hindsight traded.
So, we wait in the bushes...and wait for the correct break to attack

Inside capitulation....Outside accumulation ...what are those? It took me 3 reads to break that one down

V-shaped recovery...well that is one from the economy journals. from what I understand you have done your MBA (or finance ? ) from Penn state....I plan to do my post-grad in finance/economy but currently broke Don't want to take out costly loans and with only 25 ..age is also on my side ..hopefully fx will pave the way.
Quote
hope all this sits well.. if I didnt explain well or there is questions just rephrase and ask again its not being a pain...
Yep, all sits well...Had more questions..asked them all Many people / gurus tend to take negative to this amount of questioning..

Thanks for patiently answering all my doubts.


PS: The interest rate table shows RBA rates lower...isn't that near 4 % ??
  • #1,122
  • Oct 10, 2010 10:49am Oct 10, 2010 10:49am
Quoting domino
Ive attached a great PDF about Yield curve divergence.
Thanks for the PDF... though how would you apply the same fundamental to stocks??

Quote
psych zones if you look at the picture I posted about the formations... thats as far as I go as describing them.. i gotta keep some secrets dude.

the calculations and everything is proprietary ..

Dude? Now thats new. What makes you think I am a dude

Also, looks I need to work on the 66% of the knowledge which is not propitiatory.

Quote
nothing is open until 8900.. I have formation and entry statistics that are proprietary but just cause its at the red doesnt mean I hold a position I just have a buyside mentality through that zone.. price has to move upward through the zone and breakout to be a legit buy... with fundies the same and the breakout at 8900 the aussy became a buy and turns into outside wave formation in the psych zone.. the outside wave formation is rebroken and there is a new buy at 9200 stops are moved up and price continues to trend are chased at lows..

I will reiterate what I said earlier..there must be a trade open at the break of 9400...I got your point on the breakout buy at 9200 .
  • #1,123
  • Oct 10, 2010 6:47pm Oct 10, 2010 6:47pm
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  • #1,124
  • Oct 11, 2010 7:16am Oct 11, 2010 7:16am
Quoting vicky_ag
Domino, not to be complaining you as you are helping me out here but decoding your posts is one of my major questions.
no problem
Quote
So, did you mean :

IRD affects the way the pair moves. Increasing IRD leads to the price moving up and decreasing leads to the price moving down..both time the movement is till the fair value (academically speaking) has been reached. Now IRD in itself moves with the macro-economic factors inflation etc.

Price cycles, interest rate cycles but risk app / aversion cycle too? I am skeptical about it...though this picture looks perfect for IRD ..isn't it true that in case of risk app we will have the market taking up carry trades and in risk aversion...
yes you are correct..
Quote
What I mean is say there is an impending gap in AUD/CAD rates causing a rally...wouldn't a scenario like Dubai crisis cause a selling even with the IRD still intact ? Or a sudden ban by Chinese on imports ?
yes it would, and yes it would..
Quote
Ok even with the price falling to 8800 the IRD was still intact..thats why no reconsideration sell ??
no all the fundamentals was still intact aussy was still low debt still strong still increase in rates the divergence widening. cad raised then halted. as they are recently raising the divergence is even but getting ready to look like convergence now.. I never sell against rates unless the differential is very close.. like .25%-.5% so technically by having no position i am selling but in a safe manner.. because im in cash rather than a position..
Quote
I analyzed the chart once again ...if we were to follow ...HL, HH, HL and break of previous HH to buy we would have been safe..but with one trade at around 9400...the next one coming at 89/90
dont get tripped up with the picture thats when I was doing research on basket grid trading to see if I could beat it... the picture and aud/cad is just a reference about thought out trade.. since it was posted in the aud/cad forum im just saying it will reach parity when it breaks out long.
Quote
Still not getting the point about Price was not in sync till the red line..though as it is explained in terms of the prop psych terms..so we can skip that.
it didnt breakout long till 8900 that is price being in sync with IRD....
Quote
Also, you were looking at pair reaching parity, why was that??
kinda proprietary but based on how low the interest rate is cut and how long before another raise you can kinda tell...
Quote
And why were you looking at EU for long? Isn't the IRD too close to take the trade?
yeah it is..
Quote
Lastly, the diff between EU and A/C was the fact that , you look for a uptrend to be forming near the red line which happened in A/C but not EU. But then what is the max price movement you would still hold the trade? Like say the real uptrend happens 200-400 pips away from the yellow line, does it still count??
yes
Quote
If there is no HH and break of it there is a need to relook at the trade. But then let me evaluate E/U to look at the trade you are talking about and understand it, ask questions.

Domino, are you sure about no trades being triggered ? Cause I think there might have been one trade triggered from the looks of your chart in the posts you mentioned. I mean by the time price reached the red line you must have 1 trade triggered.
nope that came from the demo trading I was doing with the grid research stuff lol I use a different clearing firm for real trade not oanda for trading.
see how the orders are setup in grid around the psych zones.. meh it doesnt work.. you can grid trade as long as you take breaks tho with ird.. but i found it not worth it to finish that thread lol while i sorta made it work wasnt that great.
Quote
Well, would love to read the book on how big banks fade the move....but wasn't LTCM the hedge fund gone under cause of the Russian rouble trouble ? Dint find any specific trader names though.
gimme a day or so ill find it i have the book somewhere.
Quote
One question about the supply and demand zones....a break on the HH will act as a demand zone (for AUD in case of A/C) and LL break as supply (for AUD and demand for CAD). Is that not??
demand zones are zones potentially price should reverse where demand should start to overwhelm supply .. not HH or LL just an area where price should reverse and sync again...the support line or resistance line is an actual line in the sand where price is changed before and we are using that to pin point.
Quote
So, we wait in the bushes...and wait for the correct break to attack
make us sound like a serial killer lol but yeah
Quote
Inside capitulation....Outside accumulation ...what are those? It took me 3 reads to break that one down
psych stuff all I can say is take a look at the psych wave pictures.
Quote
V-shaped recovery...well that is one from the economy journals. from what I understand you have done your MBA (or finance ? ) from Penn state....I plan to do my post-grad in finance/economy but currently broke Don't want to take out costly loans and with only 25 ..age is also on my side ..hopefully fx will pave the way.
Yep, all sits well...Had more questions..asked them all Many people / gurus tend to take negative to this amount of questioning..
finance degree 4 year is enough... MBA is over kill for a trader.. unless ur looking on name to get you into a firm.. but mba is really overkill try new york institute of finance cert programs... thats your best bet.. the best traders attended that school at some point. Im not a guru lol I can stand the questioning..no big.. just the posts are so big they are hard to attack break it up for me a bit.lol
Quote
Thanks for patiently answering all my doubts.


PS: The interest rate table shows RBA rates lower...isn't that near 4 % ??

these are really old pictures. the point is that once there is a raise it generally trends and it continues to be raised look at IRD history.. youll see the cycle... when it stops being raised generally we know cuts are coming.. generally this is the IR cycle and im saying do some research look into it youll be shocked how easy all this seems after.
  • #1,125
  • Oct 11, 2010 7:24am Oct 11, 2010 7:24am
Quoting vicky_ag
Thanks for the PDF... though how would you apply the same fundamental to stocks??
yeah same to stocks and yw for the pdf I got a ton accumulated..

Quote
Dude? Now thats new. What makes you think I am a dude
lol I ment it as gender neutral
Quote
Also, looks I need to work on the 66% of the knowledge which is not propitiatory.


I will reiterate what I said earlier..there must be a trade open at the break of 9400...I got your point on the breakout buy at 9200 .
I think you mean we enter at 89 then 92 then 94.. and you can do that.. thats ok but the position size will need to be smaller than the lower ones.
  • #1,126
  • Oct 11, 2010 11:39am Oct 11, 2010 11:39am
Domino sorry about the post length....

and maybe we are moving away from the real topic of the thread too...ie Price and Order Flow trading....

Anyways....here are the chart for E/U and A/C for the mentioned psych waves...still unable to see the wave formations...

http://content.screencast.com/users/...10-11_2204.png

EU

http://content.screencast.com/users/...10-11_2203.png
  • #1,127
  • Oct 11, 2010 11:44am Oct 11, 2010 11:44am
Rendered to candlesticks..

http://content.screencast.com/users/...10-11_2213.png

EU

http://content.screencast.com/users/...10-11_2212.png
  • #1,128
  • Oct 11, 2010 11:52am Oct 11, 2010 11:52am
Though graphically speaking...both the charts look the same ..so according to that...the EU chart shud look something like this:

http://content.screencast.com/users/...10-11_2219.png

http://content.screencast.com/users/...10-11_2219.png
  • #1,129
  • Edited 12:48pm Oct 11, 2010 12:32pm | Edited 12:48pm
Quoting domino
no all the fundamentals was still intact aussy was still low debt still strong still increase in rates the divergence widening. cad raised then halted. as they are recently raising the divergence is even but getting ready to look like convergence now.. I never sell against rates unless the differential is very close.. like .25%-.5% so technically by having no position i am selling but in a safe manner.. because im in cash rather than a position..
Ok so look at IRD ..AUD and CAD were raising rates at the same rate ...so the divergence persisted ...and then came CAD halt which widened the IRD paving way for the upmove...


Quote
kinda proprietary but based on how low the interest rate is cut and how long before another raise you can kinda tell...
I understand that cuts / raise are ways to control the monetary flow...how do you gauge the "how long before another raise" part? I mean..say currently USD stands at 0.25% ..how can you be sure..when will the next raise will come? Say 3rd qtr. 2011 or somewhere..

that will certainly require a talented economist on your team..

Quote
demand zones are zones potentially price should reverse where demand should start to overwhelm supply .. not HH or LL just an area where price should reverse and sync again...the support line or resistance line is an actual line in the sand where price is changed before and we are using that to pin point.

psych stuff all I can say is take a look at the psych wave pictures.
Well drew both of them...if possible please point out any mistakes...

Quote
finance degree 4 year is enough... MBA is over kill for a trader.. unless ur looking on name to get you into a firm.. but mba is really overkill try new york institute of finance cert programs... thats your best bet.. the best traders attended that school at some point. Im not a guru lol I can stand the questioning..no big.. just the posts are so big they are hard to attack break it up for me a bit.lol
Actually done my 4yrs (aka undergraduate ) in Biotechnology...no finance background...now thinking maybe economics would have helped a bit more

Will have a look at the cert programs...If there are free online courses maybe I will complete them without the degree.

Working on the post breaking part...deleted many non-required stuff...still it be huge..sorry

Quote
these are really old pictures. the point is that once there is a raise it generally trends and it continues to be raised look at IRD history.. youll see the cycle... when it stops being raised generally we know cuts are coming.. generally this is the IR cycle and im saying do some research look into it youll be shocked how easy all this seems after.
Ok I will try and look for some site which can plot me the IR for different currencies..though with the actual news gone it will be difficult to assess the whole thing objectively..
Yeah it all does seem easy....passing thru the honeymoon period of my fundies BWILC...been selling USD..up more than 30% in my last month...but the market non-reaction to NFP has made me uneasy....maybe cause the job loss was already expected...maybe not...lets see..

BTW...looking forward to the LTCM traders book.
  • #1,130
  • Oct 11, 2010 1:02pm Oct 11, 2010 1:02pm
Quoting domino
image addon for previous post
The near yield vs the long term yield chart....what is the below chart? Rec_prob and NBER_Rec
  • #1,131
  • Oct 11, 2010 1:09pm Oct 11, 2010 1:09pm
Quoting domino
yeah same to stocks and yw for the pdf I got a ton accumulated..
Maybe we can get some more to read....though how does the short term yield vs long term yields on gov treasuries figure in stocks? Perhaps a bit off topic for the thread.
  • #1,132
  • Oct 11, 2010 2:32pm Oct 11, 2010 2:32pm
Update on the A/J 4 hour if anyone is interested.
Attached Image (click to enlarge)
Click to Enlarge Name: AJ4H.png Size: 10 KB
  • #1,133
  • Oct 11, 2010 8:48pm Oct 11, 2010 8:48pm
Quoting vicky_ag
The near yield vs the long term yield chart....what is the below chart? Rec_prob and NBER_Rec
probability of going into recession.. and 1 or 0 recession occurred
  • #1,134
  • Oct 12, 2010 1:33am Oct 12, 2010 1:33am
Any chance we get some more pdf's?
  • #1,135
  • Oct 12, 2010 1:45pm Oct 12, 2010 1:45pm
AJ3H.
Attached Image


Fundies in sync and mass psychology is present. G/C trade has turned out nicely too.
  • #1,136
  • Oct 12, 2010 2:10pm Oct 12, 2010 2:10pm
Quoting Benevolent
AJ3H.
Attachment

Fundies in sync and mass psychology is present. G/C trade has turned out nicely too.
Ben, replied to you..hoping to hear back.

BTW, G/C trade has just started rolling lets see how much can be wrung out.

And this A/J trade dint the price initially moved downwards after the breaking the range you defined in your last post? Still sticking to longs??
  • #1,137
  • Oct 12, 2010 2:29pm Oct 12, 2010 2:29pm
Both ranges are two completely separate ranges, with two different meanings to me. If price broke out of my initial range(where I analyzed accumulation), that still gives us an opportunity to buy at a cheaper area. Think of it as in terms of real estate, why buy a more expensive house when you know a cheaper house is in the market? If price moves past any of these lows I'll reconsider my position, but as of right now it's still looking like a long to me. Just my 2 pips.
  • #1,138
  • Oct 13, 2010 6:49am Oct 13, 2010 6:49am
Quoting Benevolent
AJ3H.
Attachment

Fundies in sync and mass psychology is present. G/C trade has turned out nicely too.
take a look at the weekly chart on this AJ weekly..

check out the G/C sell at 1.5773 on weekly..
  • #1,139
  • Oct 13, 2010 7:57am Oct 13, 2010 7:57am
Hey Domino,

LOL, I'm far from being a vet, I've been wheeling and dealing in markets for about 6 years now and that's only thanks to my curiosity that made me go into them one day, LOL. Actually you'd be surprised by my age

Regarding how I trade - much like yourself I like building pyramids of positions and since that is based on trend riding my profit taking is usually exactly like yours - just dragging stops above/below each next supposed orders cluster. Through the years I built my trading personality as more of a tactical player, rather then action hero so I rarely stay on the lower time frames these days - too much noise and the risk/return ratio doesn't feel right for the amounts of stress included (I still go for some dogfights every now and then but that's more of a thrill seeking rather then real profit oriented trading). Taking a trade is usually based firstly on macro fundamentals for me and then cross-checked with the technical scenarios (assumed orderflow included heavily). The most important question for me remains "why would the market want to go there?" so if the answer to that is good enough I would then dig deeper and start looking into details. So on that premises IRD trades are always on my radar. XAU and XAG are also in my list for their fantastic performance despite the negative swaps build on the way up. I wouldn't like to bore anyone with technicalities from my personal decision making so I guess I should stop here.

By the way that GBPAUD trade is proving to be fantastic with each day past...Trades like that are really what this is all about

Best regards
S

Quoting domino
thats setebos.. good to see a vet in here im interested to here about your trades cause our thoughts are in line.. so I hope to here more from you.


Ill chase IRD forever if I can.. so basically at longer term breaks against the IRD ill exit and move to "cash" and wait for these to desync from fundamentals again... dragging stops behind lows with trend allows me to retain that 1 risk but drag the reward of the trade into many multiple of risk but "long tail distribution" style if you know what I mean.. and dragging stops up even when they...
  • #1,140
  • Oct 13, 2010 9:40am Oct 13, 2010 9:40am
Quoting Benevolent
Both ranges are two completely separate ranges, with two different meanings to me. If price broke out of my initial range(where I analyzed accumulation), that still gives us an opportunity to buy at a cheaper area. Think of it as in terms of real estate, why buy a more expensive house when you know a cheaper house is in the market? If price moves past any of these lows I'll reconsider my position, but as of right now it's still looking like a long to me. Just my 2 pips.
Ben, for my 2 pips..one of the most defining features of order flow trading has been quick moves....it either moves or it doesn't. So still looks doubtful for me (as a newbie in order flow).
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