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Forex Market Deciphered: The Equilibrium Cross

  • #41
  • Jan 5, 2011 2:16am Jan 5, 2011 2:16am
Quoting ezcurrency
FYI, I added 1 more long position:

1) price at 38% retrace on 1 hr charts
2) price at 200 ema on 1 hr
3) candlecode uptrend and TL support and buy signal soon

Regards,
EZ

PS - thanks for sharing your method! Don't worry about all of the people doubting your intentions ... I appreciate other successful traders sharing their methods. I am always looking to learn more!
Pretty in line of what I expected, Thank you. That 38% retrace is probably where many traders would go short due to the shape of a pull back.

Looking from the Secondary Confirmation's perspective(the equilibrium "arrow" view is here: http://www.forexfactory.com/showpost...2&postcount=33), the reasonable valuation for this pair in near term should about here:

In this case it's funny to see that the Secondary Confirmation method actually had better entry point

Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpytarget.gif Size: 90 KB
  • #42
  • Jan 5, 2011 2:28am Jan 5, 2011 2:28am
Quoting aicccia
Dopey I reported you for violating Forum Rule #1 in this post: Respect your fellow trader.
You're joking, right? How did I disrespect anyone? You can't be that clueless about threads like this. Or are you?
  • #43
  • Jan 5, 2011 2:58am Jan 5, 2011 2:58am
Quoting Dopey
You're joking, right? How did I disrespect anyone? You can't be that clueless about threads like this. Or are you?
Dopey u are busted.
.
  • #44
  • Jan 5, 2011 4:38am Jan 5, 2011 4:38am
Hi Sophos,

I am intrigued by this, particularly to your references to the order book and Layer 2. I am afraid my maths isn't up to these standards, but wondered if your algorithm had anything to do with Nash Equilibrium ?
  • #45
  • Edited 8:03am Jan 5, 2011 5:06am | Edited 8:03am
Quoting rogerha
Hi Sophos,

I am intrigued by this, particularly to your references to the order book and Layer 2. I am afraid my maths isn't up to these standards, but wondered if your algorithm had anything to do with Nash Equilibrium ?

Yes, it's kind of a mixed-Nash Equilibrium where number of participants are finite, I grouped them into two: Net Expectation Long and Net Expectation Short in which there are fixed number of trading strategies involved. So keep it short, after breaking down and examining the Forex market structure, few basic strategies based on Rational Expectation can be establish. Note that the critical element of all these is TIME which is asymmetrical in this case, and this leads to stochastic analysis with fixed and non-fixed frequency which is a big pain in the you know what......then I basically derived the conclusion that there must exist a point in the probability space where one of the Net Expectation is at maximum.

Maybe I'll post something more technical later, if you are interested
  • #46
  • Jan 5, 2011 5:30am Jan 5, 2011 5:30am
Thanks Sophos, looks like I have got a bit of reading to do then !
  • #47
  • Jan 5, 2011 9:02am Jan 5, 2011 9:02am
Quoting sophos
Maybe I'll post something more technical later, if you are interested
Hi Sophos,

Yes, please do post more technical material ... I for one am definitely interested. I have been trading a while, and have a M.S. in Nuclear Engineering and working on a second Master's degree in Operation's Research now - a lot of what I'm learning is very applicable to trading :-) ... so I have a pretty technical background and would love to see the technical details.

I was also wondering how you came up with your GBPJPY price target. I have about the same target (~ 130) ... based on TL resistance on the daily. Both GBPJPY positions have over 100 pips profit and SL at breakeven.

Regards,
EZ
Attached Image (click to enlarge)
Click to Enlarge Name: GBPJPY day.png Size: 38 KB
  • #48
  • Jan 5, 2011 5:13pm Jan 5, 2011 5:13pm
Quoting ezcurrency
I was also wondering how you came up with your GBPJPY price target. I have about the same target (~ 130) ... based on TL resistance on the daily. Both GBPJPY positions have over 100 pips profit and SL at breakeven.

Regards,
EZ

The 130 area is where the last upward equilibrium cross occurred, before the 3 weeks down leg that extended to last Friday. That was the "signature" of where the last upward demand/supply relationship started, and of course it's logical to assume that the current up leg is trying to reach that old area. Slightly different from your resistance line approach but essentially the same.

Unfortunately I forgot to make a screenshot of that last equilibrium cross, but please do check it for yourself as it happened around 6th of December.

Cheers
  • #49
  • Edited 7:35pm Jan 5, 2011 5:54pm | Edited 7:35pm
Time now is 06/01/2011, 10:50am, AEST(GMT +10)

An upward Equilibrium Cross has just formed, close previous short position and enter a new long position now at the entry candle.

btw here is the previous short position: http://www.forexfactory.com/showpost...3&postcount=30

Attached Image (click to enlarge)
Click to Enlarge Name: audusd06012011.gif Size: 42 KB
  • #50
  • Jan 5, 2011 8:55pm Jan 5, 2011 8:55pm
Thanks for the signal..

Is there a STOP LOSS strategy to this or just keep it open as well?
  • #51
  • Jan 6, 2011 12:13am Jan 6, 2011 12:13am
Quoting sophos
Time now is 06/01/2011, 10:50am, AEST(GMT +10)

An upward Equilibrium Cross has just formed, close previous short position and enter a new long position now at the entry candle.
AUDUSD also looks long to me at current levels. Reasons:

1) AUD index near support line
2) AUDUSD pair near 38.2% and 61% fib lines which exactly line up
3) candlecode on daily near buy signal

I bought some here, and will add > 1.0010. Sl below lows ...

EZ
Attached Image(s) (click to enlarge)
Click to Enlarge Name: AUDUSD day.png Size: 35 KB
Click to Enlarge Name: AUD index.png Size: 24 KB
  • #52
  • Jan 6, 2011 12:21am Jan 6, 2011 12:21am
I forgot to add ...

12:30am AUDBuilding Approvals m/m -4.2%-3.6%

Fundamental data worse than expected, and AUD not hammered too badly across the board, which means underlying strength ...

EZ
  • #53
  • Jan 6, 2011 12:46am Jan 6, 2011 12:46am
Quoting sophos
Time now is 06/01/2011, 10:50am, AEST(GMT +10)

An upward Equilibrium Cross has just formed, close previous short position and enter a new long position now at the entry candle.

btw here is the previous short position: http://www.forexfactory.com/showpost...3&postcount=30

Attachment
I see here a simple 2nd touch of resistance turned into support.
Is that what you mean by 'equilibrium cross' ?

fun_demental
  • #54
  • Edited 4:20am Jan 6, 2011 12:56am | Edited 4:20am
Quoting ezcurrency
I forgot to add ...

12:30am AUD Building Approvals m/m -4.2% -3.6%

Fundamental data worse than expected, and AUD not hammered too badly across the board, which means underlying strength ...

EZ

Thank you for raising this point.

This is probably where many traders would stuck in troubleville here. They see the worse than expected data and jump on the big sell wagon without analyzing the pairs underlying strength.

IMO, before the fed bond purchases finish in June, AUD is still the winner of market, also buoy with China's good outlook and general resources demand from Asia Pacific area and many more...... Wouldn't be a bad time to buy some AUD futures.

Cheers

Quoting marsgodlee
Thanks for the signal..

Is there a STOP LOSS strategy to this or just keep it open as well?
Sorry let me rephrase it here: I don't set in house stop loss since there's no practical need, but if I have to set one, I usually have a 200 - 300 pips SL. But please don't follow this, it depends on the size of your capital and money management rules, set your SL as see fit. Sometimes if the market decided to go against the equilibrium point for more than a week, cut your position loose would be the last resort if your patience runs out. Every second there is an open position on your book, it's a torture.

Cheers
  • #55
  • Jan 6, 2011 2:59am Jan 6, 2011 2:59am
thanks for the advice.. but 200 - 300 pips stop loss is kind of too wide.
Unless the potential rewards can be at least 2:1... with at least 400 - 600 potential pips to gain...

Btw, there is no signal on my chart regards to this Equilibrium Cross that you mentioned even after your templates and indicators are all loaded and setup accordingly..

Am I missing something?

await for your kind advice.

Thanks,
  • #56
  • Edited 6:35pm Jan 6, 2011 5:27pm | Edited 6:35pm
Is this the Season of Growth or Season of Desperation? For the first time ever on 5th of Jan 2011, Bloomberg has featured two extravagant segments about retail Forex trading on the SAME DAY, a double-dose for those havn't heard the gospel of big market movers. Join the ranks or get deserted? Hmm... I wonder

Inserted Video


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For traders who's been holding USD/CAD since the last equilibrium cross:http://www.forexfactory.com/showpost.php?p=4284549&postcount=16 http://www.forexfactory.com/attachme...3&d=1294137193
I want to reinforce your patience! Experience has taught me that this pair is very likely to go into a mechanical-wave-like pattern. Also we will definitely be seeing some signs of decoupling of this pair from the general economic situation, as major U.S index scales higher and higher along with more positive employment figures, "US assets will be in high demand" and hence the dollar appetite....or at least that's how the current logic goes.... Somehow I could smell the next equilibrium point is nearing.
  • #57
  • Jan 6, 2011 6:50pm Jan 6, 2011 6:50pm
Hi sophos,

There has been all this discussion of where an Equilibrium Cross (EC) appeared, but there is no definition of what an Equilibrium Cross actually is or how it is created.

A few people on this thread have also asked the same question.
This is becoming a very frustrating thread to understand and follow.

For example, I see in Part Two trend lines creating the EC, but how would we know how to draw the trend lines?

Is there a specific way to do it?

Thanks!
  • #58
  • Jan 6, 2011 8:10pm Jan 6, 2011 8:10pm
Quoting the-game
Hi sophos,

There has been all this discussion of where an Equilibrium Cross (EC) appeared, but there is no definition of what an Equilibrium Cross actually is or how it is created.

A few people on this thread have also asked the same question.
This is becoming a very frustrating thread to understand and follow.

For example, I see in Part Two trend lines creating the EC, but how would we know how to draw the trend lines?

Is there a specific way to do it?

Thanks!
Hello!

The definition of an equilibrium point is given in Part One under the framework, and to put into graphical representation as the equilibrium "cross", I used a combination of things such as trendlines and Andrews' pitchfork to mark its occurrence in Part Two. The way to draw it is just completely trivial, I can use any thing such as an arrow or a text bar to mark the price level, but intersecting lines that make a "cross" with direction is easy to understand.

As for the actual equilibrium point calculation, I've implicitly suggested few times in the thread that I wish it remains proprietary. The purpose of this thread is to create an open invitation for traders who would like to discuss the original meaning of "Trading System": Quantitative method, as oppose to the indicator-piling and criterion selection nonsense. I wish this thread is gradually focusing on discussions such as game theory, stochastic method, probability/statistics etc, and of course the most important element in Forex trading: Fundamental Analysis, discussions about economy and markets. I will try my best to post the occurrence of equilibrium points that I personally trade on a timely basis, along with fundamental commentaries and thoughts, which again is an open invitation for discussion from live traders. I always welcome more sophisticated and more relevant discussions.

So if you are looking for an applicable and relatively accurate trading method, I've provided indicators and a template in Part Four, unfortunately It still falls within the realm of indicator-piling and criterion selection so use it at your own discretion. Feel free to post any charts on the Secondary Confirmation view so we can discuss potential entry point, exit point, where the market is going etc.

Cheers
  • #59
  • Jan 6, 2011 8:21pm Jan 6, 2011 8:21pm
Thanks for the clarification...

Will you be sharing how the equilibrium point calculation in details?
Or is it up for sales or something like that?

await for your advice.

Thanks,
  • #60
  • Jan 6, 2011 8:39pm Jan 6, 2011 8:39pm
http://i55.tinypic.com/juesrq.jpg


A new work of art entitled "Pretension", apparently now selling at Sotheby's for $9 mil.

Analysts think this a new van Gogh. Bids are now being accepted for this limited edition.
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