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  • #41
  • Jan 26, 2011 4:14pm Jan 26, 2011 4:14pm
We need to define what "fundamental value" is. I see many of us, including me, saying fundamental value here and there, inefficiency in price bla bla. But none of us really knows where to get the "fundamental" value of a currency. How do we know what the value is to the different participants?

Yes unnamed, 1000s of hours staring at a chart would help, but if you understand what to look for, maybe it will get easier. But it is clear to everyone, ALLOT of time and thinking needs to be done, and I am all for thinking, but I don't know what to think about first..

Take care guys
  • #42
  • Jan 26, 2011 4:18pm Jan 26, 2011 4:18pm
chriskins,

i wasn't talking to you.
Didn't see your charts.
  • #43
  • Jan 26, 2011 4:23pm Jan 26, 2011 4:23pm
Quoting Carnegie
We need to define what "fundamental value" is. I see many of us, including me, saying fundamental value here and there, inefficiency in price bla bla. But none of us really knows where to get the "fundamental" value of a currency. How do we know what the value is to the different participants?
Well, the fundamental value is determined after digesting all the available fundamental information. And there is no way of knowing what this value is to different participants, other than looking at the same info, and interpreting it in the same way they are. Knowing the fundamental value however may not be that important for us here, since this is not about trading based on that. More important would be the inefficiencies that would arise from the large players, trying to profit based on the fundamental value. Entering the market for them is very difficult because of the size of their orders. So they need to use certain techniques that would be exploitable for someone aware of them. That's why understanding how the market works is so important.
Stubbornly persistent
  • #44
  • Jan 26, 2011 4:25pm Jan 26, 2011 4:25pm
Quoting UnnamedPlayr
chriskins,

i wasn't talking to you.
Didn't see your charts.
Sorry Playr
Kind Regards Chris
  • #45
  • Jan 26, 2011 4:33pm Jan 26, 2011 4:33pm
Quoting Carnegie
We need to define what "fundamental value" is. I see many of us, including me, saying fundamental value here and there, inefficiency in price bla bla. But none of us really knows where to get the "fundamental" value of a currency. How do we know what the value is to the different participants?

Yes unnamed, 1000s of hours staring at a chart would help, but if you understand what to look for, maybe it will get easier. But it is clear to everyone, ALLOT of time and thinking needs to be done, and I am all for thinking, but I don't know what...
Darkstar has a chapter in his book called "The fallacy of fair value". I don't think orderflow trading requires you know the fundamental value of a currency. I'll quote DS :

"Order flow is read by deconstructing the logic processes of participants within the context of the execution limitations imposed by market microstructure."

So first of all you need to fully understand market micro structure and its execution limitations. Then the harder part is trying to anticipate the thinking of broad categories of participants.
Kind Regards Chris
  • #46
  • Jan 26, 2011 5:15pm Jan 26, 2011 5:15pm
Quoting Carnegie
We need to define what "fundamental value" is. I see many of us, including me, saying fundamental value here and there, inefficiency in price bla bla. But none of us really knows where to get the "fundamental" value of a currency. How do we know what the value is to the different participants?
I've run into this same problem in the book. The solution I came up with was to seperate value into a number of different forms:

Intrinsic value = The base value of a security. For stocks and the like it is 0. For currencies, because they are priced on a relative basis, the value is 1.

Current or Market Value = The price at which a security is trading now

True Value = What a security would be worth if all participants had perfect knowledge regarding its value.

Perceived Value = Market participants estimation of what true value is, given the imperfect information available.

Nobody can ever know true value (even though it does exist) because nobody will ever have perfect information.

Fundamental traders (latent demand participants) look for oportunities to arbitrage any deviation of market value from perceived value.

Perceived value is ascertainable with a fair degree of specificty, but it takes a good understanding of themes, sentiment, and economic theory.

Hope that helps
  • #47
  • Jan 26, 2011 5:20pm Jan 26, 2011 5:20pm
Quoting chriskins
Darkstar has a chapter in his book called "The fallacy of fair value".
I'm not disputing the point of your post, but I feel I should mention that that table of contents is total crap. The content and structure has changed probably 100 time since then...
  • #48
  • Jan 26, 2011 5:30pm Jan 26, 2011 5:30pm
Quoting Darkstar
I'm not disputing the point of your post, but I feel I should mention that that table of contents is total crap. The content and structure has changed probably 100 time since then...
Hi DS, I'm still on the list for the book? LOL My brother in law has a music album he has been finishing/perfecting since 1978. So I am still hopeful. LOL
  • #49
  • Jan 26, 2011 5:31pm Jan 26, 2011 5:31pm
Quoting Darkstar
I'm not disputing the point of your post, but I feel I should mention that that table of contents is total crap. The content and structure has changed probably 100 time since then...
Ah right, sorry, look forward to reading it if I get a copy. (Put my name down a while back).
Kind Regards Chris
  • #50
  • Jan 26, 2011 5:31pm Jan 26, 2011 5:31pm
Quoting Darkstar
Fundamental traders (latent demand participants) look for oportunities to arbitrage any deviation of market value from perceived value.

Perceived value is ascertainable with a fair degree of specificty, but it takes a good understanding of themes, sentiment, and economic theory.
Do we need to know what this Perceived value is to be able to exploit deviations from it?
Or we just need to guess/figure out what the Perceived value is in the moment we see an opportunity?
  • #51
  • Jan 26, 2011 5:37pm Jan 26, 2011 5:37pm
Quoting Darkstar
Perceived value is ascertainable with a fair degree of specificty, but it takes a good understanding of themes, sentiment, and economic theory.
Anyway, as I read it, fundamentals are what drive the market. Or, I'd say, fundamentals are what drive the Perceived value.
Let's say we have a GOOD and IMPORTANT news for EUR, but EURUSD doesn't move or, worse, it falls down. The Perceived value is higher than market price, so we could look for the next best place for a foundamental and big player to enter to exploit this deviation from the Perceived value and front-run him.

Am I understanding this the right way?
  • #52
  • Jan 26, 2011 5:37pm Jan 26, 2011 5:37pm
Quoting scott89
Do we need to know what this Perceived value is to be able to exploit deviations from it?
Or we just need to guess/figure out what the Perceived value is in the moment we see an opportunity?
If price is in a range then surely its near its perceived value? If price then deviates from this to some degree then either the perceived value has changed or its now mispriced, so what I think needs to be discerned is has anything happened to change the PV?
Kind Regards Chris
  • #53
  • Jan 26, 2011 5:42pm Jan 26, 2011 5:42pm
Quoting scott89
Do we need to know what this Perceived value is to be able to exploit deviations from it?
Or we just need to guess/figure out what the Perceived value is in the moment we see an opportunity?
Depends what your trying to do. There is no "One way" to hunt stops or trade orderflow, so the answer will be highly contextual.

Jones! - Yeah brother if you sent a request, your on the list (that goes for everyone who sent one in btw). And no it's not going to be a 20 year project.

A long time ago I watched an interview with George Lucas. The interviewer asked him how he knew that a movie was finished and his answer has stuck with me all these years. His answer was:

Works of art are never perfected, they are only abandoned.

I'm quite willing to abandon it as soon as it can acomplish its objective.
  • #54
  • Jan 26, 2011 6:39pm Jan 26, 2011 6:39pm
Quoting Darkstar
Depends what your trying to do. There is no "One way" to hunt stops or trade orderflow, so the answer will be highly contextual.
So in some way it's possible to profit from it even without knowing what the perceived value is, right?

What can you tell me about big players that, after a stop-hunt, entered the market and that now NEED to get out? Would that be something interesting to work on? Or it's just useless informations?
  • #55
  • Jan 26, 2011 8:19pm Jan 26, 2011 8:19pm
Quoting Carnegie
I really think we need to learn the REAL BASICS before moving on. The way I see it; price equlibrium is when the demand and supply curve cross eachother. That's when most of orders are traded and that's the most liquidity because both sellers and buyers are satisfied.
Now when price moves up strongly, it is obviously EXCESS DEMAND, someone want's more of it so they bid it up to WHERE THERE IS EQUILIBIRUM ONCE AGAIN, where sellers WANT TO SELL.

But then why does someone bid up that strong? Why not with any retracements? And why the hell did the...
Stops are demand. They are real orders. In this case, buy orders. We assume that as demand increases at a price level in the form of limit orders (latent), so does the probability of price actually reaching that area to fill those orders. Have you considered that sellers would very much like to sell above current price; to gain a better price point?
  • #56
  • Edited 9:57pm Jan 26, 2011 9:53pm | Edited 9:57pm
Darkstar, i already subscribe on your blogs and hope on your list before my stop belong to mighty for too long.

Hope continued trade well.
  • #57
  • Jan 27, 2011 4:26am Jan 27, 2011 4:26am
Quoting HipsterPipster
Stops are demand. They are real orders. In this case, buy orders. We assume that as demand increases at a price level in the form of limit orders (latent), so does the probability of price actually reaching that area to fill those orders. Have you considered that sellers would very much like to sell above current price; to gain a better price point?
Hmm hipster could you explain this a little bit more. BTW. Are limit orders "latent" as darkstar explained them in the other thread? Weren't they fundamentals?

Yes I have considered that, and also that buyers would like to buy below current price.. but can't get anywhere as to how to implement it.

BTW I've downloaded a forex simulator now called vHandsTrade (thank you he who pointed it out) and I am going to spend some time just looking at price action as it "moves".. without trading. I just want to watch how price moves sometimes inefficiently like 20-30 pips at the time "from nowhere". I picked USDJPY 1HR chart..

Take care
  • #58
  • Jan 27, 2011 5:35am Jan 27, 2011 5:35am
Quoting Carnegie
Hmm hipster could you explain this a little bit more. BTW. Are limit orders "latent" as darkstar explained them in the other thread? Weren't they fundamentals?

Yes I have considered that, and also that buyers would like to buy below current price.. but can't get anywhere as to how to implement it.

BTW I've downloaded a forex simulator now called vHandsTrade (thank you he who pointed it out) and I am going to spend some time just looking at price action as it "moves".. without trading. I just want to watch how price moves sometimes inefficiently...
Latent orders are the manifestation of the demand and supply curve. I would urge you to read all of T&E before making any more assumptions.
Kind Regards Chris
  • #59
  • Jan 27, 2011 6:06am Jan 27, 2011 6:06am
Quoting Jimmy Jones
The Way of the Dollar. I'm reading it now and frankly it's a very difficult read for me.


Thanks Jimmy.
  • #60
  • Jan 27, 2011 12:17pm Jan 27, 2011 12:17pm
Hmm it's really looking like I am missing out on something. Look at that move on hourly at USDJPY. That has to be some kind of inefficiency...
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