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Islander and Medici trade the European open

  • #3,041
  • Feb 15, 2011 2:15am Feb 15, 2011 2:15am
Quoting vasi
I'm sorry to see that this thread is ...."closed".
I will post some screenshots.
I will put first of all my mistakes. Perhaps ... someone will help me.
Thanks in advance.
Go ahead...and let's see what we can do
  • #3,042
  • Edited 3:07pm Feb 17, 2011 2:45pm | Edited 3:07pm
Hi,

Would like to get an idea of how and why the big orders are placed and try to get an idea of what the big players are doing. I only look at S&R (all the better if it lines up with 'powerful' fibs) and (extremely obvious to everybody) trendlines. I also follow very basic fundies and news releases to keep me out of trouble. Im also a beginner!

On g/u below I see the green rectangle as important support, ie, would be looking to buy or sell there in the future

Price breaks through support (after BOE report) and the lower range of that previous support acts as resistance during last night's Asian session.

Around 0730 price hits upper range of that support and price sells @1.6119 (second red arrow) for 20+ pips.

About 35 minutes later price comes back to 1.619 (third red arrow) and sells off again for 40+pips.

What has happened leading up to the first red arrow and then to the second arrow.

What happened in that 35min period, were all the big players looking at that level and placing more sell orders etc?

Suppose Im trying to understand why price moves in the way it does at S&R

Thanks!
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: Chart_GBP_USD_5 Mins_snapshot2.png Size: 17 KB
  • #3,043
  • Feb 17, 2011 4:02pm Feb 17, 2011 4:02pm
Quoting Scotty2Cues
Hi,

Would like to get an idea of how and why the big orders are placed and try to get an idea of what the big players are doing. I only look at S&R (all the better if it lines up with 'powerful' fibs) and (extremely obvious to everybody) trendlines. I also follow very basic fundies and news releases to keep me out of trouble. Im also a beginner!

On g/u below I see the green rectangle as important support, ie, would be looking to buy or sell there in the future

Price breaks through support (after BOE report) and the lower range of that...
To find out why and how price moves the way it does, the shortest route is to spend a few years watching charts, read up on the fx market micro-structure literature, have a few mates at dealing desks in the City, and to collate your findings into a coherent framework.

At least that's how I figured a couple of things out. And if you continue down that line you may want to trade on that information, and your mates may be willing to provide it - at a price.

In absence of insider order flow information one may then, as you seem to be hoping to do, try to anticipate from chart patterns what is going on. That is how this thread started, and that is what I used to derive sometimes amazing profits from. Anticipating what would happen during the morning session I could predict most twists and turns.

But there is a fundamental problem with this, and it lies in the word anticipating. While such anticipation may be possible during long stretches of time, it doesn't imply any capability to predict what is going to happen. It just happened that during the successful stretch, that the 'boys' were happening to be repeating old tricks. But what if they change the rule-book, and what if they move on in life and are replaced by a new group of people with new tricks up their sleeves?

The conclusion is that, unless you have secure access to inside information, anticipation is a precarious approach to trading, even if you become an expert at the intraday market patterns.

And if you think about it, how could you or I in the long run anticipate or explain what is going on at dealing banks with multi-billion dollar accounts and ability to move the market at their will - unless we know a few people working in those organisations?

One may recall the words of mathematician Leonhard Euler (1707-1783):

Although to penetrate into the intimate mysteries of nature and thence to learn the true causes of phenomena is not allowed to us, nevertheless it can happen that a certain fictive hypothesis may suffice for explaining many phenomena.

The conclusion is, of course, that trying to anticipate the markets may be futile, but perhaps we can find a 'fictive hypothesis' that enables us to trade the markets profitably.

And studying the charts I found that many if not most patterns that I used to anticipate could actually be read and traded straight off the charts without anticipation.

So these days I trade by rules that enable me to enter and exit trades without any sense of anticipation. This has two major benefits.

First, I am relieved of personal involvement in the trades. I see a setup and I enter. If it's a win or loss has nothing to do with me or my thought processes - it's simply a matter of what the market happened to be doing now.

Second, I can trade any market at any time. I used feel most comfortable during the European morning - now I trade any market any time.

To put it more briefly, my recommendation would be to let go of all attempts to anticipate the market, and to find a way of trading compatible with that.

This doesn't mean that one shouldn't study and learn as much as possible about the markets. But when that study is done, the findings should be summarised in a trading system that in no way is based on discretionary anticipation of what may happen next.

Follow, don't anticipate.
  • #3,044
  • Edited 4:48pm Feb 17, 2011 4:32pm | Edited 4:48pm
This post should be a sticky. Well said Medici.

Quoting medici
To find out why and how price moves the way it does, the shortest route is to spend a few years watching charts, read up on the fx market micro-structure literature, have a few mates at dealing desks in the City, and to collate your findings into a coherent framework.

At least that's how I figured a couple of things out. And if you continue down that line you may want to trade on that information, and your mates may be willing to provide it - at a price.

In absence of insider order flow information one may then, as you seem to be hoping to do,...
  • #3,045
  • Feb 17, 2011 4:40pm Feb 17, 2011 4:40pm
Quoting sam0182
This post should be stickied. Well said Medici.
Thank you for kind words, Sam
  • #3,046
  • Feb 17, 2011 4:44pm Feb 17, 2011 4:44pm
Quoting medici
To find out why and how price moves the way it does, the shortest route is to spend a few years watching charts, read up on the fx market micro-structure literature, have a few mates at dealing desks in the City, and to collate your findings into a coherent framework.

At least that's how I figured a couple of things out. And if you continue down that line you may want to trade on that information, and your mates may be willing to provide it - at a price.

In absence of insider order flow information one may then, as you seem to be hoping to do,...

Thanks!

So as price approaches support (resistance), you think it is a mistake to both, a) anticipate the clustering of buy (sell) orders at that support and resistance level and b) to place a buy (sell) order at level?

It is better to wait for a confirmation of the cluster of market moving orders and then to enter the market?
  • #3,047
  • Feb 17, 2011 4:57pm Feb 17, 2011 4:57pm
Its not that I want to know to the nth degree what everyone is doing, but just enough of the crowd psychology to give me a slight edge as to where price is likely to head, or the levels where price is more likely to react. Like a gas, I dont need to know what every atom is doing to determine its properties
  • #3,048
  • Edited Feb 18, 2011 4:55am Feb 17, 2011 5:00pm | Edited Feb 18, 2011 4:55am
Quoting Scotty2Cues
Thanks!

So as price approaches support (resistance), you think it is a mistake to both, a) anticipate the clustering of buy (sell) orders at that support and resistance level and b) to place a buy (sell) order at level?

It is better to wait for a confirmation of the cluster of market moving orders and then to enter the market?
Good questions!

It isn't necessarily a mistake to enter at levels, as long as you have a statistically verified method backing up your bets. But if your order entries are based on discretionary judgment calls, then you are essentially gambling on the hypothesis that the non-existent future will conform to your memory of the past.

Waiting for confirmation is another expression of an anticipatory mind-set, being based on the hypothesis that price will reverse or continue at a level. Apart from the issues involved in anticipatory trading, a few of which I mentioned above, waiting for confirmation is a mental state that is prone to various cognitive biases. See

http://en.wikipedia.org/wiki/List_of_cognitive_biases

Consequently, both anticipation and "waiting for confirmation" (which is essentially the same thing) are approaches to trading that violate fundamental philosophical and psychological principles, and they should therefore be avoided.

Follow, don't anticipate.
  • #3,049
  • Edited Feb 18, 2011 12:35am Feb 17, 2011 5:12pm | Edited Feb 18, 2011 12:35am
Quoting Scotty2Cues
Its not that I want to know to the nth degree what everyone is doing, but just enough of the crowd psychology to give me a slight edge as to where price is likely to head, or the levels where price is more likely to react. Like a gas, I dont need to know what every atom is doing to determine its properties
The only way to get an edge as to where price is heading is to follow price, unless you think you can anticipate.

An analogy may help. One of my mates used to work for the US DoD developing anti-missile defense systems. Guess what principle the systems were based on.....follow, don't anticipate. Could you possibly track down a missile with its own built-in route plan and navigation system by any other means - unless you have access to that information?
  • #3,050
  • Feb 17, 2011 5:18pm Feb 17, 2011 5:18pm
Quoting medici
Good questions!

It isn't necessarily a mistake to enter at levels, as long as you have a statistically verified method backing up your bets. But if your order entries are based on discretionary judgment calls, then you are essentially gambling on the hypothesis that the unpredictable future will conform to your memory of the past.

.
"The true logic of this world is the calculus of proprobabilities" James Clerk Maxwell I know the odd quote too you know

http://www.ted.com/talks/dan_gilbert...happiness.html

about errors in estimating odds and payoffs

Im struggling to fully differentiate waiting for confirmation and following, can you give an example please?
  • #3,051
  • Feb 17, 2011 5:20pm Feb 17, 2011 5:20pm
Quoting medici
The only way to get an edge as to where price is heading is to follow price, unless you think you can anticipate.

A metaphor may help. One of my mates used to work for the US DoD developing anti-missile defense systems. Guess what principle the systems were based on.....follow, don't anticipate. Could you possibly track down a missile with its own built-in route plan and navigation system by any other means - unless you have access to that information?

ahh, i see, can you give a trade example?
  • #3,052
  • Edited 6:48pm Feb 17, 2011 5:25pm | Edited 6:48pm
Quoting medici
The only way to get an edge as to where price is heading is to follow price, unless you think you can anticipate.

A metaphor may help. One of my mates used to work for the US DoD developing anti-missile defense systems. Guess what principle the systems were based on.....follow, don't anticipate. Could you possibly track down a missile with its own built-in route plan and navigation system by any other means - unless you have access to that information?
that is a very nice analogy!
  • #3,053
  • Feb 17, 2011 5:33pm Feb 17, 2011 5:33pm
Excellent stuff!

Quoting medici
The conclusion is, of course, that trying to anticipate the markets may be futile, but perhaps we can find a 'fictive hypothesis' that enables us to trade the markets profitably.

And studying the charts I found that many if not most patterns that I used to anticipate could actually be read and traded straight off the charts without anticipation.

So these days I trade by rules that enable me to enter and exit trades without any sense of anticipation. This has two major benefits.

First, I am relieved of personal involvement in the trades....
  • #3,054
  • Feb 18, 2011 12:38am Feb 18, 2011 12:38am
Quoting Scotty2Cues
ahh, i see, can you give a trade example?
No, because the difference is not in the market or in particular trades but in your mind-set. Simply stop thinking you can figure out where price is heading next, and trade based on that. That is, trade based on where price is heading.
  • #3,055
  • Feb 18, 2011 1:46am Feb 18, 2011 1:46am
Hi Medici,
Those 10,000 hrs certainly help with the following or anticipating!!!.

many pips to you all.

doc.
  • #3,056
  • Feb 18, 2011 2:41am Feb 18, 2011 2:41am
Quoting medici
No, because the difference is not in the market or in particular trades but in your mind-set. Simply stop thinking you can figure out where price is heading next, and trade based on that. That is, trade based on where price is heading.

So for g/u am I on the right track by saying: Since all the buying after the sell off on 16/2 to around 1.6000, price is headed higher and a buy this morning at 1.6150 is a good entry point to follow the herd higher?

or am i way off?
Attached Image (click to enlarge)
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  • #3,057
  • Feb 18, 2011 2:48am Feb 18, 2011 2:48am
Quoting Dr.Scalpall
Hi Medici,
Those 10,000 hrs certainly help with the following or anticipating!!!.

many pips to you all.

doc.
Hello Doc! Good to see you again

Indeed, those hours help, but at the same time a lot of time was wasted trying to figure things out based on false premises.

As Brett Steenbarger says:

"Proper training for a trader is, at root, an epistemological undertaking."
  • #3,058
  • Edited 4:02am Feb 18, 2011 2:55am | Edited 4:02am
Quoting Scotty2Cues
So for g/u am I on the right track by saying: Since all the buying after the sell off on 16/2 to around 1.6000, price is headed higher and a buy this morning at 1.6150 is a good entry point to follow the herd higher?

or am i way off?
You're still trying to figure out and explain. Remember the missile analogy.

Equip your charts with a missile tracking system, consider current price as a noisy measurement rather than the "true price". Measure direction and noise. When noise is low, and when direction coincides with current price measurements (i.e. short-term momentum) - shoot!
  • #3,059
  • Feb 19, 2011 6:44am Feb 19, 2011 6:44am
Quoting sam0182
This post should be a sticky. Well said Medici.
Should anybody want to discuss these matters further, I set up a separate thread for it

http://www.forexfactory.com/showthread.php?t=281516

where I plan to post a few more thoughts, time permitting.
  • #3,060
  • Feb 19, 2011 7:14am Feb 19, 2011 7:14am
Quoting medici
Should anybody want to discuss these matters further, I set up a separate thread for it

http://www.forexfactory.com/showthread.php?t=281516

where I plan to post a few more thoughts, time permitting.
Thank you for your time and effort, medici. I will be reading with interest.

PS. I'm sorry that my vouch for you was pulled. CindyXXXX got a little carried away with vouching for strangers and got all of his vouches pulled, which means that I lost the 4th voucher thus voiding all of my Vs. I've have come to the understanding that people here don't care much about those Vs but I thought I'd just let you know.
If you don't risk, you don't ever have to lose.
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