Origin Of Price | Forex Factory

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Origin Of Price

  • #1
  • First Post: Aug 18, 2011 12:31pm Aug 18, 2011 12:31pm
After years of watching price move hours on end sometimes blinded by the trading system of squiggly lines cast over the chart. I have recently come to one very simple conclusion. We are all nothing more than cow-birds pecking off flies from the mohemuth giant we call price. When I say price I'm not speaking from the perceptive point of trying to figure out where it will go rather more specifically the point that it just moves by some form of hidden mechanism.

In the spot market we are told from our brokers they get price feed from multi banks and some sort of formulation to derive a best figure we are constantly presented with on the chart. Now here's where we simply say ok. But where the hell did these so spoken of banks come to a price conclusion individually?
The story as told really makes no sense in a real time chaotic world of constant change, where some one or some one's can make precise numeric logic of all this in such a manor it can be harnessed.

UNLESS... The Origin of price is a common factor agreed upon by all sources that illuminate the illusion. Liken this to the wrestling business. Simply they put on a good show to the public playing good bad and ugly but behind closed doors, well... They are best of buddies. Now don't forget here were only describing FOREX as a spot market with no real grid locked price, only what is presented to the market as price. With this concept understood it makes a real good case for the curious concern over the Origin Of Price.

Questions:

Since The Spot Broker is connected to the inside, what do they really know?

Being as the banks are the price originators, How well informed are they of each Broker's (interim) order book?

With different models in action ECN, STP, versus the good old "Broker is the house" How much back lash does this create upon the banks price creation scheme?

Is this truly a secret market from the inside out, and being as though 95% of retail participants lose constantly what would the banks do if only for one day that 95% actually got it right?
"Look Left Think Right"
  • #2
  • Aug 18, 2011 12:52pm Aug 18, 2011 12:52pm
Quoting CurrencyAnalyst
After years of watching price move hours on end sometimes blinded by the trading system of squiggly lines cast over the chart. I have recently come to one very simple conclusion. We are all nothing more than cow-birds pecking off flies from the mohemuth giant we call price. When I say price I'm not speaking from the perceptive point of trying to figure out where it will go rather more specifically the point that it just moves by some form of hidden mechanism.

In the spot market we are told from our brokers they get price feed from multi banks...
origin of price:

from what I know, the forex market is a big fat flow chart for people and companies exchanging money.
There are different motives for exchanging money:
invest in the local stock market, hedge against currency risk, travelling, buying goods overseas, mergers & acquisitions transactions, speculation of currency appreciation/depreciation, seeking bonds with higher yield or safer bonds...

A lot of these factors are outside of the control of banks. I think due to the nature of the forex market and how it is so interrelated with everything else, it is impossible for banks to determine price in a secret circle.

Speculation is only part of the motives, but I think it is not the main reason of price changing and the other reasons are mainly outside the control of banks.
Somebody correct me, if I am wrong here, please.
  • #3
  • Aug 18, 2011 1:00pm Aug 18, 2011 1:00pm
Quoting CurrencyAnalyst
After years of watching price move hours on end sometimes blinded by the trading system of squiggly lines cast over the chart. I have recently come to one very simple conclusion. We are all nothing more than cow-birds pecking off flies from the mohemuth giant we call price. When I say price I'm not speaking from the perceptive point of trying to figure out where it will go rather more specifically the point that it just moves by some form of hidden mechanism.

In the spot market we are told from our brokers they get price feed from multi banks...

It's also true that 95% couldn't get it right all at the same time because there is only so much supply at any particular price level at any specific time.

So if 95% of all speculators either entered the market all at once or changed directions all at once, it would cause massive volatility, and if this occured in the synthetic markets the bid-ask would become as wide as the grand canyon.
  • #4
  • Aug 18, 2011 1:03pm Aug 18, 2011 1:03pm
I appreciate the elaborated response this was exactly the kind of direction I intended this thread to go.

One point though all these mentioned sources that interchange currency all derive price from the good old banks. The banks are the money changes and such rates are some how derived from them. maybe someone here has peeked behind the wizards curtain and seen the unseen. The main angle here with this thread is how the brokers come to accept the price they push to us. As well as what part the banks are playing along with the broker based on the end result, hence: "The Order Book's".
"Look Left Think Right"
  • #5
  • Aug 18, 2011 1:12pm Aug 18, 2011 1:12pm
Quoting beachallstar
It's also true that 95% couldn't get it right all at the same time because there is only so much supply at any particular price level at any specific time.

So if 95% of all speculators either entered the market all at once or changed directions all at once, it would cause massive volatility, and if this occured in the synthetic markets the bid-ask would become as wide as the grand canyon.

In the world of exchange traded instruments I can see this supply issue a bottle neck, But remember this is SPOTFX and each broker is his own market so I don't really see any such supply from a control standpoint. Rather every single broker takes orders as they see fit individually.

Now this concept says 2 things. Either they are all in cohutz together if such a supply problem synthetic or real were so, and if not in cohutz then yes a one sided trade over load is very possible as it takes a bit of time for each of them to realize every retail trade is right and the banks or retail partners wont provide any off set.
"Look Left Think Right"
  • #6
  • Aug 18, 2011 1:17pm Aug 18, 2011 1:17pm
Quoting CurrencyAnalyst
I appreciate the elaborated response this was exactly the kind of direction I intended this thread to go.

One point though all these mentioned sources that interchange currency all derive price from the good old banks. The banks are the money changes and such rates are some how derived from them. maybe someone here has peeked behind the wizards curtain and seen the unseen. The main angle here with this thread is how the brokers come to accept the price they push to us. As well as what part the banks are playing along with the broker based...
figure it out in terms of ANY other auction, and you have your answer.
Congratulations ScalaFX for coming out of the closet!
  • #7
  • Aug 18, 2011 1:22pm Aug 18, 2011 1:22pm
Quoting CurrencyAnalyst
I appreciate the elaborated response this was exactly the kind of direction I intended this thread to go.

One point though all these mentioned sources that interchange currency all derive price from the good old banks. The banks are the money changes and such rates are some how derived from them. maybe someone here has peeked behind the wizards curtain and seen the unseen. The main angle here with this thread is how the brokers come to accept the price they push to us. As well as what part the banks are playing along with the broker based...
okay, so you wanna know about the market structure.

Well, here is an amateurish article trying to explain just that: http://www.investopedia.com/articles...#axzz1VPiXWTM6

I think for a more indepth analysis you need to study some academic papers on how the prices are derived on a technical basis.
  • #8
  • Aug 18, 2011 1:31pm Aug 18, 2011 1:31pm
Thanks "CusTos"

Actually I know Kathy Personally a nice gal, however a pure Retail Robot.


Spot is not like anything else the price is derived with a bias of unique nature I am sure of it. Maybe as the thread continues Deeper shall rabbit hole go.
"Look Left Think Right"
  • #9
  • Aug 18, 2011 2:14pm Aug 18, 2011 2:14pm
Quoting CurrencyAnalyst
Thanks "CusTos"

Actually I know Kathy Personally a nice gal, however a pure Retail Robot.


Spot is not like anything else the price is derived with a bias of unique nature I am sure of it. Maybe as the thread continues Deeper shall rabbit hole go.
Price isn't "derived" in any special way with a synthetic broker. Your broker is simply matching your sell order with a buy order or your buy with a sell.

It's how he matches these that are unique in the synthetic market. Your broker has two choices, either a) genuinely match your trade to an opposing traders order or group of traders orders or b) take the other side of your order themselves.

Choice b) is where the high failure rate of retail traders is to the brokers advantage, where retail traders are net loser's and a transfer of wealth flows straight to the broker(plus spread).

Broker's can't manipulate the price of their market too far away from the real world market for two simple reasons.

First is all broker's may share the position of being counter party to their losing client's but they are also in competition with other retial providers, therefore, if one dissent's and offer's their retail customer's a more competitive market, the other's must follow suit in order to prevent losing customers to the dissenting broker.

The second reason is predataion from sophisticated traders. If a broker is manipulating price out of line with the market, there would assumingly have to be a correction at some point, and that would lead to predatory oppurtunities for sophisticated traders to take advantage of.
  • #10
  • Aug 18, 2011 3:11pm Aug 18, 2011 3:11pm
Such a waste with all this useless FX 101 bantering. Price is nothing more than a master manipulation and can as well as does blast against all the ignorant fools that are spoon feed all the propped up Technical analysis. I assumed the Forum junkies would start to respond with due ignorance. What would a forum be without a huge base of social idiots. Anyhow as this story unfolds I'm sure some good collaboration with come.
"Look Left Think Right"
  • #11
  • Aug 18, 2011 3:46pm Aug 18, 2011 3:46pm
To me, price is just a temporary disagreement that was created via the imbalance of the orderflow. The market, obeying zero-sum rules, is a mere machine, that processes orders and creates new prices based on the perceptions and expectations of the participants.

Anything deeper than that my brain starts to boil, and I crawl back to my hole.
  • #12
  • Aug 18, 2011 4:02pm Aug 18, 2011 4:02pm
Quoting fluiDynamic
To me, price is just a temporary disagreement that was created via the imbalance of the orderflow. The market, obeying zero-sum rules, is a mere machine, that processes orders and creates new prices based on the perceptions and expectations of the participants.

Anything deeper than that my brain starts to boil, and I crawl back to my hole.
Thanks, Kindly were on the roll now.

Now, Price is and always has been the most spoken of yet root cause overlooked component in spot trading. The entire mass psychological lean has been towards technical analysis specific to Support and Resistance biased by herd mood swings. No body ever cares to look into the causation prior to the visual application, except the Gann, astro etc followers, and even still they give no though to the physical price presentation as mechanical causation of the action. I have so called this underlying point of analysis "Swamp -n- Stomp".
"Look Left Think Right"
  • #13
  • Aug 18, 2011 7:05pm Aug 18, 2011 7:05pm
Quoting Custos
okay, so you wanna know about the market structure.

Well, here is an amateurish article trying to explain just that: http://www.investopedia.com/articles...#axzz1VPiXWTM6

I think for a more indepth analysis you need to study some academic papers on how the prices are derived on a technical basis.
That's a good read. These articles also have a nice presentation and good explanation on the subject:

http://www.fxstreet.com/education/le...rrency-market/

Cheers =)
The tone of your words reflects the quality and result of your trading ;-)
  • #14
  • Aug 18, 2011 7:54pm Aug 18, 2011 7:54pm
Wrong forum, bro.
  • #15
  • Aug 18, 2011 11:32pm Aug 18, 2011 11:32pm
It's all about perception as humans do have a common harmonic resonance of likeness. Some however are a mark above as well as below this commonality. Liken to a poker game as some see just a bunch of people playing cards of chance, others have the bluff gift and are able to manipulate the odds of chance into their favor over hard aspects. Another point to help understand this is the example of a comedian. As he/she tells jokes and suggestive spew the observer is awe inspired at that moment of cognition to the riddle and or concept. Nothing has changed for the presenter nor the observer other than the recipient’s enlightenment of altered perception.

Regarding The Forex Market. This is the ultimate manipulation, being as it is not hidden by any physical intent rather it is a given being as the majority of recipients will not perceive the true intent instead will accept as a group mentality of a natural common condition. Let me speak simply here: "Market participants are being played as a fool” This is why the trading methods wheel keeps getting re-invented day after day!

It works just as good today as it has for decades, and will continue to function as the individual perception of the observer hence “the trader" has been conditioned to evacuate counter reasoning to the root causation of the affect. (Traders Keep Recalibrating and tweaking trading systems)

This manipulation is clean according to common law as the law itself has been conditioned to have no defining calculation to such action other than considering the questioning of such action to be taboo. This explains why the majority of you here only fight the plausibility of such possibility. And few others have curious attraction with blind intent. By a throw it out quick guess I'd say maybe 1 in 5 million subjects can accept and engage this matrix of illustration. And being as this Forum does not have anywhere near that many members, or trolling viewers. Let me now conclude this thread as a fruitless cause.
As I stand and watch the herd be devoured by the Mohemuth. I shall not wonder why but rather remain informed as to causation.
:nerd:
"Look Left Think Right"
  • #16
  • Edited 12:30am Aug 19, 2011 12:13am | Edited 12:30am
Quoting CurrencyAnalyst
It's all about perception as humans do have a common harmonic resonance of likeness. Some however are a mark above as well as below this commonality. Liken to a poker game as some see just a bunch of people playing cards of chance, others have the bluff gift and are able to manipulate the odds of chance into their favor over hard aspects. Another point to help understand this is the example of a comedian. As he/she tells jokes and suggestive spew the observer is awe inspired at that moment of cognition to the riddle and or concept. Nothing has...
well, I personally can't believe that the biggest market in the world can be controlled by a couple of banks.
I've been introduced to an fx desk one time and all they do there is to hedge their own currency exposure or their client's currency exposure. This hedging activities make up for the price. Also how would banks be able to control a market that is exchanging a trillion $ + per day.
I just can't believe that such a huge market can be controlled by a couple of entities, at least not for long. They would run out of cash. We should not forget that banks are essentially very risk averse, especially these days. Why would they risk overexposure.
Thirdly: the nash equilibrium: oligopolies generally don't last long, since one of the parties will sooner or later not play part anymore and just try to profit from the group. Then the oligopoly dissolves.
  • #17
  • Aug 19, 2011 1:06am Aug 19, 2011 1:06am
Quoting CurrencyAnalyst
It's all about perception as humans do have a common harmonic resonance of likeness. Some however are a mark above as well as below this commonality. Liken to a poker game as some see just a bunch of people playing cards of chance, others have the bluff gift and are able to manipulate the odds of chance into their favor over hard aspects. Another point to help understand this is the example of a comedian. As he/she tells jokes and suggestive spew the observer is awe inspired at that moment of cognition to the riddle and or concept. Nothing has...
I love this early 1800s English. Go on, do your Thomas Jefferson impression too, it's well funny.
  • #18
  • Last Post: Aug 19, 2011 3:54am Aug 19, 2011 3:54am
Quoting CurrencyAnalyst

Regarding The Forex Market. This is the ultimate manipulation, being as it is not hidden by any physical intent rather it is a given being as the majority of recipients will not perceive the true intent instead will accept as a group mentality of a natural common condition. Let me speak simply here: "Market participants are being played as a fool” This is why the trading methods wheel keeps getting re-invented day after day!
If it wasn't so then Forex wouldn't be open to retail trading. If you want to make money learn to take advantage of it. If you consider this immoral then you're in the wrong place.
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