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  • #21
  • Jan 21, 2012 12:51pm Jan 21, 2012 12:51pm
Quoting ghous
1) Incorrect. Your candles and the big ones in particular are formed when there is a disequilibrium between demand and supply, i.e buyers and sellers. An equilibrium state is easy to spot on the chart. a really tight consolidation zone with low volumes is a good indication that traders more or less agree on the price the security is being traded at, currently. Unfortunately because of so many factors that affect this trader "sentiment" such as news, technical levels and bogus trading by the day dreamers this state will often break up into a disequilibrium...
Hey Ghous, thanks for your helpful answer. It seems like I'm looking for the holy grail here.

By the way, nice to see you here. Are you still active in the James16 thread? I was also writing there a while ago and am still a member of Jim's PF.

Best regards
Hans
Thanks J16, Sam Seiden, Udine and Jacko
  • #22
  • Aug 24, 2012 8:52pm Aug 24, 2012 8:52pm
Interesting questions you pose HS.

I just watched the video and to be honest, that person is not really doing anything differently than what we are in the J16 thread or what Jaroo is doing, it is just the way he presents it that is a little different.

Interesting to see people asking all kinds of not related questions in that video.
  • #23
  • Aug 25, 2012 12:37am Aug 25, 2012 12:37am
Hi PB, thanks for joining us here. I agree with you, Seiden just looks at it from another perspective. Instead of talking about support and resistance he calls it demand and supply. The impact on price remains the same. However, I found his definition slightly more accurate as it describes very well WHY price is moving the way it does. Whereas support and resistance only tell us THAT/WHERE something happens. I just can speak for me, but this slight change in perspective made all the difference for me.

Anyway, I think both perspecitves are totally valid and can make you a profitable trader. And in the end that's all that matters, isn't it?

BTW, are you still active in the PF? I look forward to see you around.

Best
Hans
Thanks J16, Sam Seiden, Udine and Jacko
  • #24
  • Aug 25, 2012 12:43am Aug 25, 2012 12:43am
After almost two years I just reread all the great answers in this thread and I'm really grateful that you guys shared your wisdom with me. I want to tell you that it really changed the way I trade and I look at charts. Thank you for that.
Thanks J16, Sam Seiden, Udine and Jacko
  • #25
  • Aug 25, 2012 11:49am Aug 25, 2012 11:49am
Quoting HanSolo
After almost two years I just reread all the great answers in this thread and I'm really grateful that you guys shared your wisdom with me. I want to tell you that it really changed the way I trade and I look at charts. Thank you for that.
And i thank you for introducing me to this thread today
I don't need easy. I just need possible.
  • #26
  • Edited Aug 26, 2012 11:17am Aug 25, 2012 5:52pm | Edited Aug 26, 2012 11:17am
There's commercial trades, fund trades, then retail trades. Retail trades are most often wrong while commercial trades are most often right. We can conclude that in order to make money, one must be able to buy low/sell high. If commercial traders are most often right, then they will have been behind a 50-250 pip move.

These guys don't buy in huge lots all the time, they may acquire a very large position over time to keep price from going up/down.

The retail trader is emotionally weak. When they get stopped out, they go in the other direction. This in turn causes them to freak out more.

If commercial traders are building positions slowly and retail traders put a freakton of stops where a lot of funds put stops, price will end up moving sharply. The funds/retails will be trying to cover their losses while the commercials are taking profit. This in turn causes the retails to get knocked out. The funds will have been smart enough to see profit taking and will have gotten out. Retails weill end up going back in their initial direction while commercial and funds will be adding positions. Retails get fucked, once again...

This last fucking will have slowed the momentum as commercial traders are taking full profit with funds taking half profit.

There's also supply/demand.

*Just my point of view, I could be completely wrong.
Play the players, not the cards.
  • #27
  • Aug 26, 2012 2:15am Aug 26, 2012 2:15am
Thanks for your view Gnarly. I wonder how many retail and commercial orders there are on a major pair like EURUSD per day. Are there any statistics on that? Would it even be possible to find out? I doubt that.
Thanks J16, Sam Seiden, Udine and Jacko
  • #28
  • Aug 26, 2012 11:15am Aug 26, 2012 11:15am
Quoting HanSolo
Thanks for your view Gnarly. I wonder how many retail and commercial orders there are on a major pair like EURUSD per day. Are there any statistics on that? Would it even be possible to find out? I doubt that.

I would imagine there's a lot more commercial orders. A lot more! You can see the C.o.T. report from the C.M.E. and this will give you a clue, though because it is a lagging report, it should only provide clues and not a clear answer. It is possible to find out, but not for the entire pool of orders.

The big boys will always know what the orders look like with their own pool of liquidity. They may try to look at each other's pool, but their own pool they fully understand. Retail traders are just swimming in the pool, either getting sucked up in a large undercurrent or kayaking!

Maybe there can be an analogy based on chlorine.. Poker is probably a better choice. (You can't see the other players hands, but you can see their body movements, hear differences in pitch.)

Anyways, just two measly cents.
Could be entirely wrong.
Play the players, not the cards.
  • #29
  • Edited 1:31am Aug 27, 2012 1:12am | Edited 1:31am
I believe that you are wrong in your assumption about commercial positions. Commercial positions in COT report are mostly hedge transactions. They don't have much impact in the market becouse they mostly end up as a net "0" positions. By the nature of bussines - farmers, hedgers, exporters etc. diminish their risk resulting from currency/commodity volatility using forward / futures contracts.
  • #30
  • Aug 27, 2012 2:40am Aug 27, 2012 2:40am
Do banks and governments also fall under your definition of "commercial"?
Thanks J16, Sam Seiden, Udine and Jacko
  • #31
  • Aug 27, 2012 2:47am Aug 27, 2012 2:47am
Two further questions to all of you guys:

1. Which are the most important reads (webpages, forum threads, books, etc.) to understand pure bare-naked price action?

2. I've heard a lot about Larry Harris' Trading and Exchanges: Market Microstructure for Practitioners. Has anyone of you read it? Did it change the way you look at charts? Did it improve your day to day trading in terms of bare-naked chart reading? Or is it more like a book for fund managers and people getting serious in financial business?
Thanks J16, Sam Seiden, Udine and Jacko
  • #32
  • Aug 27, 2012 2:48am Aug 27, 2012 2:48am
Quoting HanSolo
Do banks and governments also fall under your definition of "commercial"?
I do not think that banks use Futures for their transactions. Banks exchange currencies on top-level interbank market.
  • #33
  • Aug 27, 2012 7:59am Aug 27, 2012 7:59am
Quoting Greenhaze
I believe that you are wrong in your assumption about commercial positions. Commercial positions in COT report are mostly hedge transactions. They don't have much impact in the market becouse they mostly end up as a net "0" positions. By the nature of bussines - farmers, hedgers, exporters etc. diminish their risk resulting from currency/commodity volatility using forward / futures contracts.

I understand that commercial positions are usually for hedging purposes. If an airliner is expecting fuel costs to go up, they can go buy some futures or something to combat the costs. However, they buy in such bulk unlike the retail trader does.

Can you explain the "0" net positions? On the provided attachment, you can see the Aud is being shorted more than it is being bought up by the commercial trades, while the retailers are buying more than they are shorting. The total positions from both almost even out, but they don't. The Aud is being shorted more than long. This, in turn, will generate more supply of the Aud dollar, while will end up driving prices down.

Taking that and looking at the Aud charts, you can see a reversal could very well be taking place in almost all pairs.

Please, let me know if I'm wrong.
Attached Image (click to enlarge)
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Play the players, not the cards.
  • #34
  • Aug 27, 2012 8:06am Aug 27, 2012 8:06am
Quoting HanSolo
Do banks and governments also fall under your definition of "commercial"?

Well, they do, but not in the sense of a business. Banks trade currencies with each other, and the videos I've seen, it looks a lot like poker. If a bank in Hong Kong wants to buy 150 million sterlings, the English aren't just going to let them have the best possible price...

Really, though, my definition of commercial are basically the Tier-1 traders. Tier-2 are the funds because they don't directly have a part in the economy. (I'd like to see the day when a manager goes out and starts doing farm work.) Tier-3 is... ME! Just the average person.

I hope I said that alright, I just woke up not that long ago.
Play the players, not the cards.
  • #35
  • Aug 27, 2012 8:16am Aug 27, 2012 8:16am
Quoting GnarlyPips
Well, they do, but not in the sense of a business. Banks trade currencies with each other, and the videos I've seen, it looks a lot like poker. If a bank in Hong Kong wants to buy 150 million sterlings, the English aren't just going to let them have the best possible price...

Really, though, my definition of commercial are basically the Tier-1 traders. Tier-2 are the funds because they don't directly have a part in the economy. (I'd like to see the day when a manager goes out and starts doing farm work.) Tier-3 is... ME! Just the average person....
Yes, makes sense. Thanks for your input.
Thanks J16, Sam Seiden, Udine and Jacko
  • #36
  • Aug 27, 2012 9:31am Aug 27, 2012 9:31am
Quoting GnarlyPips
I understand that commercial positions are usually for hedging purposes. If an airliner is expecting fuel costs to go up, they can go buy some futures or something to combat the costs. However, they buy in such bulk unlike the retail trader does.

Can you explain the "0" net positions? On the provided attachment, you can see the Aud is being shorted more than it is being bought up by the commercial trades, while the retailers are buying more than they are shorting. The total positions from both almost even out, but they don't. The Aud is being...
You are right there Gnarly. I am entirely wrong about this "0" net position thing. Commercial positions are there to hedge the risk of unexpected price volatility but these are not banks and hedge funds . Unlike the Large speculators, commercials positions are not there to profit. If company A will have to sell a commodity in 6 months time from now then they will (or might) enter forward or futures market with short position only to exclude the risk of price decline. In this kind of bussines (car makers, medium/large exporters, farmers, miners etc...) most of the time profit comes from the actuall product/commodity , not from speculation.

On the other hand Large speculators earn profits from pure speculation.
By observation of their net position and open interest you know how much "big" speculative capital is actually there to be distributed. It does tell a lot more about the perceived value of the instrument.
Attached Image (click to enlarge)
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  • #37
  • Aug 27, 2012 10:04am Aug 27, 2012 10:04am
Quoting Greenhaze
You are right there Gnarly. I am entirely wrong about this "0" net position thing. Commercial positions are there to hedge the risk of unexpected price volatility but these are not banks and hedge funds . Unlike the Large speculators, commercials positions are not there to profit. If company A will have to sell a commodity in 6 months time from now then they will (or might) enter forward or futures market with short position only to exclude the risk of price decline. In this kind of bussines (car makers, medium/large exporters, farmers,...

I believe I may be stretching the definition of commercial to fit my own bias. (I'm a big fan of Sim City.)
Play the players, not the cards.
  • #38
  • Aug 27, 2012 10:09am Aug 27, 2012 10:09am
Quoting GnarlyPips
I believe I may be stretching the definition of commercial to fit my own bias. (I'm a big fan of Sim City.)

LOL... COT is very interesting and pretty wide subject and i have to update my knowledge about it aswell becouse there are some things that are not clear to me.

Check this sites out if you want to get more indepth information about it:

http://commodities.about.com/od/comm...r/cot-book.htm

http://www.tradingmarkets.com/eminis...-1-800675.html


This particular bit is worth investigating imo:

"2009 - Significant COT changes occurred. In September 2009 the CFTC began publishing a new disaggregated COT report.
The new disaggregated COT contains new categories of traders and begins classifying traders differently. No longer are traders classified as simply commercial or non-commercial. The new report contains more specific categories, such as "Producer/Merchant/Processor/User", "swap dealers", "managed money" and "other reportable" as well as a non-reportable category."

All the best!
gh
  • #39
  • Aug 27, 2012 8:13pm Aug 27, 2012 8:13pm
ok i will do the best i can to explain this, been a long day haha, ok so...as you know in the markets there are bulls and there are bears, when the markets gets choppy, you can in a sense see a "battle" going on, the bulls and the bears are fighting head to head to see which one wins, and therefore picks a direction which we call break outs, ok so when a direction is established meaning, either the bulls or the bears finally win the 'battle" a breakout happens, when the break out finally happens and the market finally picks a direction, the losing side abandons their trade for a small loss, and then they join in on the direction of the breakout which only makes it that much stronger, make sense? I hope this helps you understand Have a great day my friend, stay safe in the markets! ;D
  • #40
  • Aug 28, 2012 12:19am Aug 28, 2012 12:19am
Quoting Greenhaze
You are right there Gnarly. I am entirely wrong about this "0" net position thing. Commercial positions are there to hedge the risk of unexpected price volatility but these are not banks and hedge funds . Unlike the Large speculators, commercials positions are not there to profit. If company A will have to sell a commodity in 6 months time from now then they will (or might) enter forward or futures market with short position only to exclude the risk of price decline. In this kind of bussines (car makers, medium/large exporters, farmers,...
The way I understood COT reports and the Commercials activity from Larry Williams and Stephen Briesse, is that the Commercials are the "Smart Money" in the futures business. Large Speculators and Small Speculators are on the other side of the Commercials' orders.

The idea they presented (as i understood) was that the Commercials have entire teams of researchers and the best idea of the real world supply/demand factors for their specific asset (cocoa, wheat, lumber, gas, currencies, etc). They are not in the markets to speculate, they are there to hedge against price fluctuations and actually buying/selling the assets.

So the general idea was to only look when the Commercials net position is at an EXTREME level (of past X number of years), which would indicate an exaushtion of the supply and demand for that particular asset.

So when the Commercials are at an extreme net LONG level, we should anticipate a market bottom being made, and when they are extreme net SHORT, we should anticipate a market top to unfold. The Commercials are right on market tops and bottoms and wrong during the trend (position wise), while the Speculators are right during the trend, but wrong at market tops and bottoms.

Attached Image (click to enlarge)
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I know it may be exactly what you said, but i just posted this to see what i remember from all the COT adventures lol.

Good luck!
I don't need easy. I just need possible.
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