Questions by email:
Have had a lot of questions by email and PM and Skype, here is a small selection that I thought I should place here as they seem to get asked a lot.
I intentionally wrote about market making in the post above first as essentially the answers to the following questions follow on from what I have written there. So if you haven't read the post above on market making please do so first.
"Since you know this business could you please explain me (if you know of course) if the markets are manipulated as the rumors say (ok i know they are, i m not that stupid, its quite obvious from the candles reactions the last 2 years), about stop hunting that banks & institutions do and whats the role of the retailers on this? Why actually they need us?"
In a nutshell yes there is as you rightly say market manipulation but proving it is a different matter. In any business in the world there is going to be market manipulation by the people at the very heart of the supply demand equation. As I have explained above a market maker is playing a very particular type of role, he is essentially a risk manager. What he may see as simply gathering key information that helps him in his role (speaking to other dealers/participants about client flows then acting on that information) you may perceive as market manipulation. It is a very fine line. If you were in a position (a big player) where you had certain "information" passed to you I am sure you would act upon it because proving that you made a decision based on that "information" is going to be extremely difficult for a regulator to prove and secondly you may feel you were just doing your job. There is an "old boys club" mentality that exists amongst the dealing community but here is my take on it, you have no access to this club from outside, it makes no difference to your trading decisions and there is nothing you can do about it. So I wonder why this topic is so heavily discussed by the community here, bloody waste of time if you ask me. Trying to influence or profit from something you will never have any influence or clue over how it works is a futile task in my opinion and just a recipe for trading disaster. Secondly, you talk about candle reactions the last 2 years, again very difficult to prove that those reactions were down to manipulation or stop hunting as you put it. Anyone who thinks otherwise I firmly would class in the "paranoia" section. It could just as easily be a normal market (behavioral/emotional) over or under reaction to directional perception. You see, this is where we are getting into details of how banks manage their currency inventories and the games between them and the big players. You can drive yourself crazy trying to figure it out and as an outsider you have more chance of winning the lottery, i.e. the odds are terrible. Stick to gaining an edge with what's in front of you.
Regarding retailers, let me make this 100% clear, a bank doesn't give a monkeys about your stop. I can promise you they don't even know you exist or where your stop is nor do they give a rat's ar##. The transaction sizes we deal in are nothing but a drop in the ocean, a huge ocean. All our risks are bucketed and transacted electronically with the bank by the brokers we use. The dealer is unlikely to even be aware for a while that he has taken on a bucket of exposure through one of the brokers you and I deal with because the broker themselves are managing their "inventory" and may not necessarily transact as and when they receive execution from us. There is so much BS written on the internet about stop hunting and retailers you can either listen to people who haven't got a clue what they are talking about or someone who has seen it. Bottom line is retailers are actually very valuable to not only the banks but also the marketplace in general as we provide a good source of liquidity and we keep the wheels turning but on an individual level we are meaningless. Regarding areas of interest with regards to price levels, the irony of it is dealers themselves are often just as much "out of the picture" as anyone else in that they are trying to figure out where a concentration of stops/orders may lie. Personally I think in a market with millions of participants thinking millions of different things you are just asking for a nervous breakdown as an outsider trying to even work these things out. If you are a big player with access to order flow information it's a different matter, that's your edge to some extent, but then as I explained in the above post on market making quite often the aim of the role you are playing is totally different - i.e. inventory management versus outright speculation. As a final note these things (stop hunting/manipulation) are impossible to model so I don't waste my time with it. I leave it for the story tellers and dreamers to use stop hunting stories and theories to sell their crap. As always it comes down to bottom line profit and whilst I think tales of stop hunting make for a great night out and selling a bucket load of useless forex "services" they don't make you money (in my opinion). Stick to a reputable broker and transact your edge and you will be fine. Good question though
.
"did the trader's you learnt from base importance to price revisiting previous London and New York closes/opens? i.e. price higher then look for buys lower look for sells".
Good question. The traders I learned about risk taking from and model development paid no attention to these types of things. However as I have explained I was not on a spot desk. Traders on a spot desk will take these factors into consideration of course especially as some of these levels will be used as fixes in other products. This may also be a factor for shorter term scalpers that use short term timeframes as you are bound to get some small reactions to these levels. In any case in what I am doing now, taking a more medium term approach, the level the market closed at NYK, London or Timbuktu makes not a blind bit of difference to me. As I mentioned in a previous post the market is just one continuous stream of quotes to me. I think part of the problem is newcomers into this industry become obsessed with transacting constantly and therefore will be using smaller timeframes and get sucked in to all the things I have talked about above, dealers games, stop hunting, london opens, closes, correlations with other markets, short term news. That's the nature of the beast I guess. As you mature as a trader all this crap tends to drop away, that's been my experience anyway.
do you look to weekly/monthly prices for trend bias?
The algos I developed do take into consideration the monthly to some extent but as a chart on its own I do not look at the monthly no. I will go into more detail later today.
"it seems that once you decide direction you place the order above/below so you get in as the move is kicking in your intended direction. is this the way most of you were doing or were there (icluding yourself) any that waited for a retrace to get a better risk reward?"
As alluded to in many previous posts there is no one way of trading in the institutional sector. As I will explain shortly I prefer to buy/sell when the market is going in my direction but other pure proprietary traders will buy at market or using limit orders I have no issue with that. There is no one size fits all. I respect every trader's approach on one condition, they are transparent, make real money and are not selling dreams like most of the zero conscience vendors here. It would be foolish of me to rule out any approach (including S/R even though I don't use it) especially if that approach is backed up by bottom line profit, the trouble is 99% of what is spouted in this world is not backed up by fact. Plenty of people seem very happy to draw lovely super duper charts but as soon as you ask for real profits - silence. They should stick to art school let the real traders trade.
I have intentionally spent some time writing about these things because although in my eyes it's totally irrelevant to what I do now, people in the retail community seem fascinated by all these things. I can understand as they are outside the 4 walls where all this goes on but we must make full use of what is in front of us and all these factors as I have spoken about in some detail do not concern us nor do we have any influence over them in any way. If anything they will drive you round the bend trying to figure out and I certainly see no advantage or edge to be gained from it. Just my opinion. It's bound to pop up again so in future perhaps people can just refer others to these last few posts.
Thank you for the kind words, great to have your support.
Dear Tradestar, I have not posted any charts, yet. I am not sure where you see this information maybe you are looking at the trade explorer. The trade explorer just shows a generic blank chart it is not my chart. In any case great to have you on board please wait till I have gone in to more details as these questions will be answered.
I think that's all the backlog of answers I had to clear, sorry for the delay I was out cold for most of yesterday with the flu but slowly recovering now. I am working on an introduction to some of my trading style and will hopefully post something later today before the Arsenal game.
Regards, NV
(skype: nv_trader, email: [email protected])
REAL LIVE ACCOUNT:
***http://www.myfxbook.com/members/nv_t...-trader/749457***
Have had a lot of questions by email and PM and Skype, here is a small selection that I thought I should place here as they seem to get asked a lot.
I intentionally wrote about market making in the post above first as essentially the answers to the following questions follow on from what I have written there. So if you haven't read the post above on market making please do so first.
"Since you know this business could you please explain me (if you know of course) if the markets are manipulated as the rumors say (ok i know they are, i m not that stupid, its quite obvious from the candles reactions the last 2 years), about stop hunting that banks & institutions do and whats the role of the retailers on this? Why actually they need us?"
In a nutshell yes there is as you rightly say market manipulation but proving it is a different matter. In any business in the world there is going to be market manipulation by the people at the very heart of the supply demand equation. As I have explained above a market maker is playing a very particular type of role, he is essentially a risk manager. What he may see as simply gathering key information that helps him in his role (speaking to other dealers/participants about client flows then acting on that information) you may perceive as market manipulation. It is a very fine line. If you were in a position (a big player) where you had certain "information" passed to you I am sure you would act upon it because proving that you made a decision based on that "information" is going to be extremely difficult for a regulator to prove and secondly you may feel you were just doing your job. There is an "old boys club" mentality that exists amongst the dealing community but here is my take on it, you have no access to this club from outside, it makes no difference to your trading decisions and there is nothing you can do about it. So I wonder why this topic is so heavily discussed by the community here, bloody waste of time if you ask me. Trying to influence or profit from something you will never have any influence or clue over how it works is a futile task in my opinion and just a recipe for trading disaster. Secondly, you talk about candle reactions the last 2 years, again very difficult to prove that those reactions were down to manipulation or stop hunting as you put it. Anyone who thinks otherwise I firmly would class in the "paranoia" section. It could just as easily be a normal market (behavioral/emotional) over or under reaction to directional perception. You see, this is where we are getting into details of how banks manage their currency inventories and the games between them and the big players. You can drive yourself crazy trying to figure it out and as an outsider you have more chance of winning the lottery, i.e. the odds are terrible. Stick to gaining an edge with what's in front of you.
Regarding retailers, let me make this 100% clear, a bank doesn't give a monkeys about your stop. I can promise you they don't even know you exist or where your stop is nor do they give a rat's ar##. The transaction sizes we deal in are nothing but a drop in the ocean, a huge ocean. All our risks are bucketed and transacted electronically with the bank by the brokers we use. The dealer is unlikely to even be aware for a while that he has taken on a bucket of exposure through one of the brokers you and I deal with because the broker themselves are managing their "inventory" and may not necessarily transact as and when they receive execution from us. There is so much BS written on the internet about stop hunting and retailers you can either listen to people who haven't got a clue what they are talking about or someone who has seen it. Bottom line is retailers are actually very valuable to not only the banks but also the marketplace in general as we provide a good source of liquidity and we keep the wheels turning but on an individual level we are meaningless. Regarding areas of interest with regards to price levels, the irony of it is dealers themselves are often just as much "out of the picture" as anyone else in that they are trying to figure out where a concentration of stops/orders may lie. Personally I think in a market with millions of participants thinking millions of different things you are just asking for a nervous breakdown as an outsider trying to even work these things out. If you are a big player with access to order flow information it's a different matter, that's your edge to some extent, but then as I explained in the above post on market making quite often the aim of the role you are playing is totally different - i.e. inventory management versus outright speculation. As a final note these things (stop hunting/manipulation) are impossible to model so I don't waste my time with it. I leave it for the story tellers and dreamers to use stop hunting stories and theories to sell their crap. As always it comes down to bottom line profit and whilst I think tales of stop hunting make for a great night out and selling a bucket load of useless forex "services" they don't make you money (in my opinion). Stick to a reputable broker and transact your edge and you will be fine. Good question though
."did the trader's you learnt from base importance to price revisiting previous London and New York closes/opens? i.e. price higher then look for buys lower look for sells".
Good question. The traders I learned about risk taking from and model development paid no attention to these types of things. However as I have explained I was not on a spot desk. Traders on a spot desk will take these factors into consideration of course especially as some of these levels will be used as fixes in other products. This may also be a factor for shorter term scalpers that use short term timeframes as you are bound to get some small reactions to these levels. In any case in what I am doing now, taking a more medium term approach, the level the market closed at NYK, London or Timbuktu makes not a blind bit of difference to me. As I mentioned in a previous post the market is just one continuous stream of quotes to me. I think part of the problem is newcomers into this industry become obsessed with transacting constantly and therefore will be using smaller timeframes and get sucked in to all the things I have talked about above, dealers games, stop hunting, london opens, closes, correlations with other markets, short term news. That's the nature of the beast I guess. As you mature as a trader all this crap tends to drop away, that's been my experience anyway.
do you look to weekly/monthly prices for trend bias?
The algos I developed do take into consideration the monthly to some extent but as a chart on its own I do not look at the monthly no. I will go into more detail later today.
"it seems that once you decide direction you place the order above/below so you get in as the move is kicking in your intended direction. is this the way most of you were doing or were there (icluding yourself) any that waited for a retrace to get a better risk reward?"
As alluded to in many previous posts there is no one way of trading in the institutional sector. As I will explain shortly I prefer to buy/sell when the market is going in my direction but other pure proprietary traders will buy at market or using limit orders I have no issue with that. There is no one size fits all. I respect every trader's approach on one condition, they are transparent, make real money and are not selling dreams like most of the zero conscience vendors here. It would be foolish of me to rule out any approach (including S/R even though I don't use it) especially if that approach is backed up by bottom line profit, the trouble is 99% of what is spouted in this world is not backed up by fact. Plenty of people seem very happy to draw lovely super duper charts but as soon as you ask for real profits - silence. They should stick to art school let the real traders trade.
I have intentionally spent some time writing about these things because although in my eyes it's totally irrelevant to what I do now, people in the retail community seem fascinated by all these things. I can understand as they are outside the 4 walls where all this goes on but we must make full use of what is in front of us and all these factors as I have spoken about in some detail do not concern us nor do we have any influence over them in any way. If anything they will drive you round the bend trying to figure out and I certainly see no advantage or edge to be gained from it. Just my opinion. It's bound to pop up again so in future perhaps people can just refer others to these last few posts.
Hi NV, Thanks for the insights of the market makers. While it may not pertain to everyday trading, it's good to know some of the mechanics of how it operates behind the scenes. Nice job of trading. Reviewing your trades it really shows the importance of "letting your winners run & cutting the losers quickly". Over 11% return in a few weeks with 3 wins & 8 losses is pretty impressive. Would have been even better if the one GJ trade hadn't been barely nicked before it ran in your direction but that's trading. Please continue passing the knowledge. Thanks
Hello NV, I understand you make trading decisions based on 4 hr. However, I see some of the trade graphs are 5M and 15M. Do you zoom down to lower time frame to time the entry once you have decided to take a trade? Thanks TS
I think that's all the backlog of answers I had to clear, sorry for the delay I was out cold for most of yesterday with the flu but slowly recovering now. I am working on an introduction to some of my trading style and will hopefully post something later today before the Arsenal game.
Regards, NV
(skype: nv_trader, email: [email protected])
REAL LIVE ACCOUNT:
***http://www.myfxbook.com/members/nv_t...-trader/749457***
!!
