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Price is everything

  • #29,601
  • Feb 7, 2015 6:11pm Feb 7, 2015 6:11pm
I heard of a very large oil trader that would close out his position every time he went to the bathroom. would always cause a wrinkle in the price. Then he would reestablish the position on returning, the result was another wrinkle.

How true it is I don't know. But traders can be a funny breed. I wouldn't be surprised if it was true.
Illegitimi non carborundum - Noli pati a scelestis opprimi.
  • #29,602
  • Feb 7, 2015 6:31pm Feb 7, 2015 6:31pm
Quoting charvo
this story actually conveys wrong idea sometimes someone might get the idea, oh ok, the market may not be predicted, or even it is random in fact, the only conclusion from the story is that junior analyst is naive in saying 'ABSOLUTELY' about his prediction. nothing else. any major market may only reflect two things: the leading market mover's action, OR, the collective participants' intention. and both of these two are representative of human intelligence, they are supposed to be considerably predictable.
I agree. I guess the point of my post was just, like you said, to never assume that one will always be correct about their trade opinion. Even if you have the most wonderful engulfing whipsaw and the QM is perfect and looks great, it's never smart to play with fire and avoid placing some sort of damage control stoploss in case another black swan even happens. The above discussion just put the idea in my head that some believed that the patterns were always going to work out no matter what and I personally can't believe that will always be true, as accurate as they usually are for me. Just a cautionary tale I think.

Remember, some institutional traders who know the game really got burned on this too. The SNB was looking out for number one.
  • #29,603
  • Feb 8, 2015 7:14am Feb 8, 2015 7:14am
Quoting Kanzler
{quote} I agree. I guess the point of my post was just, like you said, to never assume that one will always be correct about their trade opinion. Even if you have the most wonderful engulfing whipsaw and the QM is perfect and looks great, it's never smart to play with fire and avoid placing some sort of damage control stoploss in case another black swan even happens. The above discussion just put the idea in my head that some believed that the patterns were always going to work out no matter what and I personally can't believe that will always be...
Hi Kanzler,
yes for example the Deutsche Bank lost $150 million.

All I wanted to say is that there are events that let the normal market mechanism stop working. All demand zones were taken out in a second. I'm even not sure if price moves this way that it can't "gap" (liquidity gap) over your stop.

@Warren: Okay a long time is relative. I entered the trading business 2008 and I stumbled across S&D/PA trading in 2011. I'm trading live since one and a half year. That means I study S&D trading since 4 years. It's not that long but for me it feels like a decade.
  • #29,604
  • Edited 8:24am Feb 8, 2015 7:52am | Edited 8:24am
Quoting AndyMate
How does SD analysis work on the pairs in which there is little direct flows? Should we always be looking at the related pairs to see which is the one with the true SD? As I said, I hadn't thought too much about it before, but did so recently, and it started driving me crazy, ha ha Thanks, Andy {image}
Mate, you answered your own question.
You are looking to short NZDCAD. ie NZD is weaker < than CAD
a) NZDUSD has a supply zone (maybe an insti selling)
b) USDCAD was up. ie USD is stronger > than CAD

Since USD is stronger > than CAD, USD is not the weakest.
Would you then choose to short NZDCAD or NZDUSD?
Then, short the hell out of the NZDCAD supply zone when price comes back.

But there are other problems. USD is the major currency in the world, and can drag along other crosses.
CAD may not have been really weak, it could have been pulled along by correlated currencies. To ensure CAD is really weak, check all CADXXX minors.
If CAD is not the weakest, I might in this case, look for another XXXUSD pair to short, after confirming that other USD majors are indeed strong & XXX minors are indeed weak.

Exception! If you really knew NZDUSD's ss zone was due to a large insti selling, short the sh*t out of this zone. This is inside info, the insti orders may not have been completely filled.

Of course then, the ultimate problem is identifying the pair where the real money is flowing and which pairs are just being dragged along.
This is where some folks use currency meters etc. But beware, trading the strongest-weakest cross may well be joining the party after it has already climaxed.
  • #29,605
  • Feb 8, 2015 9:47am Feb 8, 2015 9:47am
Thanks Econbizer.

I think the thing that is playing on my mind is how can we trust the locations of SD given that price gets dragged around by the movement of other pairs.
If I tried to short NZDCAD as in the last image of my previous post, at the price where the apparent NZDCAD supply was, I'd have had my stop hit.

I had a look at a real example of a clear supply zone on NZDUSD and where price reacted. It reacted very well at the supply as hoped.
When looking at NZDCAD, I saw the same strong drop at the time of the initial supply, and the same strong reaction drop at the same time as that on NZDUSD.
However this reaction was located somewhat further down on the chart because USDCAD had moved about in the meantime.

If we're trying to look at things like compression and engulfings, the shifting SD that I'm describing seems to affect the validity of these.
For example, the last image of my previous post shows that the supply has been engulfed, when actually the supply has only been tested, not broken (NZDUSD chart).

I hope all this makes sense. Perhaps I'm looking too deeply into it, or misunderstanding things.

Thanks,

Andy
  • #29,606
  • Feb 8, 2015 10:35am Feb 8, 2015 10:35am
Been sharing some charts with a trader on skype he frequents this thread.

"Traders helping Traders"

Attached Image (click to enlarge)
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I need to finish something i started
  • #29,607
  • Feb 8, 2015 2:24pm Feb 8, 2015 2:24pm
Quoting bigwal
Been sharing some charts with a trader on skype he frequents this thread. "Traders helping Traders" {image}
Nice chart.
  • #29,608
  • Feb 8, 2015 3:07pm Feb 8, 2015 3:07pm
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  • #29,609
  • Feb 8, 2015 10:50pm Feb 8, 2015 10:50pm
On EURUSD notice price gapped down today as well...may not be strict PIE tradition but pro gaps like that are often powerful indicators of exhaustion.
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  • #29,610
  • Feb 9, 2015 6:46am Feb 9, 2015 6:46am
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  • #29,611
  • Feb 9, 2015 6:50am Feb 9, 2015 6:50am
Quoting Winston Reed
{image}
just took same trade, gl for both.
  • #29,612
  • Feb 9, 2015 7:06am Feb 9, 2015 7:06am
Hi still learning this method, was lurking around for some weeks here now finally i have registered
what do you think about my trade was the entry right? i expect some rejection here or would it be better to wait for an engulfing candle south?
comments are very welcome

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  • #29,613
  • Feb 9, 2015 7:53am Feb 9, 2015 7:53am
Quoting AndyMate
I hope all this makes sense. Perhaps I'm looking too deeply into it, or misunderstanding things. Thanks, Andy
Mate,

U r on to something. If u poured through all of redsword11's posts, u would noticed he routinely observes movements of correlated pairs.
What u r looking at on NZDUSD or NZDCAD is this observation.

If we can device ways of identifying where the actual money flow is happening, i.e. on NZDUSD or NZDCAD, we will greatly increase our trading E(V).
Personally, I am looking at ideas from threads on this topic.
  • #29,614
  • Feb 9, 2015 9:14am Feb 9, 2015 9:14am
Hi Econbizer,

Just thinking hypothetically here as I don't know how it all fits together:

Suppose each currency has its own value which we don't directly know, but we do know its relative value to each other currency (these are our exchange-rate pairs).
Buying or selling of a currency pair causes the value of one currency to rise and the other to fall.

So thinking back to our complete set of individual currencies, one is now of a higher value than it was, and one is now lower than it was. But by how much?
I assume there is a calculation made to make sure that the rise in value of one is equal to the drop in value of the other, and that the combination of these 2 changes is exactly equal to the change in price of the currency pair that sourced it.
Having adjusted the value of the 2 currencies, then all pairs that relate to one of them will be adjusted by the value of that particular currency.

I suppose to find the pair that the move originated on, you'd look for the biggest relative change in price, or something like that...?

All of this can get quite messy, as in the following example:
Large selling on EURUSD => EUR value drops and USD value rises.
We therefore see EURJPY drop by the EUR decrease in value, and this triggers buyers' orders causing price to rise.
This causes the EUR value to rise and JPY to drop.
The rise in EUR value here is reflected back in EURUSD... so it bounces around...

It's just the way of a complex system, I suppose. Finding balance with so many inputs.

Still, for trading a pair based on past events at specific prices, it would certainly be good to know if those events actually relate to that pair.
Maybe this is why a lot of traders look at USDX or the Nikkei etc?

Well, I've rambled on long enough, ha ha. Thanks for reading

Andy
  • #29,615
  • Feb 9, 2015 7:31pm Feb 9, 2015 7:31pm
Quoting AndyMate
I assume there is a calculation made to make sure that the rise in value of one is equal to the drop in value of the other, and that the combination of these 2 changes is exactly equal to the change in price of the currency pair that sourced it. Having adjusted the value of the 2 currencies, then all pairs that relate to one of them will be adjusted by the value of that particular currency. Andy
U r referring to exchange rate equilibrium theories, fisher theory, purchasing power parity etc.
This is part of how market makers like your bucket shops & instis make $. There are smart bros here who figured that: kurka's arbitrage dashboard for e.g.
But these brokers ain't stupid, that's why hedging is no longer allowed. Many years back, when fx was new to retail, this was still possible, now.. not so much as your broker will know what u r up to. Also.. smarter pple than us with access to shorter wires to exchanges & smart-ass ivy league grads do this with algos. One possible way is to use different brokers, but u need to have programming skills & more brains to do this.

There are many other arbs that insti's / smart pple with resources do, other than fx.. e.g. same product on multiple exchanges = inter-mkt-arb opportunities. The winner is the one with the shortest wires to the exchanges.

Quoting AndyMate
Still, for trading a pair based on past events at specific prices, it would certainly be good to know if those events actually relate to that pair. Maybe this is why a lot of traders look at USDX or the Nikkei etc?
This would be following the "trading theme" of the moment. e.g. trying to identify what all traders in the world r looking at.

Quoting AndyMate
I suppose to find the pair that the move originated on, you'd look for the biggest relative change in price, or something like that...? All of this can get quite messy, as in the following example: Large selling on EURUSD => EUR value drops and USD value rises. We therefore see EURJPY drop by the EUR decrease in value, and this triggers buyers' orders causing price to rise. This causes the EUR value to rise and JPY to drop. The rise in EUR value here is reflected back in EURUSD... so it bounces around... It's just the way of a complex system, I...
The rest of us try to anticipate where prices will likely go.
Redsword11 stated on his very first post that he is more or less a range / swing trader.
This is what this thread is about.. if you long a dd zone / short a ss zone, you are anticipating that prices will be ranging. U r range trading.
Of cos red has other mtds, for e.g. breakout trading of the zone. B/o trading is a good strategy cos u effectively trade against others who have shorted say a ss zone & have put their SLs a few pips beyond say a bearish pin. If u use a stop-entry order they will push price in your direction as u enter your trade.

As a start, if we can correctly identify the ss / dd zones on pairs where the actual flows r & range trade those. This will be already great.
Manybe what we can add to dd/ss trading is.. if you intend to short a ss zone on NZDUSD, quickly check that NZDXX minor crosses r really weak + USD major crosses r really strong. This will already add a huge edge to our trading.

It's great to discuss this.. with discussion comes knowledge. I am still a learner btw.
  • #29,616
  • Feb 10, 2015 4:06am Feb 10, 2015 4:06am
Little overnighter.

Keep it simple at all times.

Warren

Attached Image (click to enlarge)
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I need to finish something i started
  • #29,617
  • Feb 10, 2015 4:14am Feb 10, 2015 4:14am
Quoting bigwal
Little overnighter. Keep it simple at all times. Warren {image}

where was your entry?
  • #29,618
  • Feb 10, 2015 4:16am Feb 10, 2015 4:16am
Eur Usd Reverse.

Slightly late entry. of prior engulfing pattern at yesterdays low.

Attached Image (click to enlarge)
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I need to finish something i started
  • #29,619
  • Feb 10, 2015 4:25am Feb 10, 2015 4:25am
Quoting NaughtyPip
{quote} where was your entry?
I will go into more detail on that chart later.

Busy trading.

There are some important areas i should point out
I need to finish something i started
  • #29,620
  • Feb 10, 2015 11:02am Feb 10, 2015 11:02am
Hi Econbizer,

I found an excellent thread that discusses the idea of identifying the flows. It uses it for the purpose of what is happening now in order to trade now, but could be similarly used to identify what pair actually caused SD that shows up on other charts.

http://www.forexfactory.com/showthread.php?t=334165

I'm going to leave it for now and look into it later, as I really need to start becoming profitable with SD + PA before trying to bring this additional layer of complexity into it.

Thanks,

Andy
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