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Cable Update (GBPUSD)

  • #423,061
  • Feb 2, 2016 10:26pm Feb 2, 2016 10:26pm
OUR 2 CONTENDERS FOR THE DAY

LEFT: Yesterday Cable had a 4hr bar close below monthly pivot at 4379, then bounce up. The high of that candle was 4426. Stoch is still high. So look for London to break 4426 and move up to Sunday R2 which is also the Weekly R2 at 4530.
There will be some resistance at 4518 which is last Weekly R2
Because the bounce came of the Monthly pivot, we coulc possibly hold for Monthly R1 at 4679

RIGHT: Yesterday GBPJPY dropped from Sunday R1 742 to Sunday pivot at 7221. If this 4hr bar closes up, then we'll be above Sunday, weekly and monthly pivots, yet below the day pivot. If stoch can turn up by London open, then buy at 7271
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Forex, awful to watch, AWESOME to play
  • #423,062
  • Feb 2, 2016 10:26pm Feb 2, 2016 10:26pm
Think about this... Say a crowd of people rush into a market speculating on the price of something going up... Say they push up price 100 pips. Now, if nobody else follows them... The market can either go sideways, or it can wait for them to get tired and sell out, and it rotates all the way back down.

If a crowd is just rushing around in circles without other people joining them, it can only just circle up/down within the same range of prices. It doesn't matter if others are trying to push them up or down or not.

Without others joining, or increased/decreased liquidity on one side of the market, it can just circle up/down within a range of prices. Only with a solid fundamental accumulation/distribution flow of some type can the market be steadily driven in a direction. That can be something as simple as analysts constantly recommending a currency is overvalued and investors listening and shifting assets, a spreading fear among investors of something in the future like Brexit driving a large scale steady rotation out of a market, etc...


Quoting Charith
{quote} As I read it, players are waiting for long and short build up. When they see more longs, they move it down, and vice versa. Haven't you notice that happen before? And once they move it in one direction, say up, if more bulls jump in thinking it a breakout, they pull it down. If more bears jump in looking for the reversal, they keep moving it up. This is what I see on the market, don't you?
"Don't fear a bubble until it starts to burst."
  • #423,063
  • Feb 2, 2016 10:43pm Feb 2, 2016 10:43pm
Quoting meanvel
Nah, institutional players just want to make money. {quote}
Exactly, that's why they move the market against us.
You think they only make money against each other? You think they are only interested in big chunks?
There are consequences when they compete each other. But it is easier to target retail trades together. Yeah, it might be a tiny profit for them, but it adds up.
... I'm not crazy, just Paranoid ...
  • #423,064
  • Feb 2, 2016 11:01pm Feb 2, 2016 11:01pm
There was a lot of brute force trading back in the old days... Like the Salomon brothers would shift currencies 2%+ suddenly to shift market sentiment. The moves attracted enough attention that it got people rushing in, and they could cover positions profitably before the move collapsed back through the original prices. Well, actually by the time they covered it did collapse most of the way back, but they still managed to offload enough high or low enough to profit.

This is a quote from "Liars Poker."
“That was how a Salomon bond trader thought: He forgot whatever it was that he wanted to do for a minute and put his finger on the pulse of the market. If the market felt fidgety, if people were scared or desperate, he herded them like sheep into a corner, then made them pay for their uncertainty. He sat on the market until it puked gold coins. Then he worried about what he wanted to do.”

People already have to be emotional before they can be easily herded and driven in a direction. But, there is a paradox... Any large player who attempts to shift a market risks another large player going against them. However, if the market is highly susceptible to movement in a direction in the first place... It will still go to it's original destination eventually.


Quoting Charith
{quote} Exactly, that's why they move the market against us. You think they only make money against each other? You think they are only interested in big chunks? There are consequences when they compete each other. But it is easier to target retail trades together. Yeah, it might be a tiny profit for them, but it adds up.
"Don't fear a bubble until it starts to burst."
  • #423,065
  • Feb 2, 2016 11:11pm Feb 2, 2016 11:11pm
Current move up will be an attempted false breakout.
... I'm not crazy, just Paranoid ...
  • #423,066
  • Feb 2, 2016 11:14pm Feb 2, 2016 11:14pm
Let me explain the pattern of the Salomon brothers tactics back in the day. There is a good book on it. I think it was mentioned in the book "Market Wizards." This pattern on the GU 4H looks just like the old engineering patterns.

Here is the underlying dynamics if a large firm, or a few large firms were pooled together to dominate the market with massive exploratory trading. This is how Salomon Brothers did it...

When the market was consolidated and receptive for a move. They would slam the market hard, knock it up a couple percent, attract mass attention... The move would attract enough people to make money, but by the time they covered their multi-billion dollar position, prices would be about collapsed nearly back to where they were before the move.

Most Salomon Brothers traders were so inept at trading that they could only trade successfully at the firm using brute force tactics with the firms massive credit lines. They could not do the type of trading we do...

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"Don't fear a bubble until it starts to burst."
  • #423,067
  • Feb 2, 2016 11:25pm Feb 2, 2016 11:25pm
However, do realize that big players can get stuck in bad positions and cause massive tail invents... Quote from New Market Wizards. Interview with ex-Salomon Trader.

"Interviewer: One percent of a $3 billion position is $30 million! Did this loss transpire in just one afternoon?

Salmon Trader: It transpired in just eight minutes. All I wanted to do was to make it through to the Tokyo opening at 7 P.M. for the liquidity. If you really have to buy $3 billion, you can do it in Tokyo; you can't do it in the afternoon market in New York-you can't even do it on a normal day, let alone on a day when major news is out. My strategy was to try to cap the dollar in New York. Normally, if you sell several hundred million dollars in the afternoon New York market, you can pretty much take the starch out of the market. I sold $300 million, and the market went right through it. The people on my desk didn't really know the size of our position, with the exception of Robert, who was my number two man. I looked at Robert and said, "That didn't slow the market down too much, did it?" He grimaced and shook his head slowly from side to side. I realized that I couldn't cover these positions. I was really scared. "

Explanation for people to who do not fully understand trading... He sold 300mil to try to break the uptrend and demoralize the flood of bulls bidding up the currency. This is classic exploratory trading.
"Don't fear a bubble until it starts to burst."
  • #423,068
  • Feb 2, 2016 11:33pm Feb 2, 2016 11:33pm
I assume most people here have read the Jack Schwager Books, but this is a very important quote...

"Interviewer: How does your current trading for your own management firm differ from your trading at Salomon?

Trader: At the moment, I'm trading a lot smaller than at Salomon, which is a disadvantage.

Interviewer: How is large size an advantage? You're kidding.

Trader: No, I'm serious. If a big buyer comes in and pushes the market 4 percent, that's an advantage. He still has to get out of that position.

Interviewer: Unless he's right about the market, it doesn't seem like large size would be an advantage.

Trader: He doesn't have to get out of the position all at once. Foreign exchange is a very psychological market. You're assuming that the market is going to move back to equilibrium very quickly-more quickly than he can cover his position. That's not necessarily the case. If you move the market 4 percent, for example, you're probably going to change the market psychology for the next few days. "
"Don't fear a bubble until it starts to burst."
  • #423,069
  • Feb 2, 2016 11:45pm Feb 2, 2016 11:45pm
Yep, not many people got pulled in... I think it was the wrong move to move the market up. If a really solid move is going to be made, it needs to be made from lower down.

Market needs to clear out the stops under the range before anyone should consider a long trade. Big stop pocket is located under 1.44 somewhere from the people who got pulled into that...

This game is no mercy, take no survivors... Absolutely no experienced trader or pro will support the GU here until they see price hit stops below this range. It could always consolidate sideways too. But more likely we break violently into the order pocket below here.

Quoting Charith
Current move up will be an attempted false breakout.
"Don't fear a bubble until it starts to burst."
  • #423,070
  • Feb 2, 2016 11:46pm Feb 2, 2016 11:46pm
You know nothing, John Snow.
  • #423,071
  • Feb 3, 2016 12:04am Feb 3, 2016 12:04am
Quoting meanvel
I assume most people here have read the Jack Schwager Books, but this is a very important quote... "Interviewer: How does your current trading for your own management firm differ from your trading at Salomon? Trader: At the moment, I'm trading a lot smaller than at Salomon, which is a disadvantage. Interviewer: How is large size an advantage? You're kidding. Trader: No, I'm serious. If a big buyer comes in and pushes the market 4 percent, that's an advantage. He still has to get out of that position. Interviewer: Unless he's right about the market,...
Thanks for sharing these things
... I'm not crazy, just Paranoid ...
  • #423,072
  • Feb 3, 2016 12:08am Feb 3, 2016 12:08am
First order pocket cleared. Second order pocket located down below 1.4390 needs to be cleared. It's trying right now...

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"Don't fear a bubble until it starts to burst."
  • #423,073
  • Feb 3, 2016 12:12am Feb 3, 2016 12:12am
Quoting meanvel
There was a lot of brute force trading back in the old days... {quote}
Sounds like you were in this game a long time.
How do you see roles of retail traders, market players, regulators etc
What's your take on the market in a nutshell, why does it move & how?
... I'm not crazy, just Paranoid ...
  • #423,074
  • Feb 3, 2016 12:30am Feb 3, 2016 12:30am
Nope... I have only been trading since 2007. I have read just about every single trading book there is though.

Crowds of people (markets) move for just about every idiotic reason you can think of. People scared of Ebola, people panicked about the Debt Ceiling, etc... People rushing into gold and silver scared of hyperinflation caused by new monetary policies like quantitative easing in 2011.

Markets primarily move in fear... Scared money. This one hedge fund manager friend of mine from a private fund once told me... "There is no greed, the market is just fear and fear."

There is only so many people that just get scared because price is moving against their positions. For a serious market move... People really need to have logical reasons to fear for their money.

Quoting Charith
{quote} Sounds like you were in this game a long time. How do you see roles of retail traders, market players, regulators etc What's your take on the market in a nutshell, why does it move & how?
"Don't fear a bubble until it starts to burst."
  • #423,075
  • Feb 3, 2016 12:40am Feb 3, 2016 12:40am
Quoting meanvel
First order pocket cleared. Second order pocket located down below 1.4390 needs to be cleared. It's trying right now... {image}
So is it done yet?
... I'm not crazy, just Paranoid ...
  • #423,076
  • Feb 3, 2016 12:44am Feb 3, 2016 12:44am
Btw, if anyone accumulated GU after the 1.4390 order pocket clearing, be careful and tighten stops. The GU should be popped over 1.4 here to attract buyers... But...

I'm not entirely convinced that bottom will hold... I'm looking for solid 25+ pip runs and I didn't take that setup.
"Don't fear a bubble until it starts to burst."
  • #423,077
  • Feb 3, 2016 12:51am Feb 3, 2016 12:51am
Quoting Charith
Current move up will be an attempted false breakout.
banked quick 34 pips, short @4422, tp @ 4388
... I'm not crazy, just Paranoid ...
  • #423,078
  • Feb 3, 2016 12:54am Feb 3, 2016 12:54am
I did have my finger next to the button ready to buy, but let me show you the problem...

This second push down... I was looking for a weak failed breakdown attempt to buy as you would expect some additional sellers to be attracted by the violent price drop, but it didn't retest the lows. GL to those that took that setup!

I don't care much for "floating" turns... God this market is zzzZZzzzZzz tonight...

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"Don't fear a bubble until it starts to burst."
  • #423,079
  • Feb 3, 2016 12:59am Feb 3, 2016 12:59am
Quoting meanvel
I did have my finger next to the button ready to buy, but let me show you the problem... This second push down... I was looking for a weak failed breakdown attempt to buy as you would expect some additional sellers to be attracted by the violent price drop, but it didn't retest the lows. GL to those that took that setup! I don't care much for "floating" turns... God this market is zzzZZzzzZzz tonight... {image}
zzzzzz

Maybe market waits news GBP Services PMI as alarm clock to start moving ?
I might be wrong , I have been wrong before
  • #423,080
  • Feb 3, 2016 1:04am Feb 3, 2016 1:04am
Hi meanvel I have really enjoyed reading your last few posts. Can you recommend a good book with insights on how the trading is done at institutional level and how big players think of the market.
Quoting meanvel
I did have my finger next to the button ready to buy, but let me show you the problem... This second push down... I was looking for a weak failed breakdown attempt to buy as you would expect some additional sellers to be attracted by the violent price drop, but it didn't retest the lows. GL to those that took that setup! I don't care much for "floating" turns... God this market is zzzZZzzzZzz tonight... {image}
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