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moving the market

  • #1
  • First Post: Aug 24, 2006 2:37pm Aug 24, 2006 2:37pm
say 1000 contracts short on EUR-USD, what will happen to the market? given the huge leverage in FOrex, it is not entirely impossible. what if I unload it during quiet hours say after 4pm when there is not much volume. It will be an interesting experiment because if the market does not move at all, then we can say supply-demand has nothing to with price. because if it does move the market, then everyone in the world and their grandma will gather money together, say 500k dollars, put it in META4, and short or buy huge contract between quiet hours and make a killing. maybe i missed something here.
  • #2
  • Aug 24, 2006 2:49pm Aug 24, 2006 2:49pm
Funny thing...
First I don't think any broker can handle 1000 contracts easily...
Second, the spread, of 4 pips is 40,000$... It gonna take a brave grandma, what can I say....
  • #3
  • Aug 24, 2006 2:55pm Aug 24, 2006 2:55pm
Quoting moneydude
say 1000 contracts short on EUR-USD, what will happen to the market? given the huge leverage in FOrex, it is not entirely impossible. what if I unload it during quiet hours say after 4pm when there is not much volume. It will be an interesting experiment because if the market does not move at all, then we can say supply-demand has nothing to with price. because if it does move the market, then everyone in the world and their grandma will gather money together, say 500k dollars, put it in META4, and short or buy huge contract between quiet hours and make a killing. maybe i missed something here.
You will certainly move the market in off hours. You will probably move price a few pips on non-news day peaks as well.

Your idea is flawed however, because while you can run the price up with the purchase, you will instantly run it back down on the sale. The net return would be zero minus the spread.

Now if you managed to run it up into some stops, that would be a whole different matter...
  • #4
  • Aug 24, 2006 3:16pm Aug 24, 2006 3:16pm
but I think there has been a question that bugs me since the beginning of my commodity careers, but I let it go since I can't figure it out. "what stops the MMS collectively lower and up bid/ask? " someone told me that they can not do that because they will lose a whole bunch if the market turns on them. but if retails trading volume is only 1/100, even 1/1000 of their volume, why should they care? What if they have major long positions. would it not be beneficial to start increasing bid/ask so they can unload easily? do you think actually think retail shorts can stop them from doing that? I have my serious doubt over that
  • #5
  • Aug 24, 2006 3:21pm Aug 24, 2006 3:21pm
dont you think it will be faily easy for MMs to monitor retail poisitions? Maybe that is why 90 percent of people lose, because they are constanly being chased around. I am not saying all traders behave the same, but dont you agree that during any given trading day, all orders are pretty much bunched at the same level? I dont know, I am not trying to start a debate or anything, just needed to be shed some light on the truth.
  • #6
  • Aug 24, 2006 3:25pm Aug 24, 2006 3:25pm
darkstar, please explain

Your idea is flawed however, because while you can run the price up with the purchase, you will instantly run it back down on the sale. The net return would be zero minus the spread.

why would i instantly run it down? if there are so little volume, why would it go down after I purchased? because MMS refuse to lose money to me?
  • #7
  • Aug 24, 2006 3:29pm Aug 24, 2006 3:29pm
Quoting moneydude
but I think there has been a question that bugs me since the beginning of my commodity careers, but I let it go since I can't figure it out. "what stops the MMS collectively lower and up bid/ask? " someone told me that they can not do that because they will lose a whole bunch if the market turns on them. but if retails trading volume is only 1/100, even 1/1000 of their volume, why should they care? What if they have major long positions. would it not be beneficial to start increasing bid/ask so they can unload easily? do you think actually think retail shorts can stop them from doing that? I have my serious doubt over that
I'm not exactly sure what your asking. My assumption is that your referring to a retail broker arbitrerily moving the price away from the real market price to spike stops or whatever...

It's called arbitrage. If broker A moves the price say 10 pips away from the real price and broker B doesn't, you short the higher price and buy the lower price, locking in a risk free profit. At some point the prices will HAVE to come back in line or the broker will get killed when price turns around and they can't hedge. When it does you close the trades and enjoy your brokers money.
  • #8
  • Aug 24, 2006 3:31pm Aug 24, 2006 3:31pm
Quoting moneydude
darkstar, please explain

Your idea is flawed however, because while you can run the price up with the purchase, you will instantly run it back down on the sale. The net return would be zero minus the spread.

why would i instantly run it down? if there are so little volume, why would it go down after I purchased? because MMS refuse to lose money to me?
Because the price move occured because you baught. Great you moved the price! Now what? To collect the profit you have to sell and when you do, you will just move price back to where you started buying.
  • #9
  • Aug 24, 2006 3:33pm Aug 24, 2006 3:33pm
Quoting moneydude
dont you think it will be faily easy for MMs to monitor retail poisitions? Maybe that is why 90 percent of people lose, because they are constanly being chased around. I am not saying all traders behave the same, but dont you agree that during any given trading day, all orders are pretty much bunched at the same level? I dont know, I am not trying to start a debate or anything, just needed to be shed some light on the truth.
You would be very surprised how infrequently everyone is doing the exact same thing. Look what happens during news announcements as an example of when they do..
  • #10
  • Aug 24, 2006 3:45pm Aug 24, 2006 3:45pm
Quoting moneydude
say 1000 contracts short on EUR-USD, what will happen to the market? given the huge leverage in FOrex, it is not entirely impossible. what if I unload it during quiet hours say after 4pm when there is not much volume. It will be an interesting experiment because if the market does not move at all, then we can say supply-demand has nothing to with price. because if it does move the market, then everyone in the world and their grandma will gather money together, say 500k dollars, put it in META4, and short or buy huge contract between quiet hours and make a killing. maybe i missed something here.
First off, no retail broker will allow you to move 1000 contracts in 1 trade. Obviously, multiple trades would be fine, but at a certain volume (around $10 million USD, most retail brokers don't want to put up the necessarily collateral to leverage you...effectively, they could reject the order on leverage and place you on 1:1 leverage.

Remember, the brokers usually don't have 100:1 leverage with the banks...so they have to either trade internally or put up the necessary collateral. Most brokers would rather trade you against another set of clients and take the full spread rather than routing it directly to the bank (unless they can combine your orders with man others to buy the necessary lots).

I think it would be more interesting to see what you do if you try to rip a big order out of the market...could you take advantage of that move? If you take a big order out of the market, then it (in theory) move the market in the opposite direction. Either way, you're out of the market and not at risk of losing anything as the price goes in a direction. Then can you jump back in on the frenzy created and capitalize.

So, what you should do is put in 1000 contracts over a slow course of the day (maybe 50 contracts on 20 trades). Then on a day after you're collected some profit, rip the entire order from the market.

$100 million in a single currency could easily move the market. That's 1 tenth of the soros bet against the GBP. His move had a 1000 pip movement in a few minutes. Your move should at least cause 20-50 pips. :-)
  • #11
  • Aug 24, 2006 3:57pm Aug 24, 2006 3:57pm
Quoting mrmikal
First off, no retail broker will allow you to move 1000 contracts in 1 trade. Obviously, multiple trades would be fine, but at a certain volume (around $10 million USD, most retail brokers don't want to put up the necessarily collateral to leverage you...effectively, they could reject the order on leverage and place you on 1:1 leverage.

Remember, the brokers usually don't have 100:1 leverage with the banks...so they have to either trade internally or put up the necessary collateral. Most brokers would rather trade you against another set of clients and take the full spread rather than routing it directly to the bank (unless they can combine your orders with man others to buy the necessary lots).

I think it would be more interesting to see what you do if you try to rip a big order out of the market...could you take advantage of that move? If you take a big order out of the market, then it (in theory) move the market in the opposite direction. Either way, you're out of the market and not at risk of losing anything as the price goes in a direction. Then can you jump back in on the frenzy created and capitalize.

So, what you should do is put in 1000 contracts over a slow course of the day (maybe 50 contracts on 20 trades). Then on a day after you're collected some profit, rip the entire order from the market.

$100 million in a single currency could easily move the market. That's 1 tenth of the soros bet against the GBP. His move had a 1000 pip movement in a few minutes. Your move should at least cause 20-50 pips. :-)
Great post.

And if those of you reading this spend some time thinking about it, you'll begin to understand why your stops keep getting hit. Imagine what you could acomplish with the 10,000 contracts moneycenter banks trade with...
  • #12
  • Aug 24, 2006 8:33pm Aug 24, 2006 8:33pm
Quoting mrmikal

$100 million in a single currency could easily move the market. That's 1 tenth of the soros bet against the GBP. His move had a 1000 pip movement in a few minutes. Your move should at least cause 20-50 pips. :-)
Soros needed everyone on the bandwagon. You can't do it alone. Check out the Dukascopy site, there's between 150M and 200M traded per every pip of price change on the EUR/USD right now. If you use their demo you can see all the orders lined up. Billions all lined up waiting for their price to hit. And right now things are pretty quiet.
  • #13
  • Last Post: Aug 24, 2006 9:15pm Aug 24, 2006 9:15pm
Quoting Keys
Soros needed everyone on the bandwagon. You can't do it alone. Check out the Dukascopy site, there's between 150M and 200M traded per every pip of price change on the EUR/USD right now. If you use their demo you can see all the orders lined up. Billions all lined up waiting for their price to hit. And right now things are pretty quiet.
Thats a nifty broker. Anyway, we were speaking hypothetically but your right about the eur/usd. 100 mil might only pop a few pips. However on usd/jpy, gbp/usd, and usd/chf it could do some damage (7-10). On usd/cad you could cause some serious devistation (clear the board). It also depends alot on where your at in the range I imagine.
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