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  #60  
Old Jan 13, 2011 10:56am
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Quote:
Originally Posted by CindyXXXX View Post
Without trying to sound like an expert...
That was very helpful, Cindy, thank you. I have been lurking around this orderflow/liquidity topic for a while now (including reading all of Darkstar's posts), but haven't posted about it, yet.

In your banker A example, he needs to find someone who will supply him enough liquidity that he can buy his boatload of euros without moving the market too much against him (he is demanding liquidity). In Trading & Exchanges, it is stated that limit orders supply liquidity. So we can assume that banker A is looking for limit sell orders that will supply the liquidity he demands. Is he only looking for limit sell orders below the market, or would he also be interested in limit sell orders above the market? Obviously he would prefer the limit sell orders below the market (if he thinks he can push price down far enough to hit those orders) but what if there aren't any nearby below the market?

Quote:
Originally Posted by CindyXXXX View Post
Then you have guys that simply aren't profit motivated like big companies who simply want to convert their Yen profits into USD. I will stop now before I start talking about things beyond my pay grade!
I wish you would expand on this. I have been thinking about this type of scenario for the past couple weeks and trying to figure out if there are any implications to this, but I can't figure it out. Anyway, I understand if you don't want to elaborate.

Last edited Jan 13, 2011 11:08am
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  #79  
Old Jan 14, 2011 7:27am
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Originally Posted by Darkstar View Post
Knowing how it ends I know exactly what piece your missing, so I'll give you a hint:

Think about how price change and the distribution of liquidity interact. Your looking for a disequilibrium in that distribution which should give you a highly predictable outcome. Trade with the anticipation of that outcome and you have the makings of a high probability system.
When liquidity is distributed evenly, then price won't change much, right? Because everyone who wants liquidity has it. If I'm thinking about that wrong, please let me know.

So we are looking for a disequilibrium in that distribution, but I don't know what that looks like other than a rapid price move in search of liquidity. But if that's what we're looking for, then how can we make sure it isn't a false break, like has already been mentioned? I'm sure I'm missing something here.

On a side note, it looks like there's a 83.00 dig option on USD/JPY expiring today and price is currently at 82.95. From reading Darkstar's posts, I know he started off trading USD/JPY exclusively. I wonder if he is in on that this morning or not.

Last edited Jan 14, 2011 8:26am | Reason: spelling
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  #86  
Old Jan 14, 2011 12:18pm
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Quote:
Originally Posted by Leonlorenzo View Post
I would liken successful trading to playing 'Rock, Paper, Scissors' and winning. The aim is to get to know others better than they know themselves, so I guess we're social scientists now.
LasVahGoose suggested the same thing in another thread. He even pasted an article about it here.
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  #91  
Old Jan 14, 2011 8:11pm
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I feel like we still haven't dug into Darkstar's post enough, especially the parts I quoted below.

Like DS said, he already knows what the finished puzzle looks like, and he gave us a hint, so let's try to understand his post. I've been racking my brain and feel like I'm at a brick wall. If anyone has additional thoughts, please chime in. Here are my thoughts:

Quote:
Originally Posted by Darkstar View Post
Think about how price change and the distribution of liquidity interact. Your looking for a disequilibrium in that distribution which should give you a highly predictable outcome.
The disequilibrium in distribution of liquidity means that there are traders out there who demand liquidity and traders who are willing to supply liquidity, but they haven't found each other, yet. The "highly predictable outcome" is a price movement to an area of high liquidity (the people who are demanding liquidity push price to an area where liquidity is being supplied).

Quote:
Originally Posted by Darkstar View Post
Trade with the anticipation of that outcome and you have the makings of a high probability system.
In order to "trade with anticipation of that outcome" we have to be able to identify the disequilibrium before the "highly predictable outcome" occurs.

This is where I'm stuck. How do we identify the disequilibrium before the "highly predictable outcome" occurs?

If any of you guys/girls have thoughts, please post them. And those of you who already know what the finished puzzle looks like, if you would be so kind to let me know if I'm wrong in any of my thinking, I would greatly appreciate it.

Darkstar says we're close to figuring out the stop hunting part, so let's keep thinking and we'll get there!
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  #437  
Old Jan 24, 2011 2:30pm
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I'm going to quote somthing Darkstar said here in 2007. Maybe I'm just slower than everyone else, but I think it might be helpful (and it is consistent with grkfx's suggestion that we stop looking at charts).

Quote:
Originally Posted by Darkstar View Post
Our only option is to look for concentrations of liquidity and make assumptions about how prices will respond to those concentrations based on our understanding of market microstructure.
Quote:
Originally Posted by Darkstar View Post
Once you understand the mechanics you don't even need a chart.
To me, it seems like DS is suggesting that it is possible to find the concentrations of liquidity without even looking at a chart. So what does that mean, round numbers? If that's the case, then how do we know which round number (since price is always going to be between two round numbers, one above price and one below price)?

If it isn't just round numbers, then what other information could help us find concentrations of liquidity?
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  #444  
Old Jan 24, 2011 5:57pm
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Quote:
Originally Posted by chriskins View Post
Regarding the no charts thing, this is what I think you could do.

Watching IFR it reports a large DNT option barrier on Yen at 98.00, you look at price now and set a price alert when it get within 50 pips of 98.00.

A few hours later a dollar news event comes out and you watch a ticker of yen to see what happens following it for around 15 mins. This might give you information or not.

Later your alert goes off, you look at the ticker and watch it then make your play.

No charts needed.

This is the only thing I can think of that I didn't mention earlier. So if that is the case, then you would be completely reliant on IFR or some other news service to tell you where these areas of liquidity are, right? I could be missing something.

Last edited Jan 24, 2011 6:15pm | Reason: spelling
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