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  #196  
Old Jan 19, 2011 1:58pm
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Default Like on CHF this morning and right now.

"Louie
Or, if one pays attention to the price action via the longer wicks in the cluster one can form an analysis as to what the intent of the move is going to be such as the many various options or senerios as GRKFX stated. Or if you happen to be sitting at the computer and see price move 30 or so pips in a matter of a couple of minutes that would be in my mind the disequilibrium in the market at that time. Or the gaps that show up in the charts during news time. Dark has only painted the participants and the mechanics of the move. It is only actual experience and trading that will get us there. Only my two cents on the original question by Carnegie of how you see it on the chart."


This in fact happened this morning and it is also happening right now as I am typing this. Red line is USD and Blue is CHF these are based on percent strength in real time of all quotes of each currency from all pairs available, not just usdchf.

Notice how after the vacuum created, price quickly reversed to come back to fundamental value. Is this what we are hoping to see?
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  #197  
Old Jan 19, 2011 2:20pm
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Well I can also see that when this huge vacuum occurred, there was little change in the USD as reflected by the small movement of the red line at that time.

This thread has finally put the rest, ( or rather some more ) of the pieces of the puzzle together for me. Thank you every one. And special thanks to DS for the latent liquidity charts. and that excerpt from his book.
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Last edited Jan 19, 2011 2:42pm | Reason: I was presumptuous
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  #199  
Old Jan 19, 2011 2:30pm
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Quote:
Originally Posted by Scotty B View Post
I'd say that is certainly one aspect of it. This has a lot to do with the mechanics behind pin bar situations as opposed to clean trending markets. Basically, is there real time support or resistance behind a move or does the move fall on it's face? A strongly trending market (sharp slope) with small pullbacks indicate a strong bid re-population, while a strong move that collapses on itself shows no professional interest. Large traders have to average in anyways, so if values are shifting, the pros will have robots that quickly enter bids or asks...
Yes, this makes sense to me. If this is one aspect of it, do you think there is a way for the disequilibrium to be identified on a chart and be able to separate it from a lack of professional interest? Or, is there any need to separate it as they both seem to cause the same effect on small time scales.

There seems to be an aspect that has not been discussed much and that is the Option barriers that I see all the time on Thompson and have piggy backed trades to to them, with very good success. Could this be a form of that latent liquidity?
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  #224  
Old Jan 20, 2011 3:52am
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Quote:
Originally Posted by Scotty B View Post
No, I don't think you can differentiate between a move that will experiance negative feedback (be reversed) with only a chart, I could be wrong. Because fundamental information is so asymmetric, it would be impossible to know who is really making a move happen unless you had actual order information (time and sales), or you knew for example that a barrier was being knocked out.

The knocking out of a barrier, when values have not changed creates a stochastic effect in the market. The market is incentivized to make a round trip. Those who are hunting...
Wow!

So if I understand you correctly, it all keys on the ability to get the barrier info the quickest. If this is so, it all leads back to the fastest and MOST complete news AND rumor feed. When I see these tips about option barriers, they are never confirmed; the story is always rumored, but the rumor has generally turned out to be correct and that fact shows up in the chart when price reaches the barrier. Note that, on this advice, I have been successful in placing trades that tag along with price, because I have been fairly confident that price will make it to the rumored barrier. I have never had much success trading at the barrier price. I think this would be considered the classic stop hunt area. IMO, the reason is because the informed traders are already done with the feast and there are few scraps left at the barrier level, or when the barrier turns out to be very strongly defended, then to fight the defense so late in the game would be futile.

In other words, trading the rumor to the barrier seems to be the best strategy from my experience.
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  #312  
Old Jan 22, 2011 11:33am
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Quote:
Originally Posted by Adal View Post
You might find interesting similar academics experiments in fake markets done with people in the past. One of the most interesting conclusions was that inexperienced traders cause bubbles.

http://dl.dropbox.com/u/190212/ff/ex...al_trading.pdf
Thanks for this study. The part I find the most telling is pages 1149 and 1150
that basically states that the crash following a boom in both experienced and inexperienced has been on SMALLER volume than the preceding boom and that the collapse is predicted by the thinning of the bid/offer as measured by the excess bids , (number of bids - number of offers) immediately before the crash and that stabilizing of price ( I read as finding an equilibrium) tends to be presaged or foretold by an increase in excess bids.

The change in mean price in all of the experiments is positively related to lagging excess bids. They go on to state that the null hypothesis that adjustment speed coefficient is non postitive is rejected 78.71% of the time. To me that is staggering.

It seems to me there is a solid predictor in there.
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Last edited Jan 22, 2011 11:49am | Reason: clarity
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  #313  
Old Jan 22, 2011 12:06pm
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While I find it interesting that inexperienced traders can cause bubbles according to the data in this study. They also note that there is little improvement when the subject has been trained. This to me would indicate that the boom bust cycle is inevitable; something I already strongly suspected.

The important part here for me is what do we do with that knowledge? I would put forth that there is little difference with the concept a bubble and crash to the equilibrium ( the mean ) and disequilibrium ( the moving to the bubble or the crash ) on a much shorter time arena. That is why I am very interested in the findings of the excess bid concept. This is something that is tangible and can be measured and used.
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Last edited Jan 22, 2011 3:03pm | Reason: clarity
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