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  #61  
Old Jan 13, 2011 11:00am
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Originally Posted by Carnegie View Post
Hey Scotty, glad you could join the discussion.



Yes I also thought about the sideways market being liquid because there are buyers AND sellers there, instead of in a trending market where there are either only sellers or buyers (now obviously not ONLY, but I think you get what I mean..). I have been thinking about "quantifying" my ideas, i.e. testing them but I don't really have any idea where to start. First of, what is a balanced market? Or even better, what is an UNbalanced market? How do I define this? How do I predict future orders?...
Buyers and Sellers always exist. Even in trending markets there are always the same amount of buyers and sellers. The question is which side is more aggressive and is going to start bidding up the market or dumping the market. What is going to cause one side to get up off rear end and start executing market orders? What is going to light a fire underneath certain market participants that would cause them to gladly cancel their limit orders and pay market prices instead?

Take today for example. I am sure there were certain market participants that would of liked to buy EUR/USD at 1.3050. Maybe some of them put in limit orders to buy around some dips. What would cause them to say, hey my limit orders are probably not going to get filled and I need to instead start executing market orders, like right now! What would cause other market players to say hey I am currently short, but I probably need to start covering really soon, like maybe right now?

Predicting future orders is all about knowing what will generate order flow. Get into the minds of the market participants that are generating order flow and moving prices and figure out what will cause them to start executing billion of dollars in aggressive orders.

You don't need candlesticks or any other chart for that matter to execute trades based off of order flow. Now a chart may be helpful, it could also be deceiving. If the reason for the market moving and order flow being generated has nothing to do with a chart, then you don't need one. Chances are when market moves 100 pips, 200 pips, the market players that generated billions of dollars worth of aggressive order flow didn't look at a candlestick chart and say, Ohh my god a bullish engulfing pattern, I need to buy 1 yard of EUR/USD right now! Chances are they did not look at a stochastic and say wow, there is divergence, I need to buy 2 yards of EUR/USD within the next hour! Chances are they are not going to execute billions of dollars based off of the charts showing a certain combination of moving averages have just crossed. Now I have seen a few market moves based off breakouts and things like that, but usually there are other things going on underneath, things that do not show up on a chart.

Stops are great and all, and I use them every day, but they are not the only order flow generator.

My 2 cents.

You are off to a really good start Carnegie, just know that there are still a lot of barriers in your way that you need to demolish. And that it will still require immense discipline and staying power to get you into the 5% of successful traders and then into the fraction of those that have an order flow mentality.
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  #173  
Old Jan 19, 2011 12:37am
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Originally Posted by CindyXXXX View Post
A change in fundermental factors will casue a shift OF the entire curve (supply or demand or both) meaning that as fundemental factors change it will actually change the size of the number of willing buyers or number of willing sellers in any given market. This is representeted by the latent supply and demand. Ceteris Paribis chuckle chuckle

So.. using DS example of the move down in price this will of course casue the quantity demanded to increase as is dislayed by the latent bars increasing away from price... If a change in price happens...
Lets take this example: Market was at equilibrium. Now, lets say there is a shift in fundamental values to being more bullish.

What are the implications for the market and order flow and liquidity?

1. The Latent orders that Darkstar talks about, become market orders and limit orders.

2. Some market participants judge the fundamental shift to be imminent and great, resulting in execution of huge market orders into the market

3. Some market participants judge the fundamental shift to be fairly imminent, and decently sized, resulting in a smaller batch of market orders hitting the market.

4. Some market participants who were short and realize the fundamental shift need to cover, either through market orders, or waiting for a small retracement limit orders. This further reinforces the surge of market orders, and reinforces the bids at the support levels.

5. Other market participants who think there is a fundamental shift, but are not willing to commit market orders yet. Lets say they had bids which were 500 pips away, but now pull their bids higher to 100-200 pips below market. This reinforces bids at the key retracement points and support levels.

6. Other market participants who are oblivious to the fundamental shift place trades which are lower probability than what they realized(but are oblivious to it), and cause above average losses to their systems. They turn into uninformed traders and provide liquidity to the informed traders who correctly saw the change in fundamental values.

7. Market participants who correctly saw a fundamental change in values, but are not willing to commit market orders just yet or limit orders, but instead want price to go up to validate their analysis and then will generate market orders. This is where the buy stops accumulate above the key resistance points.

8. Other market participants who were already heavily long, and correctly saw a further change in fundamental values reinforces their conviction in their trade. These market participants who would have normally had take profit sell orders now decide to pull those sell orders, and reset them higher up, or decide to reduce the size of their standing limit sell orders. Results in a general thinning of the offers in the market, further adding fuel to the bullishness as buyers search for enough liquidity to place decently sized trades.

Now I hope you guys get the idea. I can probably add another 100 things to that list, but it is up to you to make sense of it and harmonize it with your personality. I can't do that. I can just stimulate thought.

Now the other question is how do you determine change in fundamental value? Or how do you determine when fundamental values will quickly reverse? Or have been falsely interpreted? Or grossly misinterpreted?

That is for you to figure out. It will make you a far superior trader if you figure it out yourself.

Last edited Jan 19, 2011 12:57am
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  #191  
Old Jan 19, 2011 10:19am
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Originally Posted by Wamo View Post
If I understand things correctly, you need to identify the currently perceived fundamental value, then recognize the false move you have described which baits all the uninformed retail traders, and then trade back in the direction of the fundamental value. All of this can be seen on a naked price chart.
Retail traders don't really move the market most of the time. False moves against fundamental values can even bait semi-informed professional traders. Sometimes they can bait even informed traders if certain market participants have goals unrelated to fundamental values, and are willing to risk capital to achieve objectives within a certain time frame, before the overwhelming amount of fundamental value order flow can catch up with them.

I don't want to make things too complicated, but there are so many possibilities.
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  #366  
Old Jan 23, 2011 12:37pm
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I know the thread title is about cluster of stops on chart. And yes charts can be helpful to locate the support/resistance and possible stop locations,etc. But in the end it is all about order, and what will generate order flow.

This thread has far too many charts posted in my opinion. Sometimes they can get in the way of taking your trading to the next level, as you can be grappling with learning the new order flow mentality, but that old technical analysis/chart mentality can be dead weight on your shoulders. And as such many people keep going back to the charts to find the secret patterns, the secret stop hunts, the secret indicators, the secret support and resistance, the special VSA, etc that they believe can help them become an order flow trader. I know, I went through a similar phase.

Let me propose an exercise that may or may not help you. Get rid of all your charts, get rid of all your computers. You are not allowed to look at a chart. You can have some books with you as long as they do not have charts, you can save forum posts and stuff and print them out to have them handy.

Sit down and think deeply about the market, about the structure, about the liquidity, about the emotions of the market participants, the expectations of the market. Think about what would cause price to move, what would cause price to move 40 pips, to move 100 pips, to move 400 pips, to move 1,000 pips.

Then play out scenarios in your head about different market setups and market participants. Write down a list of 10 things which you know will generate order flow and price movement. Write out 10 scenarios where the different market participants are battling it out and who will win. Write down 10 ideal order flow setups entries and exits. Think about liquidity vacuum, stops, etc and how they can play together.

Don't stop or go back to charts until you are done. If at the end, your list is filled with things like moving averages, price hitting a chart s/r level, or stochastic divergence, or anything related to a chart pattern, or charts in general, then I would be very skeptical. Chances are you need to redouble your efforts and think more and search more about what will really generate order flow.

Whether you choose to do the exercise or not, I hope it helps.
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  #381  
Old Jan 23, 2011 4:18pm
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Originally Posted by triger88990 View Post
Gold is not a bubble, although it's making an all time high, but it hasn't come close to hitting its old highs in real terms, if you take in consideration inflation
The whole argument that gold is going higher just because it is not near it's inflation adjusted value is ridiculous. People like to make false assumptions that just because the inflation adjusted value from 1970 should be $5,000 or whatever, they believe that a financial instrument must somehow be worth that much, or be valued at that much. They make false assumptions that somehow a financial instrument be it gold or w/e must take into account some inflation reading in determining its price appreciation. It is one of the many fallacies that perpetuates into the future.

The only time that argument for price going up or down is worth anything is if it generates order flow, sufficient aggressive order flow to move prices.

If the market participants who are going to be buying truckloads of gold don't care about what inflation adjusted value is, and thus don't buy based off that, and don't generate order flow, then it is meaningless.

I am sure there are some people buying gold because they believe the inflation adjusted value should be $5,000. The only problem is they are not currently aggressive enough or large enough to stop prices from sliding, and as such are currently wrong.
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  #386  
Old Jan 23, 2011 4:39pm
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Originally Posted by triger88990 View Post
Sorry but I have to say that you get me all wrong, I never made such an assumption.

all the best
sorry then for jumping the gun
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