At the end of the day all we can really do is guess where the orders are and what orders they are, only problem is the people that move the market actually know... Sure there might be 300 contracts in 1 tic at the peak of a high but does this mean a reversal? No
Interesting thing you said there cindy. Could you explain more? (I'm still going to read Traindg & Exchanges, but I still want some ideas on the topic).. what's liquidity to the market? Why is it so important? Why do traders care, and how can one use it in their trading?
Thanks.
Without trying to sound like an expert I will give a basic example...
Banker A wants to buy 10 million EUROS at 1.3000. What would happen if he simply clicked "Buy" with the full ammount? Remember taht "fat finger" trader guy that clicked billions instead of millions?
First all the available liquidity at 1.3000 will be consumed asumming there is not enough to fill his entire order. (I have no experience trading in the millions so my numbers may not reflect "Real" $ ammounts but thats not really important"
So... lets say for examples sake only 500,000 was available for sale at 1.3000, price will instantly go higher searching for more sellers to fill this massive ammount of demand taht is in the market waiting to be filled.
If you take that fat finger guy and what happened to him, he would have lost massive ammounts of money because although the price dropped hundreds of pips away from his original entry price, fact is that in the search for liquidity to fill that order the majority of his short would have been filled at very loiw prices you can imagine what this would cost particularly as the market corrects itself and starts going higher when he has 500 million on the lower prices and only a small portion of that on the initial entry point out of his billion dollar order
So this fat finger guy has offered LIQUIDITY and lots of it to BUYERS at very low prices.
In a nutshell without liquidity there would be no market as every buyer needs a seller. Lets go back to banker A and say he wants to buy but there is just not enough sellers to sell to him without pushing the prices against his own order like the Fat finger guy.
What does he do? He can drive prices lower through whatever means, false information, news hype, market manipulation, or even trade it lower with his own money to attract sellers to fill his buy order (take a small loss for a big win)
This is what the big guys have to do to get there massive orders filled at the prices they want. They need to find enough liquidity (buyers need sellers sellers need buyers) so they can trade. Another thing they need to do is scale into the market slowly so as to hide their intentions and also not push prices against themsleves.
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!
Sorry this was longer than intended. So yes liquidity is everything.
EDIT: might just add as a side note that the EUR has a smaller range and smaller spread than the other pairs not because iits the most unpopular (as I used to think lol) its becasue its the most liquid (popular) and thus orders are filled more easily than say the GBP/YEN which is very volatile and thus attracts a larger spread and wild swings as it searches high and low to stay hydrated!
Markets are facinating but the more you learn about how the game works and how it is played you start to realise that those figures about the risk and success/failure rate is very well justified. Other bright sparks like DS dance in this complexity and find the loopholes. Others like myself go to the cuboard in search for another panadol lol.
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? .
You would have to ask Banker A
Quote:
Originally Posted by relyt
but what if there aren't any nearby below the market?
This is the risk they take when they do this...its not a free for all, the big guys lose money sometimes as well
Quote:
Originally Posted by relyt
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)
He sure would, as a general rule as price goes down demand increases, it only logical. If you could buy a car for $4500 or the exact same one for $4499 which would you choose? There's many many people in the market taking profits getting stopped out etc ect but to get large amounts of liquidity a simple break of a support will surely trigger the SL of buyers as that's an obvious place where people would put there stops right?
What do YOU do when you're holding a long position in profit ans the market starts to drop... You get the temptation to sell don't you!
SO when a support breaks should we simply sell? HELL NO cause that may be the exact place the big guys want to buy simply because of all the sell stops there. In fact selling there may make you a victim of a buyer seeking liquidity. Its a game
Quote:
Originally Posted by relyt
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.
The only reason I don't want to elaborate is because I simply don't know. Like for example maybe a company who suddenly converts their Yen to Euros wants to do it strategically and uses the same tactics a trader would to get the best prices they can.
Maybe another company doing the same thing simply isn't concerned about the prices they get and so dump it all at once but remember that these transactions go through banks... If you want to do an international money transfer you have to go throuygh a bank right? So ask yourself, if you're a bank and have just been given 40 million Euros to convert into yen what are you going to do?
Honestly I don't know much about this but using logic you can imagine that the bank may try and profit from this the same way they would with any other market transaction... I really can't elaborate much more than that as I simply don't know.
You are correct that Buyer A would want limit sells, but these limit sells would by definition be above the current market price. A limit sell is an instruction to sell at the limit price or better. If you place a limit sell below the market price, it would execute immediately since the market price is better than it.
With regard to the participant wanting to convert Yen into USD, it puts the bank in a favourable position to conduct a scalp trade. I really wish I could remember the semantics, but at the end of the day the transaction...
Nah I was talking about that guy last year who clicked billions instead of millions... He was selling I believe. I used 2 different examples which may have confused it. the Banker A guy in my example was buying.
Yeah, you guys probably shouldn't spend too much time looking at my trades. It's very impressive how far this thread has progresed, but it's important to realize that what your talking about are only the most basic aspects of Order Flow. I've been doing this stuff for over 5 years and what I do now is so far down the chain of understanding that it's probably counterproductive to look at.
I can tell you that your close to figuring out the stop hunting thing though.
As a side note, I find this thread extremly ironic. For the last couple weeks...
Back to the original thread topic in terms of "stop clusters"
I find it interesting when people start talking about stops they always focus on the obvious swing high swing low and trenline "outskirts"
The money is in the middle not on the outskirts... If you've ever watched the volume around the S/R levels you will see that the leaset ammount of money is exchanged at these levels. The big money is accumulated closer to the centre where liquidity is plentifle.
Perhaps focusing on these points may give you a different picture. I'm not discounting the importance of S/R at all but I think focusing on them only gives you half the picture
Even without consulting a feed I can show you roughly each day of the last few weeks where the most money was focused on any given day and you can see those levels TURN INTO those illiquid S/R levels almost always.
If you find the biggest cluster of candles in the main sessions.. Ignore Asia you can almost guarantee the most volume will be traded in those clusters. And its a lot of money!
Iits like a round swinmming pool where the centre is the deepest part
Anyway this may not be very helpful just tought I'd mention it as a side note.
This is true only to the untrained eye. Most traders would be shocked to know how little volume it takes to turn a market around. It's not necessarily how much is traded at the peaks of S/R, it is WHO is placing the orders at those peaks that causes a market to turn around.
[color=black][font=Verdana]Remember, FX is a dealers market. When they've traded with an informed trader, they themselves will often immediately speculate on that very information....
Actually Scotty that has cleared a few things up for me.... I've always wondered how a market can turn on a dime off such little amounts of volume against the prevailing trend. And yes I agree price charts only help so much
Cheers
So a dealer can move a market without affecting volume>?
Hahaha yes yes, i know lol
What I meant was, are you sure that everything they trade and anything they do is visible to us?
I mean, obviusly if they turn the market with low liquidity, they must act on a psychological level.
I noticed too that the majority of liquidity is pretty much concentrated "during the move", and not when it starts or ends, and I think that has something to do with fear.
Anyway, I don't know.
Yes well that's what I was wondering as well. I have always assumed any moves in the market must accompany a transaction and therefore volume, weather it was marked up by the dealer or not. But perhaps this is not the case as a dealer could offload inventory as Scotty calls it through other dealers or banks... Now I'm just making shit up lol I dunno. Might need to do some reading/.
With all respect, what else do you want? A complete system on how to trade the stops liquidations? Come on..
I'm enormously grateful for the people like Darkstar, skfx or Domino who are very generous, even too generous (I think) for sharing such a golden nuggets on the public forums like this.
Thanks
you got me wrong... Not complaining just commenting and its true! I wouldn't expect any less! If something was put in public so obviously I wouldn't want anything to do with it anyway. And yes I'm grateful too -
It's not that he's affecting volume per se, it's that he is taking away liquidity by canceling his limit orders and by off-setting his adverse selection risk by consuming someone elses limit orders. After trading with an informed trader, the dealer has to cancel his limit orders, or informed traders will continue trading with him- making his inventory situation worse.
But a dealer is a liquidity provider in its self right? So isn't it not about limit orders but more about simply taking away available liquidity at certain prices in the way of simply marking the price up or down by either off loading or buying back inventory.
You can't imagine how many people here wish they were your girlfriend.
haha - I had a reply along those lines but bit my tongue
I think Elvis has left the building but I was just pondering over a ciggarette what this disequilibrium might be. and
Equilibrium:
is where supply meets demand and therefore the maximum number of sellers and buyers can transact at a price they both agree on.
A move up in price will casue a move along the demand curve upwards and a susequent shift of the supply curve to find a new equilibrium
A move down in price will casue a move down along the supply curve and then a shift of the demand curve to find new equilibrium.
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 and THEN a change in fundermental factors this equilibrium is thrown out of proportion and price is now in DISEQUILIBRIUM and price will venture higher or lower whatever the case to reach a new equilibrium.
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.
Insipiring thread and inspiring post thank you. I agree figuring it out my/our selves would be far more worthwhile than having it spoon fed.
Personally I can say that its very hard to learn when you dont know what you're meant to be learning if that makes sense, which has stopped me in the past. I think this thread has gone a long way to finally answering that ... the fun begins.
I hope people take this in context, having read Darkstar's earlier post.
Funny thing is I think even without the earlier post the statement would still hold true
Theres a lot of focus on Darkstar and rightly so but grkfx posts have been just as valuable IMO we can only go down from here chuckle chuckle.
I mean how do you follow THAT? And Scott I wouldnt worry about this thread nothing much has been given away that won't take some servere effort on ones part to "crack" and like the man said we're pretty dam "lazy". But a lucky few will push a bit harder and make it count.
Most people won't get it because they can't. If concepts were so easily understood, people wouldn't need so badly to be taught. .
Rubbish... anyone can its just most won't but its not because they can't. I don't believe anyone is smarter than the next person, just that some spend more effort understanding than others (becasue they want to). We all have brains and forever 2x2 will equal 4
No offense guys but you re just not gonna learn this in a week. There is so much info on this thread already that if you can't see it yet then maybe you re just not ready but that's ok some of us have just had much longer to ponder over the same questions
Personally I think it went down hill when people started posting price charts but each to their own. Now get out of this rat hole and go study
The key is knowledge. If there's one thing that separates darkstar etc from the rest of us it's that they have imense amounts of knowledge from good old fashioned hard work. Theres only so much "work" you can do on a price chart IM humble O of course.
I guess from there it's a matter of applying what you know to your advantage which is probably the hardest bit but the most fun I imagine
Quote:
Originally Posted by Carnegie
Funny thing you say there cindy.. Yesterday I looked at the thread and had the feeling that everyone knows more than I do and was really on overload trying to understand.. So I went to sleep, you know why?
Because in the back of my mind this has happened before.. Funny thing you said there: "There is so much info on this thread already that if you can't see it yet then maybe you re just not ready". That is exactly what I thought to myself.
So I went to sleep and said to myself I wont think "firmly" about this thread until I have...
And another thing clicked in my head, what about spread? I mean, that's another thing we see on the chard, with a big order coming in the spread would widen, but only on one side. If the order is a BUY order, only the ASK price would move and widen the spread.
Am i totally wrong and deviating from the path of right thinking?
Definetly thinking along the right lines - Also you can imagine before a big news event that the spread will suddenly widen... This ISNT the brokers being assholes it happens becasue large players may pull orders out of the market to avoid getting caught when they may be unsure about what will happen. With all that liquidity being removed from the market naturally the spread needs to widen to a point where there is enough liquidity to satisfy current demand
I'm borrowing an example from DS and probably murdered it but hopefully you get the gist
Also like someone else pointed out I dont think theres one specific way to trade order flow bid ask may just be one aspect of it.
Hope you got the PM if not I will put the file up of the other free trade sim that is easier to use.Have to be patient with me I work on weekends starting tonight and I have to sift through various threads to find it. Or if someone has seen the LFH Trading simulator 3 in forex factory and can post the files here.
Look up the member Ronald Raygun and there is a link in his profile
Still looking and I am looking at the Ronald Raygun files. Haven't found it yet. As a side note. Blue Ray has a thread called VHands Trading Simulator. It goes through how to load it and how to operate it. But for this purpose you just want to download the data and see the vacuum. Also if your data doesn't work well in MT 4 Open demo with Alpari. There data loads pretty well.
CINDYYYY.. I KNOW YOU'VE BEEN SPYING SOMWHERE.. YOU BETTER TELL US WHERE....
"Efficiency exists only so long as equilibrium exists in the underlying dynamic..."
I actually got that from a book about the efficiency of the horse race betting markets believe it or not.
I found it interesting that the same or similar price discovery process seems to take place.
If you liked that heres the rest of it:
"Efficiency exists only so long as equilibrium exists in the underlying dynamic: once an efficiency is embraced by the players in the game as "law", the preponderance of opinion must necessarily neglect the exceptions to its beliefs, and thus, bring about the inefficiency which it arose to defray: the exception is undervalued, and this elevates its worth."
I think a good addition to this thread would be a diagram of the Forex Market Structure (3 tier) - combined with a diagram about open market operations.
Anyone wanna have a crack?
BTW: Scotty I've been thinking about a similar idea to what you described... Inevitably id like to create a "market map" which also constitutes the order process.
Quote:
Originally Posted by Louie
That is the the other sim I was looking for. Thanks for posting it CindyXXXX. Also if you haven't, you may want to go to DareXau post#46 and spend some time at the link listed. It may spark your brain in looking at this buiness in a new way.
Thanks Louie I've seen a bit of Sam Sideons stuff and actually I just watched his video on how prices move but I have always had my suspicions about this guy... He talks a good game but it always comes back to basic TA and support resistance trading. In what ways does he make you think of the market in such a different way? I haven't seen enough of him to really have a justified opinion either way
In my book, they all mean that something isn't BALANCED. Might be wrong tho', as it is used in different "sequences".
Take care
I'm bored so if you don't mind I'll have a crack at this one - its quite simple don't let the graphs scare you
In economics equilibrium is found where supply meets demand as shown in the 1st graph below... In a competitive market the demand curve slopes down becasue as price increases less people are willing to buy. The supply curve slopes up becasue as price increases more people are willing to sell (supplies). Its all about price. You want to sell something for as much as you can get and likewise you would want to pay the least for something you want to buy...
So when this equation is maximized between buyers and sellers you find the equilibrium or efficient price and this is where things are balanced and both buyers and sellers satisfaction is maximized
Disequilibrium, imbalance, inefficiency is where this balance is thrown out..
Take the second picture for example... The demand curve shifts tho the right and therefore price needs to adjust to find a new equilibrium -
Likewise the supply curve like in the 3rd pic could also shift through a change in the sentiment of suppliers
What would cause the entire demand curve to shift to the right and cause this imbalance?
What would cause the supply curve to shift?
I might just add that the whole purpose of a market is to find this price efficiency point in order to satisfy the maximum number of people, in a competitive market it happens naturally through a process called " the invisible hand" - beacause of the reasons I described above
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 and disequilibrium 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.
NP - It seems very logical. When the river runs dry the herd must run to the next river to survive - ok I just made that up lol but I like your thinking.
But prices are not set like that. Producers optimize the price for maximum profit. It's more profitable for Apple to sell 10 $200 iPods than 20 at $75.
.
I think it was just a rushed example - Apple actually have the monopoly on I phones and so have price influencing powers but are still to a degree restrained by supply and demand forces... Obviously if they sell it for $5000 a pop they aren't going to do themselves any favors
A perfectly competitive market with free entry and exit however have to take the price that is set by market forces and this will maximize the quantity of units sold by trading at the efficient price. If a seller trys to sell at a price above the equilibrium buyers will simply go to the other suppliers selling lower at the equilibrium. If a seller tries to sell below the equilibrium it is likely they will not profit. (I think this is what DS was getting at)
Is there really such a thing as the true value of something? The value...
Its not about TRUE VALUE its about PERCEIVED VALUE - Stock prices don't rise becasue the companies necessarily performed well - It rises becasue the consensus believe it is worth buying
A simple way to look at this is this. The big players have a bunch of trucks they are loading shit up at point A(congestion/accumulation). The big players then drive the full trucks full of heaps of shit up or down(flow/trend) to point B to unload the trucks(congestion/distribution)
Semi trailors come in two sizes, B double and mega semi. Find a garage that parks trucks for free and simplt steal that guys business. The more you do this the more trucks you can park....