Quote:
Originally Posted by scott89 So let's become practical here:
Price is now at 1.2275, Bank A wants to short, and to do that it needs liquidity.
Right behing 1.2300 there's a bounch of limit orders and stop losses.
Bank A buys a relatively small amount, but enough big to move the price in the 2300/2320 are, where the liquidity is (liquidity is provided to the bank by buy limit orders from breakout traders, but the bank is actually providing liquidity for stop losses; in both ways, the bank is entering its big short order).
Price immediatly drops down, and a cascade of other... |
I am by no means an expert here, but since nobody is throwing the towel, here's my take on a possible play in your scenario:
- set 1 sell limit at 1.2305-1.2310
- set 1 sell limit at 1.2320
once filled:
- cover 1 at 1.2280
- trail the other one
depending on the size of the stop losses, one or both orders will be filled.
As I understand it, this process is called fading.
Any other suggestions?
Great thread, btw.