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  #1031  
Old Jun 4, 2012 12:29pm
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I've finally read the whole topic (plus a ton of links that came up during the discussion).

For now, i'll just say many, many thanks to all participants (for various reasons). They've made me think and i'm grateful.
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  #1033  
Old Jun 4, 2012 2:32pm
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I can say i've spent a few most exciting days thinking about this topic and i'm sure i will spend at least next month.

[ First of all i must say that i don't consider myself a trader but rather a pupil. I came to the phase where i can hold my head above the water (sometimes better sometimes not) but can't call myself a trader in any sense. Just to make that clear. ]

I found this topic very related to the work of Richard Wyckoff. His point is the same: thinking about the market and what actually drives it.
In order to think about it, we need to think about market micro structure. In other words, how exchange actually occurs and what is it that moves the price. In particular, what human motives are behind different market moves. And that's something i never thought in a way this topic pointed me to.

Now when i think about it i come to the conclusions that there are:
greedy, fearful and rational orders (meaning, people with that characteristics place them).

Personally, i find:
* greedy and fearful pretty predictable (or should i say - predictable enough).
* rational ones very hardly predictable (practically - mission impossible but i'd say mission useless)

Rational ones take advantage of greedy and fearful ones and that's pretty much all we have to know. also, from what i know so far, that is the only thing we can rely on in fx spot market. that is the level 2 data, so to speak

Next thing should be finding situations that we can rationally judge as those when greedy and fearful positions are being exploited by measurable. that is measurable. or at least - judgeable. And that brings us to stohastics: it's completely different thing to make a judgement in stohastic world or to make on in discrete world. Meaning, whenever there really are greedy&fearful orders at places we thought they will be there - we're probably in a winner trade (it's execution then). When they are not there - we're probably in a loser. But the fact that we had losers doesn't mean that greedy&fearful orders aren't still something we can rely on.

And, since there hasn't been much said about execution itself....the best tool i'm aware of so far is Wyckoffs analysis. There is plenty of material available on the Internet about it. There certainly are situations where we can be sure (in a stohastic sense) that we're looking at rational orders exploit greedy&fearful ones. And all we need for that is raw chart.


To make sure i'm not misinterpreted, this is thinking-out-loud....far from any statement or conclusions. Actually, i've just setup a demo account so i can start testing my thoughts.

Of course, if anyone wants to give his thoughs then by all means, please - i'll be very thankful.


PS.
More i think about things more i'm convinced that trading ranges is the key, not trading trends as almost every 'school' teaches. And then, at the end of the day, of course it's gonna turn out that every range is the accumulation, distribution, reaccumulation or redistribution within the trend. But that's something completely different than fibbing the pullback.

PS2.
The next thing i'm almost completely convinced (from this thread and Wyckoffs work) is that capitulation moves price - not victory.
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  #1036  
Old Jun 4, 2012 3:12pm
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@forextraderx

yep...that's what we call a stop-hunt. and it is fairly simple as your picture suggests. although, there are some variations, i guess. actually, countless. actually, as many as common price patterns that most of the people look at. each of them carries the possibility to trigger the domino effect. (patterns failure, as suggested somewhere in the topic)

on the other hand, analyzing ranges and their structure, Wyckoff suggested there are ways of making some conclusions that big money is doing. and i guess false breakout (thrusts), climaxes and stuff like that are part of that bigger picture. and from what i understand, real game starts after stops are nailed. then we look to see whether it's a creek to jump over or it is an ice to fall through.
and it seems to me (just seems for now) that thinking in terms of order flow is very, very helpful to determine which one is it.
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  #1038  
Old Jun 4, 2012 3:31pm
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Quote:
Originally Posted by forextraderx View Post
Ok, sure,... i guess then maybe i don't understand a working definition of the use of the word "orderflow"

as I understand it, the word "orderflow" was originally used by large financial institutions as they would seek to watch where orders were being placed in the market, so they could tell where market bias was, as well as how they could best exploit the existing orders to profit from this bias.

in fact, large market makers would often buy the "orderflow" from large brokerages, so they could see this in real time... or was brokerages...
yes, exactly, you're completely right about order flow in terms of definition and that's what brought confusion in topic at some point of time (at least as i understood reasons).

Quote:
I see what your saying though, and i guess that's order flow... but, what's the difference between looking at "price action" to determine where the market bias is pointing, and looking at "order flow" to determine where market bias is pointing?
i guess none. at least, i don't see it. the only reason that i see calling anything 'an orderflow' on fx spot market is: making conclusions (or should i say educated guesses) about where and what kind of orders might be and all of that based on pure price action.
at least that's how i see it.

technically, it's trading price action (by definition). but personally, i can say it's pretty exciting (and yet have to see how valuable) thinking about actual orders behind the scenes. when i say orders i mean that: who, why and where. And for me, that's more than enough to make a difference.

PS.
i'm not saying this is order flow trading at all, i just accept the terminology the topic starter suggested and find sense in it since, at the end of the day, every trading technique makes conclusions about order flow. the difference is - how many layers of abstraction there are between moving average and the real list of orders. putting it that way - this is as close as i can imagine on fx spot. (not saying it's closest)
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Last edited Jun 4, 2012 3:56pm
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  #1041  
Old Jun 4, 2012 8:15pm
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I'll post my understanding so far...

Quote:
So in order to run a bunch of stops, you need to be a fairly big player in the market, because you might need to push through several hundred million of orders in order to get to these stops.

So you've taken on a large position in the worst possible place, you are long at resistance or short at support (why?), but luckily you run into these delicious stops to close out your order.
That might be true during the London session...but also might not during some other times.
Point being, there are circumstances when you could (theoretically) move the market using $1 to run it into the stops that will buy millions (and provide you the chance for selling millions, of course).

$1 : $1,000,000 is a nice ratio
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  #1042  
Old Jun 4, 2012 8:20pm
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PS.

at the end of the day, does it really matter if it's intentional or not? i mean, from our point of view, assuming we're FF members and not banks, dealers or whoever we point our finger to as being a 'big, smart money'

stops are or aren't hunted by the market. as long as their position is predictable, does it really matter what reasons market had to trigger them?
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  #1048  
Old Jun 5, 2012 1:28pm
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Quote:
Originally Posted by pemully View Post
commercials provide liquidity coz they use limit orders....the market maker has to find liquidity to fill large orders hence looks for stops.he usually frontruns a big customer order with positive expectation.

big speculative customers also seeks to get out of his position at places where stops are deemed to be to avoid prices returning from where he bought.

also the market maker has to always hedge hence he shorts during rallies and vice versa so he is interested in squeezing the longs or short when in extremes for extra profit.

all...
who do you have on mind when you say commercials?
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  #1049  
Old Jun 6, 2012 3:01pm
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I was always wondering why would fib levels work. Even regardless the fact of their accuracy I never even saw an explanation other than 'a lot of people look at them'. But, why have hey started looking at them in the first place? Is there anything measurable behind the concept? Never seen any thoughts about it (probably because of reading wrong things).

After this topic i come to the conclusion that there might be some math/psychology behind it. It now seems to me that they are functions of time that it took for price to make some move. Having on mind what actually a retracement level is, or in other words, what makes price to stop at some level - then we surely see relation between impulsive and corrective moves.

PS.
My apologies to all for constantly bringing this topic out of dead but it completely changed the way i look at the market. The best thing is - it made me think about each single moment when i look at the market. And that's something. Thanks again to everyone.
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