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  #181  
Old Aug 30, 2009 11:16am
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Thumbs up great thread!

Hello to all. Let me say that this is one if not the most important thread that i have ever red. SKFX, thanks for having started this thread. It is very much interesting as it address the root of why currencies moves and how can we profit from a market innefficiency. Knowing what are the key factors that driver the FX market, who are the majors participants and how do they do their transactions and when and at what prices are all the keys relevant questions to be answered.

Any approach in trading that look to answer these questions and interest itself to understand deeply the auction market theory and laws of supply and demand cant go wrong, all the opposite.

This thread is so much relevant that I have gone read all the posts of Gaston as suggested and it was a great read. Also red post of Darkstar and some others.

A fascinating theme is that the guys who know what to look for (SKFX, Gaston, Daytrading, Darkstar, ect...) do discuss some of the aspects of this concept of order flow and market innefficiency but refrain from going too far in explaning it. This particular aspect is what make me in a constant search to find what they did found as i am sure it can be found.

I think i begun to get an idea of different market innefficiencies that i will begin look for and will dig into it until it click.

Anyway, great thread guys and please continue the discussion as it is a A+ thread to me as it interest itself to the root and crucial aspect of trading which, until found, nobody can really think to become successful over the long term.

Great trading week to all

Sincerely

Shreem
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  #234  
Old Aug 31, 2009 1:06pm
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Thumbs up

Quote:
Originally Posted by supremeChaos View Post
That may be true, but there are ears around here too.

i hope skfx gets well soon so the discussion can carry on.

Hello guys. Great discussion going on here. Scotty B, please continue to think out loud as it really me going deeper myself. I am writing from work but will chim when i get time and i am getting 13 weeks off work starting september 12th so will have a lot of time, next 3 months, to decipher this matter more deeply.

It really seems, that one root to successfully trading is really to get hold, somehow, of those order books of the bigs players and then develop a trading strategy where you just drive the wave along with them where your own order get picked up by their moves.

I do agree that market profile in one great graphic representation of the "other timeframe" which are big players, specially when you are using merged market profiles.

Man, SKFX has really started something very much interesting but i dont get much hope that we will give details much as his point is that the trader need to get what he offer and find by himself the "real thing".

I do agree, doing things that way, is more rewarding long term, as your own reseach will bring you to a point where you know the keys to successful trading.

Having said that, by sharing our reseach alltogether, we can definitely come with something worht it.

Shreem

EDIT: this made me think, spot forex been decentralizded as compare to future market, stock or commodities market. There is certainely a reason why this market is still decentralized and that we dont have access, as retail traders, to the whole reported daily volume. If we could get a way to get the majority of the daily volume of the true interbank fx market, we would be on something.
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  #257  
Old Sep 1, 2009 7:51am
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Quote:
Originally Posted by Fudomyo View Post
yes, you do have access. you just need to know what you're looking for.
sorry. I don't mean to sound cryptic, or just show up and say, wow, look how great I'm doing. I was responding to a rather condescending post about my inability to grasp what this discussion is about. Initially, someone said, the orderflow footprint was all you needed to know, and I was clarifying a point.

Stop hunting can operate on a spike or a fast move up. Granted the hair doesn't support a classic spike on the trade I took, but the price move was very rapid and the...

Hello Fudomyo and thanks for posting. Just let me say big Kudo to you to have found the key of how using order flow. That great i am truly happy that you found it.

I agree with you, that in order to respect the direction of the OP thread intention, if we solve the puzzle, we should not really reveal it here but only give some hints to help others dig deeper until they found it. ( I am still in that category but seeing it more and more clearly though).

I also do use VSA in my trading methodology which is, for me, near as it can get to see intentions of big players and trade accordingly.

I am still trying to figure out how those successful order flow trader can trade without a chart but will find it at some point.

Shreem
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  #317  
Old Sep 2, 2009 7:42pm
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Smile interesting except of an article

Hello all. Here is an article of Jason Alan Jankovsky on discussing about order flow. I found it very much interesting.

Here it is:

"Exploiting Order Flow and Liquidation Pressures

In my 20 plus years as a trader, and having experienced just about everything (positive and negative) you can experience as a trader, I can say with complete conviction that quality analysis of a market is not what it appears to be. There is a fundamental underlying structure to any market that is dynamic; it changes from moment to moment. Developing an understanding of those changes and applying that knowledge consistently is what will make your trading really reach its full potential. This is much more than “technical analysis” in my opinion.

Most successful traders will tell you that by far the most critical part of their success has been a high level of personal understanding. Successful traders know why they do what they do the way they do it. Equally important is a solid understanding of the bedrock underlying structure of the market they trade. Successful traders can tell you exactly what is creating price action and this is often something that has very little to do with market fundamentals or market technicals; it has to do with psychology. This is why successful traders have absolutely no conflict of any kind selling into a massive rally or buying into a hard break. They know why that market is exhibiting violent price swings and they know what will be coming next.

Today we are going to discuss the fundamentals of market structure and how to develop an understanding of when a change to the structure is coming. What to do next becomes much more definable when you see the market as a dynamic unfolding event rather than just a series of prices. Once you have a better understanding of the market structure and how it changes you can develop the skill and confidence to do the things that successful traders do without hesitation. At the very least it can help you stay out of trades that don’t have a high probability of success.


I want to start by discussing an important basic to trading. No matter how you want to slice it, once you enter a market by initiating your position at some point you must liquidate. Forget about gains or losses for a moment or about how much time you might need to liquidate; the fact is you must liquidate. Every traded contract has a last trading day. If you are still in after that you are either a hedger of the product itself (making delivery) or a consumer of that product (taking delivery). If you are not a hedger or consumer of that product; then you are the speculator and you must liquidate before the last trading day. How much money you have made or lost is not the issue; the issue is that you can’t stay in forever. It is this liquidation pressure on the bulk of the market participants (over 98% of contracts traded) that creates the order flow and the price changes you are attempting to profit from. At every moment there is a group of traders liquidating. It is this liquidation that drives pricing.

Now ask yourself the question “What causes people to liquidate?” The correct answer is “either a profit or a loss”. The issue as far as exploiting this liquidation pressure is concerned is “who is that?”

If you stop to think about it, a losing trade exerts more of this liquidation pressure than a winning trade for very sound reasons. First, the losing trader must liquidate while the winning trader can choose to liquidate. Therefore the urge to action is a higher state of pressure in the loser. At some point the losing trader has no more financial integrity to hold his position. Sometimes the losing trader has the ability to cut his loss on his own, sometimes he needs his broker to do it, sometimes the exchange liquidates because he is debit; but in any case the loss is big enough that a forced liquidation takes place. In the case of the winner, this force is less because he has a lead on the market. An open trade winning position allows a person to think a bit longer before taking action. At some point the open trade winner is “big enough” that the winner will want to take it. He will liquidate. But that choice can happen anytime; no broker or exchange will force you to liquidate a winning position and force you to take a check home. It is this slight difference in pressure that makes prices move; because only one side of the market is in a state where they must enter an order. Therefore, a large amount of price action represents people taking losses; whether they want to or not. Some of the order flow moment to moment represents losing trades being liquidated.


Suppose you know who that is? Wouldn’t you be in a better position to anticipate what sort of price action would be coming next?

For the sake of illustration, let’s ask a few basic questions about a market that has been in a steady price rise for a reasonable amount of time:

Who’s winning?
Who’s loosing?
How can I know when they are liquidating?

If a market has been in a steady climb for a period of time it would be safe to say that the traders holding open longs are the winners. The holders of short positions are losing money and at some point they will be forced to liquidate. Should prices advance into resting orders above the market, and if those orders are buy-stops, then the market is liquidating losing shorts for the most part (Why do you think they are called “stop-loss” orders?) Now if at this moment we do a little homework, we can build a case for a high probability trade. On closer examination we discover that Open Interest (O/I) has not changed very much on this advance into the liquidating orders. Although the losing shorts are now out of the market, they have been replaced; otherwise O/I would go down to reflect them leaving the market. That can EITHER be additional long positions or brand new shorts. Let’s say a little of both. We look at the volume for the day and see this was a typical day as far as volume is concerned. The next trading day we see a sharp advance in price putting the new longs from yesterday’s trade into profits and the new shorts at a loss. The day after that, we see another advance into buy-stops and we can deduce that the new losing shorts have covered. If at this point we ALSO see a drop in O/I, we know that nobody new came to the table to play and most likely after three solid days of price advance a few old longs decided to take profits.

Now, this is an illustration—not intended to be a critical discussion of V/OI but I want you to think a few things through. What continued to create the price advance? Enough buy orders to trigger the buy stops. As long as that structure continues, the market will continue to climb in price as the losing traders continue to be forced out of the market and new potential losing shorts replace them. This is one reason a bull market can become “overbought” and yet continue to advance for days or even weeks. Consequently, once the advance gets “too high” from the winners point of view—they will choose to liquidate at about the same time the losers are forced out. This is shown as high Volume with a drop in Open Interest. Both sides are quitting. The potential for a reversal is now higher and represents an excellent new short opportunity.


Of course, a potential top in a market will not form quite this simply but the central underlying change to the market structure is what creates a top. Or a bottom. The fact is, once the losing positions are forced out; the market is running out of order flow UNLESS new traders are replacing them. This is why buying into a break when the sell-stops are triggered can be such a profitable thing to do; if no new sellers are entering new positions the market will run out of selling orders. All that is needed to reverse prices is for a few shorts from above the market to liquidate their winning positions. Once that happens, that will drive the losing shorts that entered late to liquidate creating a “buy order” imbalance. Now you have a rise in price. If the new buyers open a new long at the same time the imbalance will be substantial and that is what creates a reversal. For the most part, it is this ebb and flow within the order-flow that creates what you see on the screen as price action. But what is actually creating that order-flow is the small amount of time difference between the loser being forced to liquidate and the winner choosing to liquidate. Often V/OI can provide good clues that this scenario is developing. Always remember that it takes a little time to unfold so allow yourself to use multiple time frames when looking for the most likely spots."



Lots of gems in that.

Shreem

Last edited Sep 2, 2009 8:07pm | Reason: EDIT: bold section is done by myself to show the most important part (at least to me):)
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  #488  
Old Sep 6, 2009 2:12am
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Smile Interesting link on major banks involved in the FX market

Hello all. Here is an interesting link that relate who are the current majors banks involved in the FX market and their respective shares of the whole fx market.

I found it very interesting as it gives what is their total shares of the fx spot market as a whole. As we know that there is no centralized exchange in the spot fx market, still, if we get figures from the majors banks involved, it can give us a pretty good idea of the total volume market traded in the spot fx market.

As for last 5 years in a row, Deutsch Bank is place 1st with about 20.96% of total volume traded in spot fx for 2008 until now.

Here is the link to euromoney survey:

http://mag.digitalpc.co.uk/ActiveMag...ndowHeight=974

Hope it help

Shreem
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  #533  
Old Sep 6, 2009 11:25pm
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Smile nice post of Houdini about large bank dealing

Hello guys. Here is an interesting post of Houdini (a CTA professional hedge fund manager) about how big banks use price ranges to initiate their positions and trade accordingly:

"You are on the right track, for sure. I've been managing funds for 8 years using discretionary trading based primarily on price action and some fundamentals. Each time i am in NY, London or Singapore i meet with my dealers at UBS, DB, CS and others and they say the majority of their major clients trade the ranges and price action, which supports the approach. I use S/R, fractals, fibs and fib based patterns and it has proven itself year after year. Congratulations on your realization. If i may offer a suggestion... when you look at charts, look at the price action patterns as it relates to the dealing flow. The dealing flow is not constant, rather is moves in waves as you can see on the smaller timeframes. Also, consider that the actual dealing numbers are fixed in the minds of traders and have an emotional root in the environment, which will be remembered at a future time. "
__________________

This post shows me that we may trying too hard to find what are those order flows and how could we access the order book of all those orders pending or not in the big interbank market.

The thing is, having a clear and well define technical analysis approach using major S/R levels along with fibs and a clear understanding of fundamentals that do impact the currencies that we trade is all what this game of trading is all about.

Keys Support and Resistence levels can be clearly seen either on a chart of without using a chart (for people who prefer to) and past "major" S/R levels are indeed important and will be revisited time and time again.

Anyway just wanted to put that post of a successful professional FX CTA trader that do trade within the true Interbank market. Posts of those guys that more in the "known" than me is certainely helpful!

Shreem
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