Why do people buy/sell?

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Re: Why do people buy/sell?

Postby whipcrack » Sun Oct 31, 2010 5:10 am

ivanlim wrote:why are there usually follow thorugh selling or buying by the market?

If you think about it logically in order for prices to move up & continue in a bullish directional bias, demand has to overwhelm supply & in order for prices to move down & continue in a bearish directional bias supply has to overwhelm demand.

Unless that imbalance transpires, prices will consolidate & exchange or net off at fair value. Eventually dominant order flow will have to enter the market in order to inspire price to move out of fair value or consolidation & break out to fresh highs or lows.

ivanlim wrote:What caused these sort of market action?

From a speculative perspective, it will be the result of stop loss orders (either orders buying back a profitable trade or buy/sell stops placed to initiate a new position), new market orders etc.
Take a look at the post yesterday on here:
combination-strategies-t140-220.html

Jack's final chart on his post highlights a typical each-way scenario.
This example shows how speculators view these types of technical conditions & react to the drivers & influences affecting the intraday & intraweek movement of prices.

In order for price to continue it's near-term bullish directional bias it will need to absorb any waiting supply up at the mid October highs at 1.6100.
There will be stop orders building above that level that will include fresh buy orders looking to take advantage of a breakout & continuation move + there will also be limit (profit stop) orders from existing longs booking profits.
Whichever side holds the dominant weighting will get rewarded on any move up to test that level.

The same situation if prices fall from Fridays New York close back towards the first support levels on his chart at 1.5875. If sufficient demand (buy stops) exists back towards that zone then price will get supported. If not, & supply is heavy enough then it will overwhelm & absorb the demand & continue to fall.

Obviously, there are other equally important influences impacting prices on a dialy basis such as commercial activity, where firms & companies need to exchange currency as a natural function of their daily business transactions.
Merger & acquisition deals closing out where companies absorb & buy other companies paying for those transactions in foreign currency exchanges, thus temporarily affecting volatility & liquidity requirements in the respective currencies.
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Re: Why do people buy/sell?

Postby whipcrack » Sun Oct 31, 2010 5:17 am

Rom wrote:This is about what makes the market move?

No, that isn't about what makes the market move.

That example you've posted of somebody else's analysis is the possible result, not the cause of what influences prices to move.

Go back & read ivanlim's questions again.
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Re: Why do people buy/sell?

Postby Rom » Sun Oct 31, 2010 8:44 am

whipcrack, the long post in extremely interesting and worth being saved for future reference.

Comments to http://forums.forex-strategies-revealed.com/combination-strategies-t140-220.html
spotfx wrote:most of it via fast money according to the chatter.

I am wondering what "fast money" refer to?

jack mason wrote:Next weeks FOMC meeting will be eagerly watched by all concerned.

Yes, and that meeting may create havoc for all technical analysis.

Jack Mason about market reactions
jack mason wrote:What I did enjoy was the unsurprising reaction on Cable to the comments coming out on the newswires during Thursday regards the UK's toning down of the potential QE requirements.


GBPJPY last week
GBPJPY.GIF

That GBPJPY move was the nail in the coffin for my daytrading. A solid downtrend on GBPJPY but something changed everything, I am not sure what news.

Personal experience not related to whipcrack or Ivanlim
No more daytrading without being updated about next news release. In consequence, when daytrading one first has to be prepared with an overview of news releases - that is 30 minutes work, then monitoring the calendar. That means one is in danger of being glued to the screen. Beware of strategies that reqiures long hours. Beware of strategies that requires constant updates about news for two countries (putting everything at stake daytrading 50 pips on one cross). Beware of strategies that will put you into such circumstances you cannot trade a portfolio of crosses at the same time because you will suffer information overload. Beware of gurus that have always been daytraders. They will tell you 2+ hours screentime a day is necessary, otherwise you will never succeed. To escape the nightmare of daytrading simplicity is needed in forex trading. Simplicity is achieved by changing timeframe. Implications of different timeframe is that all daytrading newsletters and all daytrading signals can be directed to wastebox.

.
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Re: Why do people buy/sell?

Postby whipcrack » Sun Oct 31, 2010 3:18 pm

Rom wrote:I am wondering what "fast money" refer to?

Fast money is a reference used to describe aggressive short-range (often intraday) bets from Investment capital & leveraged funds.

Rom wrote:A solid downtrend on GBPJPY but something changed everything, I am not sure what news.

It was a mixture of proposed scaling back of potential quantitative easing capital from the Bank of England + better than expected UK data (confirming a reduced need for more QE capital).
Output such as that will sometimes exert a strong & short-term influence on price as traders re-position & re-adjust their bets in the wake of fresh fundamental data.

You have to appreciate that normal day to day positioning in the markets, & specific currencies, is the reflection of collective traders views & perceptions of the ongoing influences & factors that affect & drive price valuations.

They constantly position themselves to reflect the current valuations based on the regular state of the countries economic health & how that country is biased v/s the other currency pair in the two way relationship.
Each time another item of fundamental data is released, traders price in the forward effect of that collective input in respect to the other pair in the relationship & v/s it's other trading partners.

If the data comes in as expected & in line with consensus, the price action won't be unduly affected.
If the data surprises the market by coming in under or over expectation for whatever reason, you can expect a violent reaction as traders scratch, exit or add to their positions, thus aggressively impacting the near-term volatility of the price action to compensate for the data re-adjustment.

Rom wrote:That GBPJPY move was the nail in the coffin for my daytrading.

Day trading is a very lucrative practice for those with very disciplined & well organized strategies & models.

It's not all based around data or news releases.
There are plenty of lower risk, higher value opportunities available throughout a typical weeks trade without having to put yourself in the firing line & suffer the effects of violent data release outputs.
Like anything else in the business world - the well prepared, well organized & smart operators will benefit at the expense of the naïve, ill-prepared & inexperienced participants.

Rom wrote:Implications of different timeframe is that all daytrading newsletters and all daytrading signals can be directed to wastebox.

The above comments are about the only sensible inclusions in that paragraph you posted.

Whoever put the rest of that information together quite clearly doesn't understand the benefits of a well constructed intraday model, but that doesn't surprise me given the garbage that's consistently spewed out to the masses masquerading as sensible advice.
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Re: Why do people buy/sell?

Postby Rom » Mon Nov 01, 2010 5:12 am

What you write makes sense to me.

During the Sept-Oct EURUSD rally half a dozen major resistance levels were taken out. Some days all daily pivots points resistance levels were taken out.

Why? The EURO rally was presumable fueled by US Treasuries being dumped for the sake of EURO bonds. The Chinese were dumping US Treasuries en mass.
The daily flow of "currency bets" was not the cause.

whipcrack wrote:Day trading is a very lucrative practice for those with very disciplined & well organized strategies & models

If the meaning is like "working in a hospital can be a very lucrative job" I agree. A lot of doctors will confirm that. Nurses will be more divided.

When trading $1.000.000 of company's money, and that money becomes $1.025.000 by the end of the month, that is lucrative for the company, even when $10.000 has been deducted as salaries. For a private speculator, who don't trade clients money, 2.5% per month, 5% as risk, 5 hours screen time - is a far cry from being at the level of a nurse - not "lucrative" at all.

Private daytraders have a disadvantage vs. nurses in that there is no state financed education and student loans for them. They have to make upfront payment for education themselves. If "a very disciplined & well organized strategies & models" can be replaced by a pretty straightforward end-of-day trading strategy the need for education, upfront payment and 5 hours sceentime will be eliminated. That seems to be lucrative.

.
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Re: Why do people buy/sell?

Postby goldtop » Mon Nov 01, 2010 7:16 am

I hear what you say regards private v/s company funded traders & of course that makes a huge difference, if only because a trader won't get hired by a private investment fund or Hedge Fund operator unless he's a proven, profitable entity.

I also take your point about the benefits of receiving the correct tuition & education. That will definitely accelerate a persons learning curve dramatically & ensure they have the correct type of feedback focused on their individual style & trading expectations.
Unfortunately, most novices who frequent these types of trading forums are under the false impression that all they need to get ahead in this business can be accessed for free.

Sure, there are some very good threads scattered around the forum world + the odd decent article or pdf etc, but unfortunately for most folks browsing these forums it's not nearly enough to keep them out of harms way.

Most simply don't possess even the barest minimum psychological requirements to succeed long term in this type of environment.

Rom wrote:If "a very disciplined & well organized strategies & models" can be replaced by a pretty straightforward end-of-day trading strategy the need for education, upfront payment and 5 hours sceentime will be eliminated.

If that was the case then everyone trading straightforward end-of-day strategies across the many forums & trading sites would all be ultra profitable & stress free.

The reality of course is very different indeed.

You only have to peruse the many varied trading forums & browse those types of (long-range strategy) threads to see that they harbour just as much despair & despondency as the many varied day trading threads.

Most folks who are attracted to this type of endeavor come to it ill prepared, naïve & carrying totally unrealistic aims & expectations of what's actually required to succeed long term.
And as long as they continue to adopt a "get rich quick" mentality the well trained, adequately prepared professional operators will take their money from them at every opportunity! 8)
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Re: Why do people buy/sell?

Postby Rom » Mon Nov 01, 2010 8:46 am

goldtop wrote:The reality of course is very different indeed.

I have failed to verify that ANY textbook daytrading system will make substantial profit .. with Graig Harris, Barry Burns and Phil Newton as serious contendents. In case of signal provider PendingPips.com, their published pips is a joke = cheat. Why? If daytrading was that profitable, how can it be they cannot publish those solid records?

On the other hand, companies with easy swingtrading strategies like http://www.netpicks.com/, http://www.TradersNow.com or http://www.efttrading.com/ apparently have a good track record of being profitable.

.
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Re: Why do people buy/sell?

Postby goldtop » Mon Nov 01, 2010 9:52 am

You mean to say you haven't yet realized that all signal providers are a complete joke? :lol:
You're wasting your valuable time chasing up that dead end street.

Why are you so reliant on others for your trading provision?
Why don't you construct your own model based around your technical preferences (including timeframes), trading style & objectives?

Surely you can put together the basis of a workable strategy based on different technical components that have piqued your interest?!

You're in for a very rude awakening if you assume you're going to be able to simply pick a strategy "off-the-shelf" & replicate someone else's returns or results.

As you're discovering, it simply doesn't work that way in the trading world for lots of different reasons – the main one being psychological (including risk attitude & tolerances) incompatibility.
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Re: Why do people buy/sell?

Postby Rom » Mon Nov 01, 2010 11:54 am

goldtop wrote:Why don't you construct your own model based around your technical preferences (including timeframes), trading style & objectives?

Yes, timeframe is essencial. I happened to come across an interview with Sean Hyman. I enjoyed it all. What he says and what daytraders says is like day and night, two different worlds. Sean Hyman & Co are running a fx service, but their "signals" are probably more like market analysis, "bullish" or "bearish" = meaningful.

http://countingpips.com/fx/2010/02/27/forex-interview-sean-hyman-shares-his-techniques-and-thoughts-on-fx-market-trading/
I tend to put on 1-2 trades every couple of weeks. Most of these trades are swing trades that last at least "days to weeks". I usually only have 1-2 trades on in the market at any one given time. I tend to use the daily chart's trend as my "directional gauge" to trade in…and the 1 hour or 4 hour chart to trade off of (to enter the trade in).

Daytraders like Graig Harris, Barry Burns, Phil Newton = 1-3 trades per day

I love to enter trades where there is a strong trend and the SSI reading gives an extreme reading that shows the retail traders are trying to "fight the trend" by attempting to pick a top or a bottom. This is the dumbest thing a trader can do. However, it gives me a very high probability trade as I stick with the trend and they get stopped out, margin called out or scared out. Either way, it's the "fuel to the fire" for my trade.

Pros know to stick with the trend. The novice says, "Its gone too far and has to turn around." Therefore they try to be a "bottom picker" or a "top picker". Once someone has been in the markets for over 17 years as I have…you learn who lasts and who doesn't.

The trend traders stand the best chance of lasting because trends are more likely to continue on than they are to reverse. Bottom and top pickers are always executing low
probability trades and rarely last over the "long haul".

Daytrader Barry Burns: If SMA 50 (intraday) is down and stochastics has topped and MACD have topped and this is confirmed by divergence, and there is no disturbing S/R lines then sell

Daytrader Phil Newton: If last H4 bar is touching weekly open then trade long at breakout to the upside and short at breakout to the downside. Use 0.1 of Weekly ATR as TP1.

Trend trading truism = buy at top and sell at bottom. Stochastics = sell at top and buy at bottom.

kjell
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Re: Why do people buy/sell?

Postby goldtop » Mon Nov 01, 2010 1:07 pm

I think you're totally misunderstanding the point we're trying to make.
Timeframe is essential only to your own personal trading plan structure.

Where do you get this strange idea from that intraday traders are obliged & even expected to initiate multi trades per day??

I trade both short-term & medium-term strategy models, as do most of the colleagues I work with, 2 of whom post on this thread: combination-strategies-t140.html

Although our day trading strategies are more aggressive in nature than our longer-term strategies, we still only execute trades when the conditions are ideally suited to the strict criteria required to trigger a position.

Rarely do we execute more than 3 or 4 intraday entries per week.
In fact so far this quarter, which started beginning October, I've only triggered 5 intraday trades in total.

You seem to have this cut & dried picture in your mind that day traders typically execute multi-positions per session & are therefore placing themselves at greatly increased risk of blowing up.....whereby swing traders apparently are better placed to attract less risk & higher long term profits.

That attitude couldn't be further from the truth.
A proficient & experienced trader will be confident & competent enough to operate via micro & macro timeframe views.

I agree wholeheartedly that inexperienced retailers who haven't got a clue what they're doing are prone to over trading on micro timeframes, risking excessive amounts with their undercapitalized funds.
That however is not the case as far as professional traders are concerned, some of whom are extremely (long term) successful day traders!

Day Trading doesn’t automatically mean multi-day entries.
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