Why do people buy/sell?

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Why do people buy/sell?

Postby ivanlim » Thu Oct 28, 2010 12:49 am

I'm sorry to flood this forum with my seemingly endless questions,but i need to ask one more. Why do people buy or sell a currency pair? What is the criteria?

For example,a price action signal,such as a pin bar reversal,why does it usually lead to continuous buying or selling? What attracts these buyers or sellers for reversal?
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Re: Why do people buy/sell?

Postby shona123 » Thu Oct 28, 2010 12:14 pm

The types of individual technical candle or bar visuals are simply representations of trader behavior Ivan.

Hammers at prior areas of support, hanging man (inverted hammer) at a prior area of resistance, spinning tops & doji's at areas & zones of prior significance are all reflections of the differing views & opinions of trader activity.

The reasons they choose to trade at certain levels are usually as varied as the strategies & systems being employed by the different tiers of market players too.

Traders go long & short at the same level for a whole host of different reasons. Some will be attempting to position themselves in step with fundamental or event risk influences, some will be taking a purely technical view of a level or zone….

Important big figure (00's) levels harbour large option barrier defense orders, commercial order flow also casts a big shadow over the market, especially when companies are negotiating & closing large merger & acquisition deals. The 3 main fixing times on the daily calendar can exert a dominant influence as banks attempt to aggregate & obtain best price for their clients, which can cause short-term fluctuations in volatility & directional bias.

Institutional & retail order flow will be constantly active booking partial profits, exiting full positions, entering fresh orders etc etc.

All the differing orders will need to be absorbed, filtered & sorted by the market players before price moves away in the direction that is being influenced by the dominant order flow.
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Re: Why do people buy/sell?

Postby ivanlim » Thu Oct 28, 2010 6:17 pm

Thank you shona. And sometimes,you might hear the term "higher probability setups". How is the probability higher when the chances of people buying or selling are 50-50?
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Re: "higher probability set ups"

Postby shona123 » Fri Oct 29, 2010 1:28 am

That term usually refers to set ups that the trader has compiled & tested/traded to execute under very specific technical scenarios.

For instance a set up that triggers on & around a confluence of events that might include, but not be exclusive to:
1) Trend (determined by their usual parameters & criteria)
2) Round Number or big figure
3) Specific technical pattern (inside bar…123…tweezer top/bottom…etc etc)
4) Acceptable risk-reward odds.
5) Confirmatory fundamental or market influences.
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Re: Why do people buy/sell?

Postby whipcrack » Sat Oct 30, 2010 6:40 am

Rom wrote:Bond traders is the main actor in currencies. When investors or the chinese learn GNP is lower and CPI is higher they become worried. Why? Because that will affect the value of their assets (bonds mostly). They will take the necessary steps to protect future value of their assets. If they considere Euro or yen to be safer, they will buy Euro or yen assets and sell dollar assets. The bond traders will monitor all news for clues.

In light of ivanlim's second post on this thread & using the information you've contributed to the topic, would you now care to expand further & transfer them onto a technical chart of your choice, showing him a couple of high probability set ups, based on shona's criteria, indicating how he might have benefited financially last week or next week based on your information?

He can of course visit the Combination Strategies thread to access plenty of solid, workable examples of plotting & preparing technical triggers based on current market views impacting the currency pairs, but I'm sure it would add value to his understanding if you could also show how your views & info translates simply to a chart where he can bet long or short based on the content of your post.
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Re: Why do people buy/sell?

Postby whipcrack » Sat Oct 30, 2010 5:50 pm

Rom wrote:What you quote is not a trade system.
I favor a long term trend riding approach.
In the September-fallout trendfollowers had good times.

I didn't ask you to comment on what I quoted.
Neither did I ask you what type of market conditions you favored.
In fact the types of market condition was neither mentioned nor requested at all.

I simply asked you to translate in simple terms how ivanlim's trading approach could benefit from your contribution to his request for feedback on why people buy & sell currencies & how he might take advantage of "high probability set ups" based around the propensity for prices to move between A & B.

His requests have absolutely nothing to do with whether trend traders or day traders or anyone else participated in Septembers activity.

Stick to the point & answer the questions posed to you instead of resorting to your usual habit of veering wildly off topic & steering the subject matter into the ditch.
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Re: Why do people buy/sell?

Postby ivanlim » Sun Oct 31, 2010 3:47 am

Back to a related question to the main topic,why are there usually follow thorugh selling or buying by the market?

What caused these sort of market action?
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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 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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