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Re: A muggers tea party!!

Postby jack mason » Mon Feb 08, 2010 4:19 am

JimmyMac wrote: We’ll hopefully get to see the color of those stops underneath this weeks lows early next week – see how “thick” they really are!

Should be plenty of offerings on the table for you ‘hit & run’ momentum muggers :wink:

Articles such as this won't help the Pounds cause much either Jimmy.

http://news.bbc.co.uk/2/hi/business/8503090.stm

There was more woe in most of the business sections of both the UK & US papers too.
Prices have dipped virtually 5 figures from the previous legs descent at last weeks high without taking a breath.
Shorting the rallies still appears to be the sensible option.

From my relatively novice observations, Monday often appears a tricky day to engage. I think unless I see a very visible set up I'll wait a while & let the orders work themselves out a little.
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Re: A muggers tea party!!

Postby Joe Whitehorse » Mon Feb 08, 2010 5:33 am

jack mason wrote:Prices have dipped virtually 5 figures from the previous legs descent at last weeks high without taking a breath.
Shorting the rallies still appears to be the sensible option.

Yes, it’s due a relief rally isn’t it.
I mentioned in a post last Wednesday that the 1.6090 zone was an area of prior support (current resistance) & likely to harbour mixed orders.

That zone marked the weeks highs & sent prices tumbling to current levels. It’s rare that prices move almost exclusively in one determined direction without testing & probing for counter move stops/reversal appetite.

What usually happens is groups or bunches of ‘short’ trailing stop orders will begin moving down on a typical leg like we’re currently witnessing on the gbp/usd. They’ll lock in profits & then begin to also attract staggered layers of ‘long’ or counter reverse stop orders to try & catch an aggressive & extended reverse move back up.

That’s what often causes spiky, erratic price action for a while until the dominant order flow reasserts itself.

If the orders are stronger to the upside, prices will retrace quickly & aggressively until they find larger stacks of offers or fresh ‘shorts’…..if the ‘long’ or trailing stop orders are weak, they’ll become more easily absorbed by those waiting continuation ‘short’ or offer triggers.

Supply & demand simply going about it’s normal business!
Add into the mix the Option contracts, M&A fund requirements, regular commercial activity & sovereign dealings, & you have a potent cocktail of ongoing volatility to contend with!

The 4 hour chart highlighting last weeks high level clearly annotates not only that prior zone of support at the 1.6090, but also the move down & subsequent pullback test. It's levels & zones such as this that offer up very consistent opportunities to partake in high value, low risk trading entries.
Well worth identifying & paying close attention to! :wink:

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Re: A muggers tea party!!

Postby shona123 » Mon Feb 08, 2010 5:47 am

Navajo Joe wrote: If the orders are stronger to the upside, prices will retrace quickly & aggressively until they find larger stacks of offers or fresh ‘shorts’…..if the ‘long’ or trailing stop orders are weak, they’ll become more easily absorbed by those waiting continuation ‘short’ or offer triggers.

Worth sticking a continuation short order below the weeks open (5597), especially if this mornings rally fails to locate further buy stops beyond the Tokyo highs at circa 1.5620-30.
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Re: A muggers tea party!!

Postby whipcrack » Mon Feb 08, 2010 6:00 am

shona123 wrote:Worth sticking a continuation short order below the weeks open (5597), especially if this mornings rally fails to locate further buy stops beyond the Tokyo highs at circa 1.5620-30.

Great minds think alike!
That was exactly my plan too. :wink:
Appropriate technical stop available above the 5 minute ledge @ 1.5615.

15 minute chart:
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Re: A muggers tea party!!

Postby jack mason » Mon Feb 08, 2010 6:59 am

Thanks for that post Joe, very insightful. I hadn’t really given much thought or consideration for that type of order flow activity. But I suppose in a typical speculative market that would be common practice.

Navajo Joe wrote: Add into the mix the Option contracts, M&A fund requirements, regular commercial activity & sovereign dealings, & you have a potent cocktail of ongoing volatility to contend with!

Could I ask what you mean by sovereign dealings?
And how much of the regular daily movement in forex is attributed to the speculative and/or retail participation?

shona/whipcrack - That's another pretty savvy entry identified there, & given all your previous explanations & commentary, not wholly unsurprising 8)
Good luck with it.
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Cable impersonating a yo-yo!!

Postby whipcrack » Mon Feb 08, 2010 9:29 am

jack mason wrote:From my relatively novice observations, Monday often appears a tricky day to engage. I think unless I see a very visible set up I'll wait a while & let the orders work themselves out a little.


That's certainly the case today Jack. You haven't missed anything that's for sure!!
Another breakeven exit. Still, it didn't cost me anything but time :)
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Re: Cable impersonating a yo-yo!!

Postby Joe Whitehorse » Mon Feb 08, 2010 9:50 am

whipcrack wrote:That's certainly the case today Jack. You haven't missed anything that's for sure!!
Another breakeven exit. Still, it didn't cost me anything but time :)

The Pound is all over the place today Bobby.
Take a peek at eur/gbp too. Kind of mirrors the type of choppy action more closely associated with large lumps of M&A activity changing hands.
jack mason wrote:Could I ask what you mean by sovereign dealings?
And how much of the regular daily movement in forex is attributed to the speculative and/or retail participation?

Sovereign accounts are Central Banks Jack.

You’ll also sometimes see & hear commentators referring to “sovereign wealth funds” – they’re typically entities such as the Abu Dhabi Investment Authority & Singapore Investment Corp, in other words – heavy hitters!

Speculative bets (including retail cash) make up a tiny percentage of the overall FX liquidity.
Much of the typical intra-week exchanges involve large commercial, institutional & Bank to Bank transactional flow.
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Big Hitters

Postby jack mason » Thu Feb 11, 2010 5:13 am

Navajo Joe wrote:Sovereign accounts are Central Banks Jack.

Speculative bets (including retail cash) make up a tiny percentage of the overall FX liquidity.
Much of the typical intra-week exchanges involve large commercial, institutional & Bank to Bank transactional flow.

Thanks for that Joe.

I guess it takes a fair amount of volume to push prices around on the Cable over a typical trading day?
What kind of money are we talking about as a matter of interest?
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Re: Big Hitters

Postby JimmyMac » Thu Feb 11, 2010 6:44 am

jack mason wrote:I guess it takes a fair amount of volume to push prices around on the Cable over a typical trading day?

What kind of money are we talking about as a matter of interest?

Reasonable size in Cable would constitute £100/200 mln, decent +£250 mln.

Conversely, decent volumes across Euro would be well in excess of 5-600 mln.
For instance, there was large sell interest going thru early yesterday morning at c.8790 on eurgbp (+ Cable proxy) from a UK pharmaceutical & heavy industrial supplier totalling +800 million.
The BIS has also been highly visible selling eurusd this week at each push toward 1.3800.

Those types of transactional flows are responsible for moving the crosses (& major pair interest) back & forth on a regular daily basis.

Usually a client will give specific instructions for the amount to transact at a specific price and/or date & time.
If the amount is particularly large, or the volumes are thin on the day of transaction, the Bank or dealing house will begin filtering or feeding the deal thru in manageable chunks so as not to spook the market as it travels thru certain levels & also to maintain pricing efficiency.

It’ll usually get done at the specific (various) daily fixings under normal circumstances.
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Re: Big Hitters

Postby spotfx » Thu Feb 11, 2010 7:09 am

JimmyMac wrote: It’ll usually get done at the specific (various) daily fixings under normal circumstances.


...and to maybe pre-empt the next question, whilst adding to the quality content of Jimmy's post, I'll reference the daily fixing times;

all London times:
ECB fix @ 12.00 (midday) daily.
Frankfurt fix @ 13.30 daily.
London fix @ 16.00 daily.

you'll occasionally notice erratic or increased volatility on & around any or all of those fixing times as deals get pushed through & aggregated.
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