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Is this price action nauseating, or what?
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Is this price action nauseating, or what?

  #31 (permalink)
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Does anyone else feel this bubble of apathy and lethargy?


tigertrader View Post
This truly appears to be a structural change in the markets and not a cyclical one, I'm afraid. Current market reality is that an overwhelming share of trading activity is based on short-run price forecasts rather than fundamental research. Under these conditions, how can one expect prices to track changes in the fundamental values of the income streams to which the assets give title?

Markets have always been based on a shifting balance between information augmenting and information extracting strategies, but the HFT arms race coupled with changes in institutions and regulation seem to have shifted the balance markedly towards the latter. Unless the structure of incentives is altered to favor longer holding periods, I suspect that we shall continue to see low volume and low volatility as any market inefficiencies that exist are quickly gamed by HFTs.

Changes in the perceived volatility and an acknowledged Fed put have given rise to greater risk taking and greater asset allocations by institutional and retail investors, but it has also served to remove not only all the risk from the markets, but all the doubt as to where the market is headed. Who cares what happens in Europe, if the ECB and the Fed are ready willing and able to provide liquidity. So , the market continues to melt up ever so slowly.

Tiger,

I really like the way you said the markets will continue to melt "up" ever so slowly. That is exactly what is happening. In equities anyway! If you look at the start of this thread,started by me, many people told me to "relax", it was just another august month. I bet most who read this thread did not even think it worthy of response. But something very interesting, if not ominous is truly happening. In every instance Ive ever seen where liquidity dries up, that market 95% of the time falls. Yesterday night I was watching the eur/usd trade right at the sweet spot around 3-3:30am. What was amazing was that on a 15 min chart I saw 4 candles in a row with nice price action upward and every bar finished just a little lower than the one before it. This is a call to get in. If you are biased long, all the players are screaming "look, it keeps trying for higher highs.!" If you believe in standard candle analysis, you will go "Ony God, 4 candles with big needles. Market is very toppy!. Jump in!" But after 2 hours price was right where it was 2 hours before! Not even a big fat spike to make things interesting for scalpers. Its like the FX is getting constipated. It wont go in "or" out. Up "or" down. So then I started watching silver and crude and they were trading the same way. Equities all aug., and sept......how many wide range bars did we see on the daily. I cant remember one! I mean equity markets frequently now have 2 indices up and one down. Like .15%. zzzzzzz


So I ask, if so few are buying, and so few selling...whats coming next? Most technicians would say a crash or a huge correction in both equities and metals. But look at this ever persistent pattern. Like you said...we are melting upward and it makes me sick. Know why? All the relatives I have who think I am nuts to try to be a trader to begin with, have been laughing their a$$ off with their buy and hold strategy which we all know has probably outdone most any other in the last 2 or 3 years. My own sister who never bought a stock in her life is making more money buying and holding and would never even think to go partners for $5!!!... with her brother...."the risk taker." Unless we are pros already making a living, this market, the whole market from Forex to stocks to metals is making us look like fools. Funny, the minute I saw the first headline after the 2008 mortgage debacle: BUY AND HOLD IS DEAD, I should have known, it aint! -( I make a prediction that more traders go back to work this past qtr. than in the last 2 yrs combined. There isnt enough volatility for even 5% of us to feed on. The average true daily range of the EUR/USD last year was over 100 pips daily I believe. Now it moves 50 pips and we get excited. This is not the career I signed on for,boys. Tell you the truth, I bet money in this climate not 1/3 of those wonderboys in the book Market wizards would even have turned a profit. Only the long term position players. All others--nap time!

One more thing....remember 5 yrs ago when you'd see them show the floor traders in the pit, we'd always stop and watch just for a moment, even if there was no sound on the TV because the excitement,the energy sucked us in. Now I feel like they can just bring in actors onto a set and no one would even look close enough to tell the difference......or care much anymore. It is like we entered a bubble,not a financial bubble. But a bubble of lethargy or apathy. Anyone else feel it?

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  #32 (permalink)
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  #33 (permalink)
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tigertrader View Post
This truly appears to be a structural change in the markets and not a cyclical one, I'm afraid. Current market reality is that an overwhelming share of trading activity is based on short-run price forecasts rather than fundamental research. Under these conditions, how can one expect prices to track changes in the fundamental values of the income streams to which the assets give title?

Markets have always been based on a shifting balance between information augmenting and information extracting strategies, but the HFT arms race coupled with changes in institutions and regulation seem to have shifted the balance markedly towards the latter. Unless the structure of incentives is altered to favor longer holding periods, I suspect that we shall continue to see low volume and low volatility as any market inefficiencies that exist are quickly gamed by HFTs.

Changes in the perceived volatility and an acknowledged Fed put have given rise to greater risk taking and greater asset allocations by institutional and retail investors, but it has also served to remove not only all the risk from the markets, but all the doubt as to where the market is headed. Who cares what happens in Europe, if the ECB and the Fed are ready willing and able to provide liquidity. So , the market continues to melt up ever so slowly.

A few incontrovertible facts about the market :a) the market is self-correcting and any exploitable inefficiencies in the market are quickly corrected b) the market is always changing, and it is always for the worse, and it is always to the detriment of the retail trader c) the market is never going back to how it used to be.

The market you see and trade now is not the same market I traded 20 Years ago. The changes did not occur overnight, and there is not one reason, but a multitude of reasons, that precipitated the change. Government regulations, the electronic trading revolution, the economy, Fed monetary policy, and negative headline events, all contributed to the degradation of the market we enjoyed in the past.

While the advent of decimalization in 2001 is probably the biggest culprit in the gradual demise of the market, the nascent decline began in 1997-1998 with the change in Order Handling Rules and Reg ATS, which opened the door to pervasive market fragmentation (followed by Sarbanes-Oxley in 2002 and Reg NMS in 2005 and you have a history of legislation that has worked to destroy what were once, very liquid and trade-able markets.)

Liquidity was allowed to be spread across multiple markets, exchanges, and trading venues. Unfortunately however, the true purpose and usage of tools like dark pools as mechanisms to effect large block trades for large mutual and pension funds, has been perverted to a means to feed internalization and proprietary HFTs. Today, the NYSE executes approximately 26 percent of the volume in its listed stocks. The remaining volume is split among more than 10 public exchanges, more than 30 dark pools, and more than 200 internalizing broker-dealers. 30 percent of volume in U.S.-listed equities is executed in venues that do not display their liquidity or make it generally available to the public.

Decimalization made High Frequency (automated) Trading possible — a business tailor-made for trading large capital companies at the expense of small caps and IPOs. Add to this the rise of Index and Exchange Traded Funds and all the action was soon in large cap stocks. Market makers were no longer supporting small caps by being a willing buyer to every seller. Big IPOs like General Motors flourished while little Silicon Valley IPOs dramatically declined.

This undermined the inherent reason why exchanges were created; capital formation. The business model of the stock exchanges may have been permanently altered as a result of the exchanges going public. Now driven by their own shareholders’ need for returns, capital formation appears to have taken a back seat, as the exchanges roll out new technology to attract even more high frequency traders, and has enabled them to embark upon new business models centered around the creation and distribution of data feeds.

There are 40 percent fewer U.S. public companies now than in 1997 (55 percent fewer by share of GDP) and twice as many companies are being de-listed each year as newly listed. Computers are trading big cap shares like crazy, extracting profits from nothing, while smaller companies have sharply reduced access to growth capital, forcing them at best into hasty mergers, debt markets and private equity. This has virtually destroyed the small cap market and has taken the venture capital market right down the tube with it, as the economics are extracted away from activities that nurture young companies and start-ups, and their subsequent exit strategies and liquidity events (IPOs).

Investors have yet to return in full force since the “flash crash”, and since then, their confidence in the market has been further undermined by other systemic risks like, PFG, BATS, Knight, and the J.P. Morgan events, and unsuccessful IPOs like Facebook and Zynga. This has left the market vulnerable to the machinations of the algo-bots, indexers and other short time-frame traders, who have no regard for market fundamentals and accurate price discovery.

And what does the market have to look forward to? More government regulations in the form of Dodd-Frank, the Volker Rule, the Basel 3 Accord, CRD4 and Solvency 2. Not to mention the volatility dampening effects of QE Ad Infinitum, a never ending near zero interest rate policy, and the new for-profit exchanges exchanges, that continue to create mechanisms that places high-speed trading interests above the interests of all other market participants, particularly retail traders and investors.


Last edited by tigertrader; October 4th, 2012 at 04:39 PM.
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  #34 (permalink)
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Excellent response!

Excellent response,Tiger! I wonder if the stat you gave us, that 45% less companies go public every year is in itself an indicator for some kind of crash? And where is that 30% dark pool money going to wind up. It still has to follow market prices after the smoke clears. Sure a shaved 1/8th here or there, oh..I forgot,we dont use decimals anymore, but anyway, sure a penny here and a penny there will disappear with slight of hand, but even a 30% drop in public volume doesnt tell me why just today when the Forex market was running with the US equities open, I had to check my charts! The 15 min bars were the size they are at 10pm when its all dead. I wonder what these dark pools have to do with those MBS pieces pf paper they let the loan companies print like water 3-5 years ago, and if the twain shall meet. Anyway, great post.

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  #35 (permalink)
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Works for me....

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  #36 (permalink)
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Where is this price action going to lead us in 2-3 years?

Man from Texas,

This chart is about the most beautiful I have ever seen. Maybe you should send it to Mike to put in the archives. ...if you like beauty, puzzles or have a keen detectives eye, this is the most beautiful sight in the world.Its a license to print money if you can get it! I say this because I told several women that if they ever got involved with me, I would hope they would help me do back testing and be a part of my market trading, at least part time. Not one was impressed in any way. I shoulda used your charts! LOL May I ask if you trade directly from it, and is this all you look at and may I ask, what website leases this so I can take a look at it and learn what tactics they use to formulate it?

Also in regards to the discussion Tiger, who definitely IS the most interesting man in the world lol... and I were having, something hit me when I started rereading my own threads and saw how right I was even 30 days later about absence of tradeable counter moves in any given session.. I mean sure, the euro managed to put in a nice move upward last 2 weeks, but as a daytrader it didnt look as good as on a daily chart which is one reason Im trying my best to push into larger time frames. My point here though is that I was commenting that there were very few counter trend moves to take this last month. Now, many of you do not take a counter trade , but remember, we ALL need them for a healthy jumping back in at a better price point, and also to put the odds much, much more in our favor that the existing trend would continue. I dont think anyone here would disagree with me in that if we could look at 20- 30 days worth of data(you pick the time frame) we would not want to see a 35 degree almost straight line going upward. Unless taken from a base or a fib point, where could you enter. You really cant. So you wait for the pullback with your cousins in Japan and London for the pullback. Lets use a 30 min bar for this example, and lo and behold, you sit there from 2-5am watching your screen, and the only pullback you see is 2 bars and they are the size of 5 or 10 min bars!!!And then the uptrend continues moving far, far away from the 8sma(thats my indicator to show an easing or temporary stalling is going to happen any time, if price bars/candles are more than 1/8 inch or so from the 8sma. I actually like to get in long when the 8sma is UNDER price OR THE LAST BAR IS TOUCHING OR GOING THRU IT!(has to be a 60 min bar! You guys can choose other time frames) For me, this one qualifier has saved me huge losses and trades that would have produced only tiny gains and not worth taking. So now lets look at a 10 min chart if thats what we normally use. We see a 3-5 bar pullback with normal size bars making a higher low, we smile, rub our hands....and then check the 60 min chart and see price had run away from the 8ma many bars ago and will never make it back in time before 3 more bars(5am)into the 8sma(or whatever MA you choose).

So not only do most trend traders get no entry, but the counter trend boys get even less or nothing as every trade they take stalls out, just like ours, and in september whats funny is that if you had 4 sets of traders 2 going with trend, 2 going counter, but 2 going long and 2 going short, many evenings Ive seen price from at 5:30am wind up back within 5 or 6 pips of where we ALL started 5 hours before!!! This is not goijng to induce anyone to trade, nor will anyones alerts be sent out or their alarm bells they set to go off. We are like hunters waiting for that big catch that never comes, and we dont understand why.

I saw an old black and white movie with Clark Gable in which he had an "order" for 2 or 3 elephants to be sold to a circus. After waiting many more days that he ever did before, he noticed Lions and other predfators were making it dangerous for the hunters to hang around as well as possibly being the reason why no elephants came by! So when he said he was thinking of quitting and his key left hand man of 20 years said to him...."Boss, I never saw you give up before." And Clark said, And I never had to wait so long for so little before. THERE IS ALWAYS NEXT SEASON." I loved that!

Anyway, Im just saying that when your session is finished and you cant even FIND the counter trend winning plays on your chart.....????????

Yesterday, perfect example, I put my orders I think it was the eur/usd and the aud/nzd at around 10pm,put in my targets and stops and forgot about it. I had about a 40 pip leeway on both trades. With this particular method I must get 2-1 r/r or I cant take the trade. Would you believe that I turn my computer back on at exactly 9:28am, right at equities open and in 15 -40 min, both pairs were right where they started from not only from 9:30am but from 1am which is usually my time to watch!

I do think what is DEFINITELY HAPPENING is that the "sweet spots" to trade spot Forex is no longer 2-5am and 9am-11am. I see random moves(both trend and non trend) just suddenly come in one 30 minute or 60 min bar at some weird hour of night like 10 or 11pm, and then its over....sideways movement ALL night long. At least on the pairs Im following! Anyone agree?

Id also like to ask a question that while not part of this thread, I see we have many intelligent and veteran Forex people here so I'd like to ask this here: What about those Nueral Network(artificial intelligence) software packages they used to sell on the internet and still do. I bought one once and the backtesting results were incredible, but forward testing was awful. So that was 8 years ago. I figure by now they might have come up with something more advanced. Yet there isnt any talk of it. Do you guys think that it just faded away like the latest fad like Gann Fans? Ot that people really came up with good software and aint talking about it, selling it and in fact these HFT's that most everyone is so nervous about, they might have their fingers in a lot of pies. Could they be involved with them,using them for those micro time frames we all speak of.................and if they can, why cant they also set them for much larger time frames as well. It seems that after all these years of following different charting package, there is a lack of excitement on anything new, just recycling the same nonsense. Channels, moving avaerages,MACD, "yawn."......................Has both price action and interest in Forex started a downhill spiral? Want an indicator..........go look up FXCM which trades on the NY stock exchange I think. Why in this raging bull market is this company down for the year????? It could only mean less trading and much,much less new accounts being opened? Where are we headed in the next 2 or 3 years? Want my 2 cents:

Technically speaking only: Extreme follows exreme. If we stay with this kind of price action for too much longer, a black swan even will follow shortly, destroying accounts in 2 or 3 days and making a few of us very very rich. Even a constipated old man, has to "let go" sometime! I pray I have funds in my account when that moment happens.

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  #37 (permalink)
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Daytrader50 View Post
Man from Texas,

This chart is about the most beautiful I have ever seen. Maybe you should send it to Mike to put in the archives. ...if you like beauty, puzzles or have a keen detectives eye, this is the most beautiful sight in the world.Its a license to print money if you can get it! I say this because I told several women that if they ever got involved with me, I would hope they would help me do back testing and be a part of my market trading, at least part time. Not one was impressed in any way. I shoulda used your charts! LOL May I ask if you trade directly from it, and is this all you look at and may I ask, what website leases this so I can take a look at it and learn what tactics they use to formulate it?

@Daytrader50

I wrote all those indicators in NinjaTrader. The details are here...

https://futures.io/ninjatrader-programming/5686-make-charts-pretty-20.html

It also changes color depending on the trend...

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Yes I trade directly from this chart, it is all that I look at and I only trade in the direction of the trend.

I trade one instrument on one computer with one monitor on one chart in one time frame.

I'm too old and slow to stare at more than one chart at a time.

I'm just a simple man trading a simple plan.

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