Money behind price formations

December 22nd, 2014, 04:24 PM

Hey guys!
Have you ever thought about the process of money allocation? The question might seem a little bit noobie, but it isn't.

The point is that those people who had experience at trading desk in an investment bank often tell that their eyes had been opened by that experience because afterwards when they saw a chart they could imagine the process behind price formations.

We all know the main principles of accumulation and distribution of smart money, but maybe there is some information on the web on the technical schemes of real money accumulation and distribution. I assume that accumulation of a large position should take time and should be done in a range and mostly this process is done by algorithms. But how do staff learn in an investment bank how and when to accumulate? There is no information on that in any financial course or CFA or other stuff. But financial sphere is huge and every year many ex-traders come in and out of banks. Is it really the case that there is still no leaks on that technical process?

I know that it is real for a retail trader to distinguish flat(range) from a trend, but it would be awsome to understand the principles of those trading algos that keep price in a range and real reasons for squeezes or widenings of a range. Cause begind every candle and every price formation is money and behind money are algos=people.

Is there any literature on the subject concerning futures market?

Thanks indeed!

December 22nd, 2014, 06:05 PM

I should break it down, I think. Just to make it clear. The most obvious thing in my opinion on futures market is that as strong hands has accumulated position (for hedging for instance) they will defend it every time the price comes back (if that position is still opened and relevant for strong hands). The price movement that we see on a chart at that moment is rejection of the price level. But more interesting is to find out the nature of any level like this with strong money inside!) Such a level consists of smart money or open interest and it was somehow accumulated. But how can smart participants keep price in a range by provoking everyone buy and sell but nevertheless keeping the price in the channel and accumulating a position? What are those technical principles? Is it possible that those technical nature of such professional actions on the market is still a great secret? Of course it is the bread of investment banks and it IS a real secret but every year the algos for such accumulations change although the main principles remain the same I suppose.

Money behind price formations

Discussion in Psychology and Money Management

Money behind price formations