Hello
Does anybody in here trade like explained in this article? I'm very curious about this and think it sounds very interesting!
http://www.21pips.com/forex-bouncing-zones-1.php
I would like to ask you some questions regarding the strategy.
Thank you!
Regards
Soren
This is not a bad idea at all, it is quite smart to track areas of possible unfilled orders, the price reaction will be rather minimal as it is the left over order pool of missed orders but I guess it is an edge if you are scalping. The beauty about the market is, there is no wrong or right way, you just need a very good edge, quant strategies or human strategies, all look for edges. At some point you will be wrong but that's normal.
I can comment on zones a little, I saw a volume analysis thread in here, not that is some kind of magic gun but if you locate a candle with high tick it indicates aggressive quoting, whether this was banks or not, doesn't matter. In most cases it is the HFT machines getting in on the action but since quoting was strong there, a combination of unfilled orders and new money tend to be waiting at that point so it forms a natural barrier. It is the same idea but the tick volume becomes an additional filter to create the zone around the candle. In reality, there needs to be additional study in this area, not even the banks know how the secondary market works, since they outsourced it to the likes of Virtu.
So don't feel stupid for posting this. Banks make the market largely rather than speculate, even though they do...
In any case let's not forget the interbank Options. These also tend to be a big driver of price especially when the bank needs to hit the strike before expiry, it also causes a lot of hedging in the spot market as traders are simply looking to neutralize delta, so it is very difficult to come up with hard and fast proof of what works or doesn't as the participants have different objectives than to just make a few hundred pips or win a trade, the reason to be active in the spot market could vary wildly from institution to institution.
In the
Traders Club we try and work a lot on market principle and investment objective, it is how we stay on top of the game. Everyone has an idea but real ideas come from seeing the opportunity before it happens, e.g. the Bond Rout last August, most people didn't even know but we did we also know it would be severe because of the selling of Put Options by brokers and portfolio managers for risk reasons, so a trade like that was hardly technical, it was just market knowledge and understanding based on professional trading principles, that all smart traders will use. Another example is the trade in Brazilian Real, most people don't realize that there are ETF's and some assets correlate. The price of Coffee traded almost 144/lb before resting, the writing was on the wall as Coffee has had poor harvest last year, price started to rise slowly, this mean't the Brazilian Real was going to pick up pace against the Dollar. Again an easy enough trade to make if you are market aware. So acquiring this market knowledge is crucial before you get started even risking real money.
I like ideas like in this post because it shows some traders think about how the market functions and try to find edges around it, rather than some popularised idea like Harmonic patterns or arbitrary price action comments. So nice post, hope it has more contributors.
