Ignorance is bliss

[wasp]

As I said to Jon earlier, very little will change in my trading other than I will have a greater understanding of the why and where etc, and that pleases me.

Like an indicator trader changing to price action, I feel more in control when I have real reasons, not just an anomaly or reoccurring circumstance.

Its just me, I like to know 'why's...' As I told you before too, my edge, imo, is knowledge, and that works quite nicely for me!

What was it Gekko said... ''The most valuable commodity I know of is information'' not quite the same context but still.

 

[wasp]

Actually given the fact that you appear to be doing fine, I don't know why you are tinkering like this. You were right the first time mate - ignorance truly is bliss.

However (and this is my big BUT so to speak). I think the route to go down is either use this stuff properly or not at all. Knowing a little bit about the workings of the wholesale market I think can be at times unhelpful. And that's your risk I feel here.

I have a feeling you may be right here though... Not sure I fancy doing a complete study of options!!!

 

[MrGecko]

Sorry dude - waaaaayy off (to use your phrase)

Risk reversals are the simultaneous trading of a call and a put with different strikes, in opposing directions. Usually the market talks in terms of what delta options are being quoted (rather than what precise strike) as the underlying can move up and down (remember the otc interbank options market is basically all about trading volatility).

So the most common R/R benchmark is the 25 delta one. And what you are looking for is whether the calls or the puts are trading at a premium (in vol terms). And whether this premium is changing.

http://www.gfmi.com/Instructors_corner_Risk_Reversals.pdf

Thanks GJ, I think I get it. Not come across the term before.

For guys like you and me Wasp, then sure I can see the point of not concentrating on it too much, as the risk that we'll get it right off and "do our ar$e's" thinking that we understand a bit about what is going on (as I think I have demonstrated very well here).

On the other hand, one can just as easily take an interest but "leave it at the front door" - I mean, someone trading an FX volatility model might not give a flying f*ck about Higher Highs, Higher Lows, Support becoming Resistance and Price action - yet still be aware of what they are; its like electricity and water - great on their own if you have the experience, just don't mix the two!

(this is the approach I try to take - I do like to learn about some of the interesting bits, but thats just because I am a dork and, sitting at a computer screen for 12+ hours a day, I cant help it. I read the economist, I have well thumbed copies of Hull et al all over the place - I just don't use them to trade).

 

[wasp]

Hey - if you can manage it then cool. And you know I'm happy to tell you guys what I can when I can (some of which is useful).

... and appreciated. I'm just going to skirt over the options part!


Another thought and I'm probably going to make myself look really dumb here but anyhow... (like I give a ****!)

IB's run books and thus see big clients books and stops. Now, assuming anyone with more than one brain cell and a decent capital amount is going to trade via ECN/NDD (currenex et al), all this is transparent and unseen, no?

So stop running is therefore commonly related to S/R (assuming enough people are seeing the same levels), rather than banks actually seeing traders stop loss placements? This would also include the hedged books of SB's too I guess as all their clients are doing the same S/R levels (the ones without coloured squiggly lines that is)?

Additionally, in the same vein, I assume Arabianights, your comment regards 'front running' is based on the books one is trading at the IB?

So, in keeping with the thread topic, are IB's a step ahead as they can see orders? OR are they like me or MrG, looking for a good entry/exit and as ignorant as the next of us?

I don't really understand how IB's or CB's work as one might have guessed by now!

 

[MrGecko]

No - I would say "riskies" or "risk reversals" for that.

I mean general risk appetite / risk aversion (which will often show up in the flow of certain currencies / currency pairs). It used to be as simple as just looking at the carry trades and seeing how they were moving but the rates are these days thats not the whole story. Nevertheless risk appetite is a force in and of itself and it's one of the binding forces in the market. Sometimes it's a strong force, sometimes a weak force (god, it sounds like my A-level physics lessons now).

(copied from your Yee-Hah! thread)

This is what I was trying to get at in my first, "waaaaaaay off" post; keeping an eye on things like USDJPY, Gold (and stocks and bonds) to try and guage how the risk appetite is changing across the market?

Apologies for the endless barrage of questions, but there is little way of knowing some of this stuff unless we ask someone in-the-know straight out.

 

[wasp]

I on the other hand, don't apologise but still want to know!

 

[wasp]

brilliant reply, much appreciated GJ, can't rep you atm.

 

[MrGecko]

Happy to make a +ve contribution - all I did was copy and paste into google!

One thing that I can suggest is to get a good sporting diary and school holidays, and in the summer to follow the weekend weather forecast. Not sure if it has any relevance to FX markets, but you can see volumes in other markets fall away if it is Wimbledon / Varsity match / Test Match @ Lords or Oval / Ascot / Superbowl etc. And during the summer, if it it forecast to be a good weekend weather-wise, you can see POETS in the volumes.

Oh, and things like half term (this week in some places).

 

[wasp]

Good points... Summer alone is enough to see a difference and it could answer my other 'vol' thread regards this week.

 

[Silversea]

The philosopher Bertrand Russell once remarked that he knew of only six people in the world who had followed his daunting book “Principia Mathematica” to the end. There sometimes seem to be almost as few people in Britain who truly understand the credit crunch and its recessionary consequences. The public is scared and uncertain; the politicians are panicky and confused. They are leading each other around and down a worrying spiral of ignorance.

The tide has gone out and, with a very few exceptions, Britain is swimming naked: almost nobody appears to know what he is talking about. The havoc of the financial crisis has stretched and outstripped even most economists. The British political class is befogged. Ordinary people are overwhelmed. And just as the interaction between banking and economic woes is proving poisonous, so the interplay of public and political ignorance is damaging the country’s prospects.

Lack of understanding of the credit crunch is magnifying its damage

 

[Splitlink]

1.) im not clever

2.) no such thing as guaranteed sys in market, any market.. its all coming down to money management, and high probability entry. once you got the "edge" keep it up, live by the rules & repeat the same thing, your account should be steadily growing

1) That makes two of us.

2) No comment on this, enough's been said, already.

Split

 

[skelly22]

Cheers Wasp, MrGecko and GammaJammer. Always a good education (or atleast a few confusing things that i have to go look up) when you lot are around.
Shane

 

[sighthound]

The philosopher Bertrand Russell once remarked that he knew of only six people in the world who had followed his daunting book “Principia Mathematica” to the end. There sometimes seem to be almost as few people in Britain who truly understand the credit crunch and its recessionary consequences. The public is scared and uncertain; the politicians are panicky and confused. They are leading each other around and down a worrying spiral of ignorance.

The tide has gone out and, with a very few exceptions, Britain is swimming naked: almost nobody appears to know what he is talking about. The havoc of the financial crisis has stretched and outstripped even most economists. The British political class is befogged. Ordinary people are overwhelmed. And just as the interaction between banking and economic woes is proving poisonous, so the interplay of public and political ignorance is damaging the country’s prospects.

Lack of understanding of the credit crunch is magnifying its damage

Silversea,
I fail to see how you can swim when the tide is out,here it's like the tide is rising more like slow drowning.Our politicians don't lead anywhere they just spin.They are not befogged their vision is hampered by their own testicles.People are treated like mushrooms kept in the dark and fed ****e.Public interplay diminished along with referendums so all in all it ain't nothing new!

Feel better now