nanningbob » Wed Mar 12, 2014 7:07 pm wrote:Bold Trader I love your stuff feel free to keep telling us what goes on behind the scenes. Thank you it is highly appreciated to have someone with your back ground and experience posting here. Welcome.

nanningbob » Thu Mar 13, 2014 12:14 am wrote:eur/nzd we are right back where we were yesterday..

nanningbob » Wed Mar 12, 2014 5:04 pm wrote: I have explained this before and I dont mind at all explaining it again. I do not enter my full positions when I trade. I start with a third and add to my position if price goes in my direction. If price goes away from me I will do one of two things. Was my direction wrong or do I need to add another position. If I am wrong I lose 1/3 of my position instead of a full position. (for example if I trade .30 lots my first position will be .10, 2nd .10, and 3rd .10) I ascertain that eur/nzd stayed in its range so I entered my 2nd position at the top of the TMA band at the 1.6400 line. So now when price moved back into my direction I ended up with the first trade being BE but the 2nd trade in a nice profit. Close out both positions and instead of taking a loss (like the one in one out philosophy teaches) I ended up in profit instead of taking a loss. That is how I always play a ranging market.

Why do I do that? Because it is said the Forex market will range 70+% of the time so I have a 70% chance of such a strategy succeeding. If I add my CSS reads to the mix which at the time is EURO strong and NZD slightly stronger I actually increase those odds. So while everyone else is cussing and swearing at the market, I ended up with a profit once again. I am back at step one of my analysis with a trade sitting at 163.00 and the next just below the previous swing low at 162.500. If price goes through those two then I profit one and will let the last trade run because that is my CSS read. If CSS shows break out, NZD stays above 20 and eur goes below 0 and then -20 I will add to my positions and finally be at my full lots that I allow myself to play with.

If I am wrong and the 2nd trade continues against me like the first trade then I will ascertain whether to play a 3rd to retrace or bail (the most likely because now the trend is well beyond the 240 line and going against me. However, my loss is lesser than my profits because I am only playing part of a full position instead of the whole thing. I call this multi-level trading and it is practiced by many a big player. If you think people who play millions (billions of dollars) are entering their full sizes and 30 pip SL your smoking something. They know the market is volatile and unpredictable in the short run so they partially enter positions until they are into the trend and then add. I have copied such a strategy. That is why you hear me preach so often trade small and live to trade another day. I dont go for home runs, I am a singles hitter and then when those couple of times a year (like last year during the JPY run) I pile it on and get the big winners. It only happens once,twice possible 3 times a year so that is when I make my good money. The rest of the year I work on getting my 5-10% a month and try to collect big when the markets breakout and run.

I keep my losses small not with tight SL that get banged every day but I keep my lot sizes small so I can play the market and ride out these spikes, reversals, news, and games that brokers play. I let them play their stupid game and when they are done, I place my 2nd position and go back into profit. I am only interested in major trend changes not the day by day jumping around. As long as I am in a range or rally/dip in the trend I stay in there. I close out positions when I think I am on the wrong side of a major trend change.

ONE MORE NOTE: If some of you are dumb enough to think that is martingaling dont put your crap in my thread. Go start another one and rail there, I am done arguing with you about this. It was the major reason I left FF.

trucomallica » Wed Mar 12, 2014 5:21 pm wrote:Bold, what is your interpretation when price breaks out and then goes back into the range and ends up breaking out through the other side of the range?

What happens when, after the breakout, price just keeps going and doesn't return to the break level? the MMs just take losses?

nanningbob » Wed Mar 12, 2014 11:58 pm wrote:This is fun walking through a trade. I have now protected my eur/nzd trade so it will not become a loser. I have it set at +25 so since yesterday I have picked up over 100 pips. If it retraces I have my 100 if it keeps going into a trend I will add my second position and let it fly. I am willing to do this because the nzd is above 20 and eur has crossed the 0 line on the 4H CSS. So far 100 guaranteed in two days and possibly more to come. If it bounces back into range a nice two days of trades. If it breaks out I will get hundreds of pips on these moves. CSS has struck again.

Stupid GBP if I am not in it dives, if I am in it sits. So you see not everything goes as planned.

johnf » Thu Mar 13, 2014 12:41 pm wrote:Great read Bob.
May I ask what dictates your second and third positions. Often at the Sweet Spots there are reversals, so are positions pending there purely from the analogy of the 4H CSS ?

boldtrader » Thu Mar 13, 2014 12:51 pm wrote:

trucomallica » Wed Mar 12, 2014 5:21 pm wrote:Bold, what is your interpretation when price breaks out and then goes back into the range and ends up breaking out through the other side of the range?

What happens when, after the breakout, price just keeps going and doesn't return to the break level? the MMs just take losses?

Reversals occur very frequently. I remember the desk would have multiple runs working at the same time and would be based on different time periods. They would have a monthly / weekly run working, while trading a 10 min and 1 hour. MM's have deep pockets and can withstand long periods, which most traders can not do. The markets are fractalized and as such, eventually all break levels are retested. Some take longer than others, but they eventually get retested. As I have commented in previous posts, I have seen 5 year levels get hit, to the pip, and then reverse. The extreme price action occurred based on the BOJ making comments regarding intervention.

A typical practice of the desk would be to carry multiple deals simultaneously. If the desk was nearing its credit limits, a practice was to contact a NDF (Non Deliverable Forward) voice broker at one of the larger banks who the desk had a credit relationship with to mediate the purchase of offsetting transactions with either that bank or other major banks. The Voice brokers were used to help the dealer's ability to offset the risk associated with the transaction(s). There was a different broker for each currency, ie: EURO, CAD, YEN, GBP, AUD/NZD. With the aid of these brokers and business-line managers, the NDF markets generally would have sufficient liquidity to enable fast offsetting of positions. Very often, the desk would warehouse NDF's while managing a large book allowing for a larger risk tolerance while being able to offset their positions at a later time of their choosing.

Here's how it works: An NDF is similar to a regular FX Contract, except that when it matures, is does not require physical deliver just like an FX Contract. A forward FX Contract is an obligation to purchase or sell a specific currency on a future date for a fixed price set on the trade date. The contract is net-settled in US Dollars based on the needed notional amount. Example, if the desk need to bundle a traunch of 50Mio, the deal would be negotiated for that notional amount at a settlement exchange rate that was based on the daily "Fix Rate". The desk/dealer activities created compensation based on the bid/ask spread of the NDF. The desk was exposed to basis risk, ie.. the potential that the offsetting contracts may settle at different rates.

In regards to the breakpoints, the market is fractalized and gives the ability to trade based on various time periods and the breakpoints of those multiple periods. In the charts of the attached pdf, the example of GBPJPY is showing Monthly, Weekly, Daily, H4 and then Edsel overlayed on H4 breakpoints.

The charts in the attached pdf are self explanatory with regards to the price action. The price action clearly shows how the various levels are hit over time and also shows levels which remain open for future price level action which I refer to as MST targets. Notice that there are two essential levels created based on Trade Lines drawn from short term and long term trending price action. An open MST is not considered an active target until price crosses the respective TL of the near term period. By monitoring the breakpoint levels (MST's) of the various periods, the dealer could maintain various deals with the expectation of accumulating positions based on the prevailing trend of the periods of interest. As long as the offsets did not approach the credit limits, the non-leveraged positions could be accumulated with the expectation of price moving back to the breakpoints and effectively taking out the stops of the aggregated book. If the accumulation did approach the credit limits, the desk simply bundled the positions effectively transferring the risk to a credit partner and generated income based on the spreads of the NDF or similar instruments.

In the last chart, the Edsel system is overlayed onto the breakpoints to show how trading either in a range or with the prevailing H4 trend, the breakpoints can be used as a targeting system for range trading and trend trading.

I hope this gives a better understanding of how MM's can and do look at the market.

Cheers.