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The fox and the market
https://www.stevehopwoodforex.com/phpBB3/viewtopic.php?t=2010		 Page 7 of 11
Author:  Forexfux [ Sun May 05, 2013 11:59 am ]
Post subject:  Re: The fox and the market
madpipa wrote:I Stefan,

I have been following this thread since it started & just had to say you are making lots of things much clearer for me. Most of these concepts I have come across before - I even understand some of them. :o But for some reason your in-depth explanation of a number of these ideas has really turned the light on for me. I don't know if I can see the fox quite yet, but I know I saw some paw prints the other day!!

Thanks for your time & effort to create this thread. I'm sure there are many more lurking here like me who appreciate your efforts. And I note how no-one has asked for you to clarify anything you have said. That shows that your grasp of English is a good as your understanding of foxes. ;)

I look forward to future instalments.

Thanks again & cheers,
Mick
Thank you for your kind words :mrgreen:
Author:  Forexfux [ Mon May 06, 2013 10:15 am ]
Post subject:  Re: The fox and the market
Hello, I hope you had a nice week end!

Next topic: Attacks/consumption

When institutions want to trigger stops they sometimes need to attack a zone more than once. That's because it's common that offers/bids are put infront of stop orders. They have to take out the orders before they can go for the stops.

you can see that behaviour on the attached ss:
There were a batch of offers at 78.80/94 while stops were seen at 79.00/25. After two attemps the level of limit orders was taken out but the stops still weren’t triggered. This happens sometimes. Generally it’s an open invitation to attack it again. A little bit later it blew through the stops and touched the 79.25 level.

So that means that wicks aren't only a sign of stop hunting/rejection they can mean consumption too. Later I will show a third significance of wicks.
Author:  mobthehop [ Mon May 06, 2013 11:49 am ]
Post subject:  Re: The fox and the market
Moin forexfux(-fuchs),

thanks for sharing this stuff, makes very interesting reading - quick question, are the dots in your last post added by hand or via 3LZZ, in the later case, what are your the settings for P1 to P3?

Cheers Mop
Author:  jasonckb [ Mon May 06, 2013 12:29 pm ]
Post subject:  Re: The fox and the market
A very good thread in FF talking about market making and market structure by a former senior dealer in a tier 1 bank. worth to have a look.
http://www.forexfactory.com/showthread.php?t=57639
Author:  Forexfux [ Mon May 06, 2013 12:58 pm ]
Post subject:  Re: The fox and the market
mobthehop wrote:Moin forexfux(-fuchs),

thanks for sharing this stuff, makes very interesting reading - quick question, are the dots in your last post added by hand or via 3LZZ, in the later case, what are your the settings for P1 to P3?

Cheers Mop
Hello Mop and thank you for the question.

All my indicators are only for visual purpose. I'm more or less a lazy chartist. I monitor 11 pairs and a few correlation instruments atm and I would have do my analysis for 7 timframes (5m to weekly). Drawing and deleting trendlines and boxes on 77+ charts every day is too much for me. I'm using two s&d indicators, one s&r indicator, one indicator for pivots and one indicator in order to see the highs and lows faster and one session indicator. Additionaly I'm using an overlay indicator to see where the money flows (will be part of my next topic).

The indicator you are asking for is the chaos semafor. It shows 3 levels highs and lows. It helps me to find significant past turningpoints. I can post the indicator when you want.

My trades are not based on my indicators. I'm using them to find locations of interest.

I hope this helps.

Grüße
Author:  Forexfux [ Mon May 06, 2013 1:03 pm ]
Post subject:  Re: The fox and the market
jasonckb wrote:A very good thread in FF talking about market making and market structure by a former senior dealer in a tier 1 bank. worth to have a look.
http://www.forexfactory.com/showthread.php?t=57639
Hi Jason,
I know the thread but never had time to read it. It's on my to do list.
Author:  Forexfux [ Mon May 06, 2013 1:57 pm ]
Post subject:  Re: The fox and the market
Correlations and money flows

Correlation is a huge topic. Many great traders are including correlations into their decision process. One of them wrote once:

"Cable does not live in a vacuum, it can't, it reacts based on external influences and the more you are aware of the externals, the easier it is to trade."

That's true for every pair. Read the following posts regarding correlation to get a brief overview. They were posted by the traders Lovejoy, Nashir Khan and Malcomb14 at FF. There is alot stuff out there about correlations.

1)
"We use Equities like Dow and S&P for Dollar and YEN based pairs, Gold for AU and OIL for Ucad.

When Dow, Gold or Oil are near any SR or BRN's we lookout for setups respectively on FX pairs.

If you want more insight and info on why these things work read some books on intermarket relationships (Especially one from Ashraf Laidi)."

2)
"Nasir summed things up very well in terms of what J16 gives you (IMO) and how basic correlations work.

The whole area of intermarket analysis is a very deep subject and I personally only use some very basic correlations...mainly because that's all I need to know at the moment. For me equity markets are the best single guage of current risk appetite and I use S&P e-mini futures (EPxx on Fxpro) and Dow mini-futures (Ymxx on Fxpro).

Like Nasir said a basic correlation is that the USD is pretty well correlated with YM and S&P i.e. when YM and S&P rise this means risk appetite is increasing and people are more willing to buy 'riskier' assets i.e. in terms of FX this means moving money out of the so called safe haven currencies like USD, JPY and CHF into higher yielding currencies like AUD, CAD, NZD, EUR and and GBP. The opposite is of course true when YM and EP are falling...money will flow into the safe haven currencies (USD, JPY and CHF) as risk aversion is rising / risk appetite falling.

This is where the correlation between EP / YM (risk appettite) and (in particular) the USD and JPY come from.

I also watch US Light Crude Oil (CLG1 on Fxpro at the moment) as again this is a broad measure of risk appetite...although it does have it's own supply/demand (plus geopolitical) drivers and this IMO is not as good a measure of risk appetite as EP and YM.

I don't really follow gold too much from a correlation perspective...broadly gold rises when risk appetite is decreasing as in the most severe cases of risk aversion money flows out of all currencies into gold as the ultimate safe haven play....if you think about it gold offers no returns apart from an increase in value...no interest yield, nothing so money will flow there when things are really bad (i.e. the financial crisis!) and investors are so nervous they dont want to take any risk at all...but gold is also a hedge against inflation risks (not really relevant at the moment) and moves for other reasons which are not off interest to me.

you can also follow other correlations like CAD / Oil - Canada is a big exporter of oil, who to...the US! Personally I dont really follow these types of correlations as I feel they hold more weight for longer term trading...but they can be good additional confluence on a setup. Personally I look at US+Canada+Oil together...signs of a weakening US economy = less demand for oil = a significant affect on Canada's economy and GDP etc.

Other things I look at are the USDX and also FX amongst each other...I lookat mainly the main USD pairs, JPY pairs and CHF pairs all together and over time with lots and lots and lots of chart watching you pick up things...not always things you can explain with a hard and fast rule but little things that just stick out as being odd that can tip you off on what might happen next on another pair or across similar pairs (i.e. all USD majors etc).

A recent example was last week when I shorted EU...EU was at a good well defined daily PPZ (which for me was not enough to take a short as I dont generally take trades on FX pairs based on a PPZ alone there HAS to be additional confluence), USDX was a a good daily support area...YM and Oil were at double tops this was telling me that the path of least resistance was a stronger USD and EU (having had a big rise so far up to the point...a move that to me looked over extended and artificial) was the best technical setup in my eyes due to how clear the EU daily PPZ was....now this didnt really work out for me as there was no real momentum on Friday which was what I was looking for and thus I closed mine for a small win...but today EU so far has fallen about 160pips from where I shorted it on Friday.

There was another good example last week which Rac exploited well, but I won't go into that.

Lastly, another well known correlation between FX pairs is UCHF and EU.

Intermarket analysis, like I said is a very deep subject and Ashraf Laidi (like Nasir said) is certainly a very current well know IM analyst (I follow his intraday reports and his 'tweets')...though I did find his book a bit dull (but I'm no good at reading books to be honest) and history based, but his intraday reports are quite interesting and he clearly knows his stuff - it's certainly something I'm learning more and more about (though I don't incorporate any of it into my trading apart from what I mentioned above)."

3)
"JPY is a risk aversion currency. I do not fully understand the reasons for it but it is . Often when you see us markets move up jpy pairs move with them , when markets move down jpy pairs move down.

USD is also correlated to markets ( other than today when GU dropped due to weakness in GBP) . when markets go down usd gets stronger as money flows into bonds and other safe haven vehicles , opposite for when market is bullish...everyone gets out of bonds ( hence yields go down as market goes up) and gets into stocks.

CHF is not directly related to gold any more. The perception that it is still is there thgh and it can move with gold , although the correlation is a little weaker.

OIL and usd correlated , when oil goes up eurousd raises .... do not ask me why but noticed it does.

Hope that covers it. ....very rough i now , maybe someone who has a better depth of knowledge then this can do a better post."

When you are interessted in this subject plz don't start to buy EUR when Dow is rising. It all depends on experience. Learn more about correlations and include it slowly into your trading.

It's all about Risk on/Risk off environment and where the money flows. For instance I never trade USD pairs before I haven't checked the USDX.

I have added a screenshot of the godlike S&D trader I mentioned once. I'm using the same template but unfortunately my broker has no oil charts.
Author:  mrelectron [ Tue May 07, 2013 1:02 am ]
Post subject:  Re: The fox and the market
thanks for the link jasonckb, its got some excellent info.
Author:  mrelectron [ Wed May 08, 2013 9:48 am ]
Post subject:  Re: The fox and the market
Thanks Stefan, that's a very nice succinct correlation summary.
Author:  sk29 [ Wed May 08, 2013 12:17 pm ]
Post subject:  Re: The fox and the market
Hi Stefan,

Once again, enjoyed reading this article you have posted. Quick question. Given that a retail trader's stop loss on a buy position is the same as setting a sell order in the same where the stop would have been; do you have any thoughts on comments on this approach?

For example, if I buy at 3100 with a stop loss at 3000, I could instead use a 'sell stop' at 3000 instead of a stop loss order, right.

This way, as long as I'm scaling up in the direction of the market move, I will move with the fox, scaling up with the fox where ever he goes.

Any thoughts on this?
Forexfux wrote:Another one by Scott Percival

Placing Better Stops

Introduction

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