Question on how price moves
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thread: Question on how price moves

  1. #1
    Junior Member jaibotaf's Avatar
    12

    Question on how price moves

    Hi, can someone explain this to me ? ECNs are part of the interbank, right? That's, I see actual quotes from banks and other traders etc., though the liquidity I see will be limited to the amount the participating bank selects to display to the particular broker I am with.

    Let's say there is 100 million provided over 10 pips on an ECN. I put a 100 mio market order in and consume that liquidity, moving up the offer 10 pips. Let's assume for argument's sake the bid follows match, maybe because people think that it's a genuine move, therefore we get a disperse bid/ask 10 pips greater than it was. I have moved price 10 pips greater. Who sees this greater price? The people/banks who get my broker's feed. Now it's my understanding that, as there's no central market or market maker, the price the numerous banks and market makers etc are bidding or supplying is kept pretty much the same as every other through arbitrage.

    So what would happen to the currently from whack feed that my broker is displaying? Can it immediately get arbitraged away by progr/people selling into the new high bid and buying in the current normal (low) offer and wait for the prices to line up again (this is my understanding of arbitrage - I am not clued up on it so may be incorrect )? Or would banks see the large price and begin increasing their bids/offers, thinking they're offering since it's gone high somewhere else? Or would they somehow know that price is wrong and only short it if they can?

    Basically I am trying to understand how large buying from one or a couple of banks would raise the price for everyone. I am not sure this clarifies it although I get the potato effect.

    Thanks.

  2. #2
    Senior Member layunny's Avatar
    195
    At the end YOU EITHER HAVE A BUY /
    SELL SIGNAL or you don't.

    Nothing else matters.
    And may I ask how you arrive at those signals?

  3. #3
    Member Sireh's Avatar
    43
    This entire thread is, shall we say, BIZARRE!!
    If it was not before, it is now. I guess you're right though in a manner. My RSI might not do the job as good as it does, When the multinational corporations were not operating by using their Vietcong tunneling progr which were put in place following the Tet offensive. I enjoy the way the multinational corporations make my moving average job , well, they restrain the 100EMA. The banks control each of the other MA's and also the bucketshops keep taking out my ceases. Everytime a multinational spends a dollar, the price moves up, everytime they make a dollar that the MACD is adjusted. It is all complied.

  4. #4
    Junior Member elektrodo's Avatar
    2
    And may I ask how you arrive at these signals?
    Each person must find their own methodology for trading. Mine would not match you, yours would not match me even if both could be demoned to be profitable. It's why some people today drive others and Fords drive Chevy's.

    But back to currencies, it's not possible to know everything that's going to move the markets. What happened won't ever be replied exactly because you will find not the specific same number of market participants or the specific same conditions.

    Therefore, you may just exchange your method and trust how you exchange because you simply can't have complete understanding of what is going to happen next. I hope this makes some type of sense.

  5. #5
    When it wasn't before, it is now. I guess you are right in a way. My RSI may not work as great as it does if the corporations were not operating through their Vietcong tunneling systems that were set up following the Tet offensive. I enjoy the way the corporations make my moving average job they restrain the 100EMA. The banks control the bucketshops and each of of the other MA's keep taking out my ceases. Everytime a multinational spends a dollar, the price goes up, everytime they earn a dollar the MACD is corrected....

  6. #6
    Junior Member jaibotaf's Avatar
    12
    Think about the new significance the phrase buy low sell high takes on with this new perspective.
    Low will pretty much be wherever you buy and you'd create your own high to sell at, right?
    However you state: They put your trade volume on the bid at the raised prices and you sell your inventory back at a profit. This could work if they didn't raise price immediately so you can buy a certain amount (say 30 percent of your entire position) at a low price, then the rest of the 70 percent of buying is shing price upward, then you sell and they don't transfer price down immediately so you get to sell 30% at a high price and another 70% pushes price down, canceling out the 70% which you bought on the way upward, and you profit the 30 percent you bought low and sold high. But if they think you're informed (because you're a financial institution and trading in dimension ) wouldn't they move price immediately? Then you'd actually have to search for liquidity (or pending liquidity consumers) to ditch.

    I am still not certain where mispricing comes in to this. The supposedly informed trader buys large, causing traders to elevate price... nevertheless the trader wasn't informed and just bought in order to move price, then he dumps his stance following buyers and leaves with a profit. If the traders knew he wasn't informed then they wouldn't have transferred price and perhaps just sold at a high spread (according to Osler's version of informed vs uninformed spreads) in order to compensate for the probable rise in price due to subsequent inventory rebalancing (dealer buying on interbank)? And since price rose but does not reflect any new information (because the buyer wasn't edued ), that could be mispricing?

  7. #7
    Junior Member Miki_EU's Avatar
    3
    In these conspiracy issues 2 mistakes are being made by that the participants.

    1. They suppose that there is a limited variety of players that are smart out there speculating and everyone waits for another to finish his game.

    2. They do not understand that, in order to get a wise player to win big, another you has to lose big.

    Since there are a lot of intelligent players and not one of them needs to shed, I really don't see how they would not speculate any inclination to manipulate the orderflow.

  8. #8
    Junior Member jaibotaf's Avatar
    12
    In all these conspiracy topics that the participants are making 2 errors.

    1. They suppose out there speculating that there is a limited number of players and everybody waits for another to finish his game.

    2. They do not know this, in order to get a smart player to win large, another you has to lose large.

    Since there are a lot of intelligent players and none of them wants to shed, I really don't see how they wouldn't speculate any tendency to manipulate the orderflow.
    Hardly a conspiracy thread I think. Please keep it on topic.

    1. No, I believe we are only making examples. You need to comprehend the core ideas before you add and can construct all the other things on it, imo. (As in, the simplistic situation might not be sensible because there are different things happening at the exact same time - however you must comprehend the fundamental situation before you can make good sense of another things affecting it)
    2. And the market moves down and up, and people are making and losing money. Who's losing? Could be a player, might be pragmatic traders, might be the dealer. So...?

    I really don't quite understand the previous sentence.

    :edit:

    ok I read another post of yours everywhere and that I think you're saying the same thing as your final sentence , basically that if a person was manipulating price like this (i.e. buying and ditching ) it would be an inefficiency and other players could jump onto it. Fair point, but price does go down and up like that every day. Why are not they thinking it is an inefficiency every time it goes 10 pips up or down? How is it that they know the reasons and can tell exactly what the reasons are behind some anonymous buying and if they have information or not?

  9. #9
    Why aren't they thinking it's an inefficiency every time it goes 10 pips up or down?
    Why do you think that more often than not, after 10 pips up it moves 10 pips down?

    Constantly be fading like they say.

  10. #10
    Junior Member jaibotaf's Avatar
    12
    Why do you think that more often than not, after 10 pips up it moves 10 pips down?

    Always be fading like they say.
    Couldn't a lot of which be accounted for by longs accepting profit?

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