Technical knowledge For Forex.

[Tanveer333]

I want to buy 1lot eurusd , you want to sell eurusd 1 lot. I dont know you (since i have no direct access to you and have no knowledge of each other) and dealer is who we go to. Your a breakout trader, im a buy limit trader, my buy limit sitting at 1.0050 your short stops sitting af 0.9950, dealer steps in, sold to me at 1.0050, and is short, now im long, then he uses your short stops to cover his long, shorts, now you short he covered im long. He net 100pips, i have my long order you got your short order. Stop hunting, and market making.

So he provided a bid ask spread, but since the orders are there already, he can just hit my orders and your orders. Only reason why this example is so wide is because 2 customers only. In reality its many people hitting them, so they are always moving in and out of orders and also to compete with other mm they have to make it competitively priced. And also, in reality, things are not so simple, this is a simplified version of it.

His job, is to match orders, otherwise orders will sit there until something happens. Also part of his job, is providing liquidity to markets when needed. If you see gbpusd on hourly charts, for the last few days, do you see spikes to both the upsides and down sides? Thats where the stop hunting is. And part of the mechanics is this.

His book is short when he sold to me, in anticipation that he can buy from you, when he is done buying from you, he is flat.

So in a bear market, lets say the main trend is still down, and he anticipates a down move, but day traders are covering their shorts, that makes the dealers short to buy from the day traders, and have more short orders. So sometimes other customers could also come in and he can pass some shorts to them if they are bearish too.

Also you never know whose looking the price, quote away from fhe markets, and you can be taken out.

See how the process goes from the picture?

[Asif777]

Yes, I suppose you could say they are neutral but they would be short neutral as they are holding the opposite side to you, but they have also sold you the long, really they have the two trades in opposite directions with say 1 pip in their favour due to the fact that you and me have to buy or sell away from the their price, you are just instructing the dealer what to do and they protect themselves by taking the opposite side, if you cash in at 10 or 1000 pips times it makes no difference to them as they cash both trades at the same time, only the really big players actually have direct market access like CB’s, tier 1’s ect, any trade we take cannot move the market, only the big players with direct access can do that, the dealers take our orders and they get processed though the market structure and depending on how big they get depends in which part of the structure the orders move to via your dealer up the structure.

It is not an easy thing to get your head around it took me a while to understand, the best way to think of it is if you take a trade out both ways at exactly the same price then will never lose or make money, the dealers are able to do this but with a small spread in their favour whatever your trade does they make this ‘scalp’ when you cash out. They do this millions of times so they are short on every pip down with every new entry made by us, so they are holding a net short or net long.

Maybe you are confusing dealer back to back trades with direct market access trades where the big players decide how to take the trade according to their view of the risk of the order by finding the opposite side to fill that order via stop/order hunting ect, that is in the first post I made to you.

Dealers… the term is a broadly used word to describe the ‘agent’ you use to process your order, this could be anything from your tiny broker service right up the structure to the tier 1 bankers.

this is my understanding of it anyway.

[Hanif484]

Thank you kindly for your reply, if in the example of a down move, how would the dealer make money by taking the opposite side of our trade, he would buy, and we would sell, but how would that make him short, I don't quite understand how this can maintain his book short. Is it because he matches both trades which balances each other and then he makes the spread? if so and he only makes the spread I don't see how this makes his book short, wouldn't his book be neutral? Scratching my head here, just trying to put this all together

[Tanveer333]

No need to apologise, we all make mistakes it is part of life/trading.

Some of the answer is in the post above, I think what fti is saying in that post about the back to back trade is what our broker is supposed to do, make money by taking the opposite trade as us at the same time minus the spread (the scalp for them) when we cash in our trade he is guaranteed that spread/scalp.

[Asif777]

Please accept my apologies I am very sorry by mistake I included the incorrect post link as it was late in the evening when I posted, this is the correct link in which Fti mentioned about the dealers:

“So by constantly covering back to back on the way down he maintains his book short.”

[Hanif484]

Sorry but I cannot see that exact wording in that post you are referring too. The nearest part I can see to your quote above is this part of the post, do you mean this part or another post somewhere? Before I attempt to answer your question it would be good to be clear on this.

1.yes, most dealers have basic grounding in technical analysis, it differs from one to another.
Most dealers do not deal in time frames, we manage it mark to NOW,
if its going up forever, we'll keep turning long forever.

You must understand that unlike traders, the market keep making the dealers short of usd if usd keeps going up.
This is because customers will keep buying usd from them making them short,
so the dealer will have to go interbank and keep getting his dollars back to stay abreast of the markets.
For dealers, timeframe is of no consequence, it is constantly being managed.
Some dealers uses the averages, mostly just look at price levels.

[Tanveer333]

When does the market close, specifically for US options?
I recently started trading options and having great success, but I'm clueless about some things.. lol

*is it 4pm Eastern time, US time?

[Asif777]

The basis of the 3K’s is the that you are trading the market wheel against the other big kingdoms, this is a very over simplified view/explanation but when the USD lines up in all the pairs you should see a good move because they are ‘in sync’, if one or more is not in sync then that is due to what is going on news wise either known by everyone or some few have heard a ‘whisper’ shall we call it. I have not got time ATM to go back through the thread to find the relevant posts, maybe someone else will also help with your question, there is a lot more to the relationship of these pairs and it will often show before the news hits the wires, only experience of watching/trading them will show you.

it does take a few reads of the first 200 pages to start to understand what is here, good luck with your journey.

[Hanif484]

That's fantastic news, thank you very much for taking the time to post it here. I'm a little sad that this thread has become so inactive but perhaps many of us feel uncomfortable sharing our thoughts on trading here because we don't feel that we have mastered this approach yet. FTI spent nearly 9 1/2 years trying to show us the way and put up with a fair amount of stupidity along the way: I don't think he could have done much more than he did. I never had more than a handful of exchanges with him back in the day - I don't think he took to me really - but I am grateful for all the knowledge that he shared on this thread and in the TAF Lounge thread.

I completed my latest practice period with a small account a month or so ago and am now waiting for funds to arrive from the UK before embarking on my final serious assault on the markets. I've had success and I've also run into some ego-based trading issues over the years but I decided to give it one, fully committed last effort, as I think I mentioned in a previous post. I don't think I've ever approached it with a truly professional mindset in the past and while I don't mind admitting failure if it turns out I'm simply not cut out for trading, I would hate to stop now and always wonder what could have been. One way or another, I will be more at peace with myself in six months time. I'm at an age where I should be resting on my laurels rather than attempting to do something great but I never did anything great in the past and I don't want to give up without seeing what potential I really have. if it turns out to be very little, at least I will know I gave it my all.

I hope everybody else who has followed this thread over the years enjoys the success and happiness they deserve.

[Tanveer333]

Hi ukmanthailan

i myself do feel uncomfortable posting trades here without our friend FTI around to guide us if we unknowingly post something that is not in line with this great thread, the last thing i would wish to do is spoil or disrespect anything that is here, i think you are correct that most feel like this though there will still be answers posted to anyone who asks anything often with reference to fti's posts so as not to unintentionally mislead anyone.

good luck with fervery