dehannethedumbum

Why do dealers gun for stops?

Mark asks, ‘why do dealers gun for stops, that doesn’t seem very nice to me?’. Fair point and fair question Mark which we can add to our Q and A section.

 

Lets look at an example of an interbank dealer who is looking at his order book and sees stop-loss orders to sell 200 million EUR/USD at rates below 1.3700 down to 1.3690. The current rate is 1.3730 say. He has some options:

 

1. He can do nothing. He waits until the market breaks below 1.3700 and then he starts selling. The danger with taking this course of action is that other dealers have similar order boards and the market gets fast below the level. The customers might be filled 10 pips or more below their stipulated level and they would not be happy. Plus the dealer doesn’t earn anything from this.

 

2. He sells 20 at 1.3730. The market starts drifting lower so he sells another 20 (if the market goes up he cuts the 20 short position for a small loss). He may buy 10 back but keep himself 20 or 30 short. Lets say his average entry rate for the 30 short is at 1.3730. When the market breaks below 1.3710, he sells another 30 and then he sells 100 at 1.3700 to ensure that the market trades at a rate below 1.3700. Then he sells the balance of the orders. He will have sold 200 EUR/USD at an average rate of 1.3706 say. He will fill the stop-loss sell orders on average at 1.3696, with each customer being filled at their stipulated level. The dealer will have ensured that the customers cannot complain about slippage and at the same time he’ll have earned $200,000.

 

All dealers will follow the second course of action which in essence means that all stops are targeted.

 

There is sometimes a downside risk in that the dealer may sell 100 EUR/USD but the market suddenly stalls at 1.3700 due to a barrier or a big Sovereign or corporate buyer. If this happens the dealer must act very quickly to start covering his shorts before the market races higher.

 

(copy from forexlive.com)

Oh ok.....I had this feeling of deja vu and then I realised even I had read the same stuff. Ahaha - its forex live, fair enough. I actually thought that you had emailed darkstar and grkfx. Sorry for the misunderstanding. Will carry on the rest of the discussion in the other thread

@ Successlife

I will post my ideas in the other thread - but its going to take some time. So be patient. I wish Yoda can contribute in the other thread too. Now on lets move the discussion to the other thread.......In the mean while can you post what darkstar and grkfx said

THanks for that, this is "resume" version and dont have all part, in special orders.

I know the original book are more than 600 pages and no one can make this job.

You mean to say that the original book has a section named "special orders" and that is not covered in this version, right?

Need to ask you something successlife...... The only reason why you express an interest in this book is because of order flow and the subsequent interest of it in the order flow threads on ff, right?

Based on everything I have done and understood so far i.e. the OF stuff. This book is going to tell you how things work and show you or give you a hint on the different players in the fx market. As such putting this into practice is quite a different story.

If possible go back to the FF threads, DS and a few others stress that OF is a mentality/Framework/perspective and OF trading is a totally different thing. Which to me implies that OF trading is the development of systems with the OF framework/mentality/perspective.

None the less - from where did you learn about the missing 'special orders' part. Even on Larry Harris's official website - it is not listed in the official 'table of contents'

Cheers

I send email to him and answer allways right.

But no videos and no trial time.

 

What do you mean by the above?

Details on your query and email.....did you send it to darkstar or to Grkfx ?

would anyone say it is worthwhile?

Yeah the book is quite costly....... I believe that everything was said in his FF posts. There is a limit to how much someone can try and explain something for over 2 years and hence I guess he decided to finally publish the book. I have written a small bit on what I have understood from his threads in FF.

Here is the link to the thread , hope it helps

http://indo-investasi.com/showthread.php/14588-Req-0rder-Fl0w-Trading-F0r-Fun-and-Pr0fit/page4?highlight=order+flow

P.S. - HOWEVER, I REPEAT - I HAVEN'T bought the book!

Here is the thread:

http://indo-investasi.com/showthread.php/8071-%28REQ%29-Trading-and-Exchanges-by-Larry-Harris-Market-Microstructure-for-Practitioners/page2

If full and no problem share here, please.

@ pippino and successlife

Here is the link to the Larry Harris paper

hxxp://xxx.4shared.com/document/iHU2gWHY/Microstructure.html

I have also posted it in the above mentioned thread too

European Debt Crisis – Expanded Version

 

The global economy experienced a boom during the years of 2005-2007. Many countries around the world experienced this boom. Even countries in Europe to an extent. An economic boom can produce temporary surging revenue for the federal governments of the European nations. And what do governments love to do? Spend money!

 

Almost all countries tend to run some form of budget deficit, whether large or small. So when you see the Unites States spending billions of dollars or hundreds of billions of dollars, they don’t actually have the money on hand. They don’t have the cash to pay for it. So if they don’t have the cash to pay for it, and they still want to spend the money, they will go and borrow it.

 

Now when a country wants to borrow money, they aren’t going to go ask for a traditional bank loan. Instead the country is going to issue a financial instrument called bonds.

 

Read complete article here....

http://orderflowforex.com/2011/12/european-debt-crisis-part-2/

Even I read that article....was an awesome artcile.

@successlife

In some forum post, I am not sure whether its in this website. If I remember right you requested the Larry Harris book on trading and exchanges....do you still need that one?