Discussion about a strategy utilizing "inside" information (need bright people)

[udc]

Hi everyone,

 

let's say that, hypothetically, you have information about various price levels where the resting orders are accumulated. Not just some random resting orders, but orders that actually move the price. It doesn't matter what type of orders, what's important is that once the price gets to such a level it either bounces back (to the previous level) or shoots through it (towards the next level). Now if you think about it, all what the price is actually doing, all those cycles and cycles-within-cycles, that's all merely just the price traveling from one level to another (with scalpers and news traders and similar short-term anomalies along the way).

 

Imagine you have access into all computers of given market, then this is basically the only information you would be able to find out - information about the resting orders (where they are placed at and in what amount). Beside that there is no other secret to find out.

 

Now I am a programmer, not a trader, so maybe it's just my ignorance or a lack of imagination, but how could you possibly use such information in order to take advantage of it? You still wouldn't know in advance whether the price will actually bounce or penetrate once it reaches the level because you can't know how strong the trend will be at that time (i.e. whether the participants already in play will "overpower" the resting orders, or will get overpowered by them).

 

So how could you make use of such knowledge? All I can think of is to wait till the price reaches the level and then set stop orders in both directions, that way both possible outcomes would be covered. Is that all what could be done?

[pippimp]

To answer your question

 

Hi everyone,

 

let's say that, hypothetically, you have information about various price levels where the resting orders are accumulated. Not just some random resting orders, but orders that actually move the price. It doesn't matter what type of orders, what's important is that once the price gets to such a level it either bounces back (to the previous level) or shoots through it (towards the next level). Now if you think about it, all what the price is actually doing, all those cycles and cycles-within-cycles, that's all merely just the price traveling from one level to another (with scalpers and news traders and similar short-term anomalies along the way).

 

Imagine you have access into all computers of given market, then this is basically the only information you would be able to find out - information about the resting orders (where they are placed at and in what amount). Beside that there is no other secret to find out.

 

Now I am a programmer, not a trader, so maybe it's just my ignorance or a lack of imagination, but how could you possibly use such information in order to take advantage of it? You still wouldn't know in advance whether the price will actually bounce or penetrate once it reaches the level because you can't know how strong the trend will be at that time (i.e. whether the participants already in play will "overpower" the resting orders, or will get overpowered by them).

 

So how could you make use of such knowledge? All I can think of is to wait till the price reaches the level and then set stop orders in both directions, that way both possible outcomes would be covered. Is that all what could be done?

 

 

To answer your question in a word, "Yes".. You could place buy/sell stop orders around the specific levels.. you would have to look at past historical data to get an idea on how much the bounce moves past these levels if at all.. The price moving past these levels might be an effort of the banks/institutions to fake the market out if i saw one of the shoot past then immediately retrace past the level, then would place an order in the the direction of the trend before hitting this level in order to make sure i got in at the very beginning of the trend.. There are other tactics that could be employed as well.

 

Let me know if you are interested in discussing further... You can instant message me if you choose.

 

Thanks, Much success to you!

 

Theophilus

[udc]

Hi and thank you for your reply.

 

So stop orders on both sides in x distance from the level, with SL at y distance and TP at z distance. Those 3 variables could be optimized against the past data. Now the question is whether any of those variables should be derived from the actual market situation at the time when the level is reached, like the spread, maybe ATR etc. In that case instead placing stop orders in advance the market orders placed in the real time would have to be used. That could also be determined by simulation using the past ticks data.

 

Anyway what I see as a major advantage of trading around these levels (although I may be totally wrong here) is that SL can be relatively tight. For example, if the level is at 50, and the next level is above 100, then I would see as reasonable a buy stop at 60 with SL at 45 (to allow a short backshoot) and TP at 80.

 

Well, so this is one way. Now you are saying there are other ways, I would be interested in hearing about what they may be. Could you outline it a bit?

[udc]

Just came to my mind maybe another way could be to trade in the middle of the levels. Like in the above example with one level at 50 and other at 100 to open a buy stop at 80 with SL at 70 and TP at 95. And of course similarly a sell stop at 70 with SL at 80 and TP at 55. Does that make sense? Another question is whether always aim all the way up close to the next level or only a predefined shorter segment. Or maybe a shorter, half position close and the rest with the trailing stop? Many questions..

[iwjw]

I think it doesn't matter which level(based on pure numbers) you take, they should all have the same probability in the long run.

One of the most respected levels I've seen so far are the pivots. The problem with the pivots is that they are depending on the broker's time. For me 00:00 GMT seems to fit fairly well. You can often see price consolidating at a level and then breaking out in either direction or a break(test)/retouch(retest) before going to the next level

[udc]

Well, the discussion is not about which levels to trade, but how to trade them.

[successlife]

If you like, I can help you in your idea, please send me PM

Thanks

[udc]

Well, sure I can send you PM but is it some kind of secret? Isn't it possible to discuss it here?

[successlife]

Now I am a programmer, not a trader, so maybe it's just my ignorance or a lack of imagination, but how could you possibly use such information in order to take advantage of it?

 

Yes you can !!!

brackets orders are losing game. Pivot points in my experience never works

I´m not free to share more info, but if you cant like send PM explore orderflow trading.

Learn type of traders and how they use orders ( by the way in your information you only can see Limit orders)

Learn about liquidity and how impact big orders price.

I recomend to you buy the darkside book about orderflow. And forget any pakage of "miracle software" for orderflow.

Edited November 23, 2012 by successlife