Understanding market fluxuations

Technically Fundamental · Feb 13, 2009

I'm not a professional trader so I've not got as much ground knowledge on what affects the market as you lot but I think it's best for me to go to interviews with as much knowledge as I can. Anyway, a quick question.

I been watching the FTSE over the last couple of weeks and at certain times in the day (not sure what markets open in the PM) I have been seeing a huge spike then a dip. Seems to be in correlation with both gold market and $/£.

Now what the hell is the deal with the correlation? Are these spikes the result of someone with a huge funds hedging? Thats the conclusion I came to.

Well if you're not busy and feel you could help me by answering my questions and giving me a little info on are connected etc then please do.

I'd also be greatful if you would suggest any reading/learning materials

:cheesy:

Mérci

everyonerich · Feb 13, 2009

Aaronmalins said:
I'm not a professional trader so I've not got as much ground knowledge on what affects the market as you lot but I think it's best for me to go to interviews with as much knowledge as I can. Anyway, a quick question.

I been watching the FTSE over the last couple of weeks and at certain times in the day (not sure what markets open in the PM) I have been seeing a huge spike then a dip. Seems to be in correlation with both gold market and $/£.

Now what the hell is the deal with the correlation? Are these spikes the result of someone with a huge funds hedging? Thats the conclusion I came to.

Well if you're not busy and feel you could help me by answering my questions and giving me a little info on are connected etc then please do.

I'd also be greatful if you would suggest any reading/learning materials

:cheesy:

Mérci

market price going at certain price because both buyer and seller agreed on that price, if you can see before the price starts heading its way, you found the holy grail..

Technically Fundamental · Feb 13, 2009

So on upwards spike someone agreed the buy at the high price as they think it will go up in future and then person selling at the high peak is hoping to short?

Wouldnt you need to trade huge volumes to have that kind of effect on the market? :S

everyonerich · Feb 13, 2009

Aaronmalins said:
So on upwards spike someone agreed the buy at the high price as they think it will go up in future and then person selling at the high peak is hoping to short?

Wouldnt you need to trade huge volumes to have that kind of effect on the market? :S

Theory from book if im not mistaken.

market is place to find an imbalance between buyer and seller.

generally :

more buyer & less seller = price up
more seller & less buyer = price down

in the above situation is true when market has enough volume going around. but it will turn opposite if market liquidity started to drop..

Hoggums said:
possible for the price to fall when there are more buyers than sellers. Buyers may put their orders on at below market price and if any seller needs to sell they'll have to settle for the best price they can get - thus moving the market price down.

in opposite, possible for the price to up when there are more sellers than buyers. Seller may put their orders on at above market price and if any buyer needs to buy they'll have to settle for the best price they can get - thus moving the market price up.

Reference : http://www.trade2win.com/boards/general-trading-chat/53390-everyone-s-winner-how-6.html#post659746

this is the reason why there are times technical analysis work and sometimes dont. same as fundamental analysis sometimes it work and sometimes dont. ANYONE IS WELCOME to CORRECT ME if im wrong.

Technically Fundamental · Feb 13, 2009

I can grasp why someone would offer to sell for below market value...

Care to explain lol

Also when this guy says its "possible for the price to fall when there are more buyers than sellers" I take it that means the price falls due to some factor other than trading and supply/demand..?

I know I'm annoying but I have an inquisitive mind.

everyonerich · Feb 13, 2009

Aaronmalins said:
I can grasp why someone would offer to sell for below market value...

Care to explain lol

Also when this guy says its "possible for the price to fall when there are more buyers than sellers" I take it that means the price falls due to some factor other than trading and supply/demand..?

I know I'm annoying but I have an inquisitive mind.

everyone is trading their own 'belief' its the mother market proves their 'belief' right or wrong later..

Technically Fundamental · Feb 13, 2009

Which results in the market price spiking up and then down?

everyonerich · Feb 13, 2009

scenario 1:

depends on market at the moment, if market has average normal volume
its more buyer (market went up) and suddenly seller outnumbered the buyer (market went down again)

scenario 2:

if market has low volume, low liquidity,

its seller has sell limit above current market price, and another buyer wanted immediate entry, therefore market up.
to find the imbalance between seller and buyer.

(assume low liquidity again)
then another buyer has buy limit below market price, and seller wanted immediate entry, therefore market down to find
the imbalance between seller and buyer.

any experts please correct me if im wrong about this. thx

Technically Fundamental · Feb 13, 2009

Will I learn all this if I do CFA?

everyonerich · Feb 13, 2009

CFA = Certified Financial Adviser?

financial adviser know nothing about making money from market, its completely different role

Technically Fundamental · Feb 13, 2009

No its not

Its Chartered Financial Analyst...

everyonerich · Feb 13, 2009

Aaronmalins said:
No its not

Its Chartered Financial Analyst...

i dunno.. probably a little.. if you want to be trader, its your experience that matter. those couldnt possibily get from qualification/paper test.. like.. if trading would make you any money by having passing the test.. then everyone just need to study hard, pass the exam and can make money so easily eh?

Rossini · Feb 17, 2009

You don't need to understand why something happens, as a trader all you need to be able to do is react accordingly when something happens...

Technically Fundamental · Feb 17, 2009

I assumed I would need to know more about trends and daily trading patterns e.g. trading volume
in/decreases when other markets open. Surely it cant be as easy as buy low - sell high and shorting?!

Rossini · Feb 17, 2009

No it not, you need to look for a relatively low risk entry where the probability of success is relatively high.

Technically Fundamental · Feb 17, 2009

Sorry to be such a newb but can you define a low risk entry.

Also, as an accountant I am only familiar with asserting whether or not a company is over-represented in the market based on the share cap/balance sheet. How would you go about quantifying the probability of success of an interest? I know that certain press releases and quarterly/annual reports can affect prices. What else? Trends, historical data? :-S

Rossini · Feb 17, 2009

Fundamental analysis (what you are taking about) is a valid form of trading, but I know nothing about this so I can't comment. A low risk entry can be defined by taking a position where you can determine that you are wrong quickly and cheaply, but at a point where you feel probability of you being right is increased because of a number of factors that you have identified (whether they are technical of fundamental). Have a took at some of the threads on here to get an idea of some low risk setups.

Technically Fundamental · Feb 17, 2009

Thanks a lot.

Any terms you can give me to look up on technical analysis. Or recommend any learning materials that I can buy?

Rossini · Feb 17, 2009

There is lots on this forum, john carter has some good books, read market wizards. Just have a look around.

Rossini · Feb 17, 2009

Have a look on John Carters site and watch some of his Vids.

Understanding market fluxuations

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