Can Market Maker Quotes predict News Moves?

[hyperscalper]

Here's a really great example of how a price movement
prior to a News Event is known with high certainty.

In this case, GBP/JPY would clearly be influenced by
news affecting either GBP or JPY. And we see that
JPY has a 10-year Bond Auction event at precisely
45 minutes past the hour. U.S. EST is the timezone setting.

In truth, I was not watching the News calendar on ForexFactory
but I was scratching my head wondering, why is my
Market Bias flat down on the floor? Is the data feed
stopped? What is happening here?

Sometimes these leading indicators are so surprising that
even I don't believe them..... But now I have more
confidence Guess all that R&D work is paying off...

In fact, it was broadcasting a clear signal that on the scheduled
news event, we were going to crash, and we did !!

This is taken from the LMAX exchange book through custom
DOM Analytics.

HyperScalper

 

[gerryg]

Waiting for release of your profit stats.. Let see if it was a prophecy or yet another coincidence...

 

[hyperscalper]

Waiting for release of your profit stats.. Let see if it was a prophecy or yet another coincidence...

An appropriate level of scepticism, my friend !

Yes, I've worked about 8 months on our port of the scalping platform
from the existing SWFX ECN Dukascopy, JForex, Atom8 (all the same)
API to LMAX.

Dukascopy, as you know, is an excellent brokerage, but
it is a retail pricing brokerage. We were seeking Wholesale price
advantage, and I almost regret the decision to migrate, as it was so
incredibly difficult..... But, having done it, now we see the value.

As LMAX is not useful to "normal" traders, the aim of the software
migration was to capture 1) narrower spreads (about 30% narrower
than Dukascopy) and also 2) a high proportion of Wholesale price
improvement. This is all proven. LMAX delivers, but only with specialist
software applications.

Both of these goals have been achieved, BUT... as everyone should know
Analytic precision is the difference between Success and Crash 'n Burn

Let no one deceive anybody by claiming that Trading is Easy. That is patently
Ridiculous. REAL traders know that...

Being consistent is the key, as you imply ...

Good Trading, and especially Scalping !
HyperScalper

 

[hyperscalper]

Modern Forex and Order Flow Reduced Spoofing

..
While I'm thinking about it, let me just throw out in a nutshell
why Depth of Market Analysis is a valid "leading indicator", and
why it will become more valuable as Forex becomes "modern".

All Forex traders should be trading on "ECN" type or "exchanges"
where pricing is fair and transparent.

With the "modern" Forex ECN or, in the case of LMAX, something
approaching the status of an "exchange"... one significant Analytic
advantage emerges.

Spoofing is something traders like to talk about, but rarely understand.
Spoofing is just throwing out "false quotes" onto the Book in an attempt
to prevent "Book Reading" or Order Flow Analysis.

But, consider this. LMAX has "no last look" and if a Quote is "hit" or
"matched", then the Liquidity Provider (aka Market Maker) CANNOT
withdraw the quote, but must honor it. In the past, a counterparty
could just decide to reject the transaction but, on LMAX or Dukascopy,
this is really kept at a minimum. On LMAX it is impossible, since the
"exchange" enforces "no last look" no "requotes", and all of that
behavior which characterized Forex in the past...

Given that fact, Liquidity Providers are very reluctant to Spoof because
they Risk being Matched. THEREFORE, spoofing is reduced, and the Book
becomes more reflective of these MM's "real" intentions.

If they are planning to drop the market, as in the first post of this thread,
then they will STAY AWAY from the downside (BID side) of the market on their
Quotes because they don't want to BUY, obviously because the market is
about to be dropped "like a rock", in this example.....

For this reason, indications found on the Book are "leading indicators"
of short term market moves. Analysis of Quotes or Orders becomes a
valid approach for Forex, given "no last look".

So I am saying that Depth of Market Analysis or what Futures types
call Order Flow Analysis becomes MUCH more valid as a "leading indicator"
predictor for short term market moves.

In short, MM's Quotes are forced to reflect better their "true" intentions,
and Spoofing is greatly reduced with modern ECN or "Exchange" Forex
venues.

Good Trading !
HyperScalper

 

[gerryg]

An appropriate level of scepticism, my friend !

Yes, I've worked about 8 months on our port of the scalping platform
from the existing SWFX ECN Dukascopy, JForex, Atom8 (all the same)
API to LMAX.

Dukascopy, as you know, is an excellent brokerage, but
it is a retail pricing brokerage. We were seeking Wholesale price
advantage, and I almost regret the decision to migrate, as it was so
incredibly difficult..... But, having done it, now we see the value.

As LMAX is not useful to "normal" traders, the aim of the software
migration was to capture 1) narrower spreads (about 30% narrower
than Dukascopy) and also 2) a high proportion of Wholesale price
improvement. This is all proven. LMAX delivers, but only with specialist
software applications.

Both of these goals have been achieved, BUT... as everyone should know
Analytic precision is the difference between Success and Crash 'n Burn

Let no one deceive anybody by claiming that Trading is Easy. That is patently
Ridiculous. REAL traders know that...

Being consistent is the key, as you imply ...

Good Trading, and especially Scalping !
HyperScalper

What can you say about Currenex platform? Have you considered/tried it? Does it provide wholesale prices/raw LP spreads? In Нotforex I have 40K $ requirement to step into it, however seems my manual trading is inappropriate there, but instead scalping/market outstripping software is all the rage

 

[hyperscalper]

What can you say about Currenex platform? Have you considered/tried it? Does it provide wholesale prices/raw LP spreads? In Нotforex I have 40K $ requirement to step into it, however seems my manual trading is inappropriate there, but instead scalping/market outstripping software is all the rage

Our experience was originally in the Futures area, where these analytics were first discovered. But then I moved into Forex to reduce exposure and have "fine grained" control for FX Spot versus FX Futures. Dukascopy was where the approach was developed more precisely, and now the ultimate move is to the LMAX exchange.

It's so extremely difficult and time-consuming to do this research and I do not have experience with Currenex. However, my accumulated experience indicates that all modern exchanges share the same characteristics, that when Liquidity Providers (aka Market Makers) are forced to honor (or "honour") their Quotes, then Spoofing declines, and the ability to "read" the Market Bias, for short term Trend prediction, is enhanced.

In Scalping or Short Term trading, every aspect of trading Methodology must be altered with a view to pricing advantage and the appropriate balance between "defensive" and "offensive" trading style. In general, "semi-automatic" triggering is needed to increase "strike precision" in scalping, and this is not present on a generic trading platform, so I had to code up this approach.

I'm always interested to discuss these topics, PM me or add to this thread.

In general, venues or access software such as Currenex provide "raw" or the most direct market pricing; however, these are complex issues with layers of software and providers, and the need to understand the distinction between software API and the underlying LP's which are participating in the market.

In general, pure commission is the key to identifying "close to wholesale" pricing; however, only large Banks with huge transactions have "wholesale" pricing. But for us small traders, as close to "wholesale" as possible is now accessible at a venue such as LMAX or other "exchange" or "ECN" brokerages.

Good Trading, or Scalping !
HyperScalper