Weak buyers and weak sellers, how do we identify them and why.

[BeginnerJoe]

Sounds like spanish stops by another name

This spanish guy sounds like he has a clue. What are all his aliases ? I have to read up on on his posts.

 

[random12345]

You can look for it within yourself. Weak buyer and weak sellers are those who use 20 pip stops, or 50 pip stops, or even 100 pip stops. The minute they enter the market, they are knocked out. Does this sound familiar ? For people who use 5000 pips stops, not only do they have the capital capacity, they also have big balls. This is why they are strong and you don't want to be selling or buying into them because they can turn around and bite your limbs off.

I see you're still unwilling to cope with losses BJ... did you ever blow up by piling on stopless positions against the market direction or are you now accessing T2W from your G550?

Who uses 5000 pip stops?

 

[spinola]

How to identify weak verses strong hands . Check your underpants ! If clean, you're strong hands, if dirty, you're as weak as the <bleep> you see in them !



Go check now !

 

[spinola]

Just amusing myself ! I've giving up wearing any !

 

[BeginnerJoe]

I see you're still unwilling to cope with losses BJ... did you ever blow up by piling on stopless positions against the market direction or are you now accessing T2W from your G550?

Who uses 5000 pip stops?

Who ? Not me. Like you said, I don't use stops. I haven't had time to check out the G550. Is it any good ?

Since I played small, it was not possible to blow up. There's always plenty more capacity.

 

[piggybridges]

Weak buyers here or not? (5min chart)
(If one knows, they know whether to go short here or to go long)

 

[Shakone]

Weak buyers here or not? (5min chart)
(If one knows, they know whether to go short here or to go long)

I think we have to be clearer about what we are asking.

From the chart, the move is parabolic, but then it stops, doesn't make a new high and is actually making lower lows. So with no larger timeframe picture, you'd expect it to drop some more, and parabolic moves can reverse quite sharply. How far? Don't know in advance, you'd have to watch it, but the nearest support level on that chart is all the way down where the parabolic move started from.

If strong hands are long during that up move, as one might expect, then where are they long from? Is the suggestion that they bought the whole swing up and are now dumping some of their position? Or that they are getting short at the top? Over what time interval are they long? Are they in it for just that swing, or plan to be long for weeks? Or is the suggestion that those buying now are weak?

There is a danger of getting muddled in who is doing what and 'fake' moves. There are no fake moves. So while there are some great insights in this thread, and people that can maybe predict well in advance what price is going to do (with high probability), if you just accept the reality of the price, you would not be holding a short during that parabolic move. You'd hopefully have a long from relatively low down as it is screaming long (at least once it gets underway), and you would be exiting some (or all!) of that long now or even a bit earlier because it is making lower lows. You could even go short. So why do we need to know whether it is weak buyers or weak hands?

 

[scholfield]

No its there, you are trying to look too hard.

But looking without knowing what you are looking for will not help either.

Sorry I dont mean to be aloof, but there is no given right for anyone to be given information.

If you dont have volume or derived indicators what do you have?

Price bars?
Is the secret something to do with the size of the bars or something?

 

[cablemonster]

Weak buyers here or not? (5min chart)
(If one knows, they know whether to go short here or to go long)

For me there is not information present in the chart alone although the chart alone could be traded profitably for someone with honed skills. I would want to be tuned into the market via a Squawk during the session so I could get a complete picture of why the rise took place. For example if the move occurred without any news flow I would be more interested than if it occurred as the result of a risk event. i.e. has price moved due to the general flow of the market or has something fundamentally changed. In addition the awareness of the time of day/local session is important, for example if the cash market has opened in the last hour I would expect more volatility and would be more careful. Also imo looking for weak hand is not enough you need to look for spots where the hands will be the weakest not just weak. my 2c.

 

[lurkerlurker]

Not only was the upmove fake, it then facilitated weak sellers, to enable strong buyers to dominate (as they are doing at the moment).

ES yesterday and today. Nudge. Anyone following this?

I'd be curious to learn if anyone has made any progress with the subject of this thread, or indeed if anyone has achieved consistent recognition of this condition...

For me there is not information present in the chart alone although the chart alone could be traded profitably for someone with honed skills. I would want to be tuned into the market via a Squawk during the session so I could get a complete picture of why the rise took place.

The information is not present in the chart, it is part of how you interpret charts. Not sure how a squawk could assist with detecting this condition however. Does the squawk tell you 'why' and if so how does that improve your trading odds?

Shame to see interesting threads die.

 

[lurkerlurker]

I think we have to be clearer about what we are asking.

Yes. It isn't just about weak buyers...some appear to be only considering one side of the market - state of buyers or demand - without considering sellers/supply. Potential and current. From both WH and SH side. mr.marcus posted repeatedly to consider these aspects, so I'm not saying anything he hasn't shared before, but otherwise fight club rules apply.

If strong hands are long during that up move, as one might expect.

Is that a logical expectation? Is it possible that they are opening new positions in the opposite direction, knowing there is little future demand to come? Could we have a combination of one timeline closing out longs and another timeline taking new positions, both being sold to weak buyers who are chasing? What information (price, time, volume) the market gives would you use to arrive at conclusions of who is trading when? That is all the information we have, so need to develop a theory with testable parameters - figure out where you are right, where you need to refine. Otherwise its an interesting discussion, but won't lead to progress until we apply the method of making educated assumptions, testing, and refining our theories.

, then where are they long from? Is the suggestion that they bought the whole swing up and are now dumping some of their position? Or that they are getting short at the top? Over what time interval are they long? Are they in it for just that swing, or plan to be long for weeks? Or is the suggestion that those buying now are weak?

Some good questions in here. Of course there are multiple timelines involved, so as wsw says price movement has to suit 'someone' all of the time (as nobody does something for nothing) but won't always suit everyone. So need to work out which traders can play in which conditions. What is the limiting factor?

There is a danger of getting muddled in who is doing what and 'fake' moves. There are no fake moves.

There is always a danger of being muddled as you try to organise the information. Striving to change the confusion to clarity is the name of the game. If you don't try, then you'll never know. Without 'who' is doing 'what' how can you profit as an independent directional trader? 'Fake' I think was a term used for when price movement exits for the purpose of enticing (weak) traders to enter, rather than when it is part of the market travelling to its destination. 'Fake' moves being movement opposite the ultimate destination - but for a purpose.

if you just accept the reality of the price, you would not be holding a short during that parabolic move. You'd hopefully have a long from relatively low down as it is screaming long (at least once it gets underway), and you would be exiting some (or all!) of that long now or even a bit earlier because it is making lower lows. You could even go short. So why do we need to know whether it is weak buyers or weak hands?

Sounds a lot like wasp, trader_dante, and a dash of dbphoenix. This place doesn't change much. Maybe you don't need to know. Depends how satisfied you are with your trading results and what you aspire to. So much of what is written here could be termed 'guessing with discipline'.

You don't say how you'd know to be long, aside from hoping to be correctly positioned by accident, or knowing to close a short before the parabolic move occurs. The last example of this type of condition I recall was EUR/USD recently...and there were plenty traders holding short from the last week as we had a double top...they were dumping on the way up with late buyers chasing the highs...is that because the traders didn't accept the "reality" of the price? Or did the price tell them the reality only after they were already positioned the wrong way, and force them to change their minds? For the late buyers, reading price movement and velocity at face value - accepting that reality - blinded them to the likely outcome (a reversal and stop out). All due to their trading without understanding the state of supply/demand. Which in turn is down to their assumptions about what they need to know about trading, and the extent which emotions such as greed overrides rational choices.

So if you can't accurately and consistently estimate supply and demand, what do you base trade decisions off? What inputs are you left with? Price movement and velocity only? Price patterns? If that 'worked' without further paramters...everyone would surely succeed, no?

And if you have to wait for the lower lows to start closing out your long positions (or indeed put on your shorts), forget the Forbes list ;-)

 

[piggybridges]

this thread needs live calls

 

[sonofcablemonster]

this thread needs live calls

nah it doesn't that would risk letting cats out of bags. speaking of which I just faded another custom spread right after NFPs and banked (again).

Have a good weekend (I know I will )

 

[Shakone]

Yes. It isn't just about weak buyers...some appear to be only considering one side of the market - state of buyers or demand - without considering sellers/supply. Potential and current. From both WH and SH side. mr.marcus posted repeatedly to consider these aspects, so I'm not saying anything he hasn't shared before, but otherwise fight club rules apply.



Is that a logical expectation? Is it possible that they are opening new positions in the opposite direction, knowing there is little future demand to come? Could we have a combination of one timeline closing out longs and another timeline taking new positions, both being sold to weak buyers who are chasing? What information (price, time, volume) the market gives would you use to arrive at conclusions of who is trading when? That is all the information we have, so need to develop a theory with testable parameters - figure out where you are right, where you need to refine. Otherwise its an interesting discussion, but won't lead to progress until we apply the method of making educated assumptions, testing, and refining our theories.



Some good questions in here. Of course there are multiple timelines involved, so as wsw says price movement has to suit 'someone' all of the time (as nobody does something for nothing) but won't always suit everyone. So need to work out which traders can play in which conditions. What is the limiting factor?



There is always a danger of being muddled as you try to organise the information. Striving to change the confusion to clarity is the name of the game. If you don't try, then you'll never know. Without 'who' is doing 'what' how can you profit as an independent directional trader? 'Fake' I think was a term used for when price movement exits for the purpose of enticing (weak) traders to enter, rather than when it is part of the market travelling to its destination. 'Fake' moves being movement opposite the ultimate destination - but for a purpose.



Sounds a lot like wasp, trader_dante, and a dash of dbphoenix. This place doesn't change much. Maybe you don't need to know. Depends how satisfied you are with your trading results and what you aspire to. So much of what is written here could be termed 'guessing with discipline'.

You don't say how you'd know to be long, aside from hoping to be correctly positioned by accident, or knowing to close a short before the parabolic move occurs. The last example of this type of condition I recall was EUR/USD recently...and there were plenty traders holding short from the last week as we had a double top...they were dumping on the way up with late buyers chasing the highs...is that because the traders didn't accept the "reality" of the price? Or did the price tell them the reality only after they were already positioned the wrong way, and force them to change their minds? For the late buyers, reading price movement and velocity at face value - accepting that reality - blinded them to the likely outcome (a reversal and stop out). All due to their trading without understanding the state of supply/demand. Which in turn is down to their assumptions about what they need to know about trading, and the extent which emotions such as greed overrides rational choices.

So if you can't accurately and consistently estimate supply and demand, what do you base trade decisions off? What inputs are you left with? Price movement and velocity only? Price patterns? If that 'worked' without further paramters...everyone would surely succeed, no?

And if you have to wait for the lower lows to start closing out your long positions (or indeed put on your shorts), forget the Forbes list ;-)

I can see where you're coming from with the DBPhoenix comment, although the Wasp and Trader_Dante comparisons leave me somewhat insulted

Nevertheless, a good post, and so I'd rather respond to that.

I believe that there are some 'rules' (or guidelines) to the game. One of them is not going against the trend, hence the lower lows comment. Knowing what not to do is the first step in knowing what one should do. I doubt I ever will be in Forbes with my trading so you're spot on there. If you can read price quite well, you know when you can go against these rules, but even then in most cases you often don't need to. Ultimately, you have to face the reality of price, and can't argue with it because that does no good, and this was central to my post. I accept that my understanding of weak hands and strong hands is not as good as some other members here, but I disagree with your statement 'Without 'who' (sic) is doing 'what' how can you profit as an independent directional trader?'. You can profit. You do not need to know. You need to accept and act on it.

In terms of the fake move discussed. Well the trend was down. Yes, we had an upmove on an intraday timeframe, but in the grand scheme of things it was relatively small compared to the longer term down trend. I don't argue with the tide.

I don't think this thread needs live calls, but it does need analysis. What were the other analyses of piggybridges chart?

Good to have this discussion furthered, and I hope lurkerlurker or someone else can take it on, so we can all learn something.

 

[lurkerlurker]

Knowing what not to do is the first step in knowing what one should do.

Then the first rule must be self honesty. Don't BS yourself. This sounds a bit abstract, but its relevant to your post and many beginners.

Your motivations are key. How many people are truly interested in learning about markets, vs people who are interested in having a hobby, showing off, or greedy to make some easy money? This affects the approach.

For someone who wants knowledge, information is not accepted uncritically. A logical approach is required, with ways to test assumptions, and rigour in the filtering of information. Broadly, what works and what does not work is no secret in this business. An aspiring trader can find out. This is different to taking in popular assumptions and cliches without critical thought.

The language we use to describe markets is key. You mention a few times the concept of 'trend'. This is a term weak hands use for their unproven assumption that price going up means price likely to continue going up (price going down likely to continue going down). If you are using visuals alone to determine trend, and cannot read the flow to determine when a move is fake, this results in chasing price only to be stopped out, and missing many opportunities to take the other side. By definition, the most profitable place to enter a buy trade is at the bottom of a move. Aim for as close to the bottom as possible. Yet the concept of trend following keeps people late-waiting for confirmation- but is convenient for the ego when one cannot read a move before the majority of it has occurred.

Then there is the inability to read when a pullback against a trend is required, and how deep this pullback is likely to be. Without this information, we have overleveraged price chasers being taken out of the market on reactions, before re-entering continuation trades later at a worse price, still with no idea of how much juice left in the trend and therefore where to close. Textbook technical analysis and concepts of trends isn't going to get them any closer to making the most of these conditions (selling on the way up, scalping the correction if it is likely to be deep enough, buying back in at a better price).

For a newbie, there is enough information available to find out which strategies have been profitable. Broadly diversified investments in equities have worked for centuries for a 20 year or more investment timeframe. Institutions with access to customer order flow have a major edge and can trade on that. Strategies involving difficult maths, difficult programming, or highly competitive execution (arbs, stat arb, HFT, e.g. writing direct to the exchange which is sophisticated and expensive) are likely to be very profitable. For those with low costs, there is market making / rebate trading although this is less competitive for manual traders. There are also some non directional strategies of note.

This is about finding a niche. If you don't have low costs, access to order flow, the finances to set up an HFT operation, the skill to run it, high level programming or mathematics knowledge, or sufficient capital to exist as a long term investor, then you are left with highly developed market intuition and proprietary trading strategies based on appreciation of order flow and how the various categories of trader do business. This too can be very profitable.

It is possible for a novice to do some research into these areas and find out where and how profits are being earned. And where the bulk of the losses come from. Check out CME's Liquidity Data Bank which breaks down volume into 4 categories of trader, with CTI4 being weak hands. Detailed study of that data will give you the ability to test whether certain assumptions are valid.

You can profit. You do not need to know. You need to accept and act on it.

In terms of the fake move discussed. Well the trend was down. Yes, we had an upmove on an intraday timeframe, but in the grand scheme of things it was relatively small compared to the longer term down trend. I don't argue with the tide.

So you miss opportunity to take points against the "trend" intraday? That isn't efficient - that is rationalising not making efforts to understand why and how the correction occurred. Missing opportunity. If you do that, you never get to the point of learning if there is a way to anticipate the counter move and profit from it. For day traders who trade every day and flat at the close, what use is longer term trend? There is rationality in exploiting the immediate future, starting with the next 1-15 minutes. In many cases this is easier to predict consistently than longer term moves, especially for beginners.

If you are trading a longer term timeframe, do you watch some of your profits evaporate being short through the upleg? Or do you exit before and re-enter at a better price? Or do you let market move 50, 70, 100 ticks against you because you call yourself a trend trader or position trader not day trader? Where is the value in this. Surely this cannot be the best approach? Especially when your ability to predict where the correction will end (or if it is a reversal of trend) is as good as your ability to predict where such counter trend moves are likely.

I could profit at roulette too, if I played it once or twice. Enough random chance of that happening. Place 10 trades a day for 240 trading days a year for a couple of years, and whether your result is similar to having played roulette a few thousand times tells you what you need to know.

Many here insist that so and so can or could work, yet these are usually the people who spend a lot of time on trading forums looking for information on how to be a better trader. Others know the flaws in these approaches, but when they are pointed out, people don't want to listen as it takes away their hope. Back to self honesty again.

So while your post seems to invite further discussion, there is still the old trope of "do you really need to know". It is gonna be difficult to sustain 14 hour days at the coalface for years refining a reliable, accurate method if some part of you doesn't believe its necessary, thats for sure.

As my mentor was fond of saying, there is room for all levels in trading, and you get out what you put in.

It is all down to the individual - I was just wanting to point out some possible benefits of working to understand when buying is weak, and digging deeper, versus assuming that textbook concepts will bring you success and that you don't need to know more.

My comment about the Forbes list - I have a friend who has a friend who is on the list, and he says its nonsense because he knows a few people who should be near the top but aren't even mentioned. Large independent currency speculators in Monaco and Hong Kong. Who do 40-50 billion dollar trades. Even at sizes an order of magnitude less, you're selling on the way up the move - by the time the buying has dried up and the market is drifting making lower highs and lower lows, good luck getting filled at acceptable prices! If there are traders already positioned in the direction that you will be triggered to trade in by price patterns, what does this tell you? Even if liquidity considerations don't affect you as a small speculator, they affect a large enough portion of traders that there is information to be learned from how they are trading. And if you ever want to move up size in day trading, these considerations will need to be understood.

The alternative is applying discipline and money management together with textbook strategies and see if a basic level of success can be achieved. Up to the individual which path to follow, but I don't have the time to contribute further or regularly here. Far too busy. I'm working all weekend on improving my trading, learning from last weeks results, always looking to improve my understanding and accuracy on entries and exits. If I didn't have the energy and motivation to keep improving, then I should be doing something else with my life. Its too short to do things half assed. Do something as well as you can do it, try to reach your full potential. How many people get that opportunity (or how many make sacrifices to create it for themselves).

I think you need to have the attitude that you can achieve more, rather than focusing on reasons why what you do currently is good enough. The more work and better quality work I do, the more chance that I'll be able to adapt to changing market conditions and less chance that I'll be out competed by others. Many traders have got away with discipline and money management alone and then lost their edge. Paul Rotter ruffled a few feathers by taking opportunity away from slower, smaller, less savvy scalpers. "I probably stepped on the tail of some monkey who could not longer compete."

The edge is YOU, your attitude, logical thinking, research, testing, hard work - the unique skills that you bring, that you've worked hard to develop. Not a trend, or accepting the reality of price.

Just trying to pay it forward as I had masses of help learning to think correctly - but I can't be giving anything away in any detail, which I'm sure you understand. Happy hunting!

 

[Shakone]

Lurkerlurker, a lot depends on how you define trend. Do you define it on what has occurred in the past, or do you, as I do, define it as the line of least resistance based on your reading of price. Line of least resistance is another cliche term which I mentioned on my other thread, but it simply means (to me) the line that price is more likely to travel over a period of time. No certainties, but not guessing either. Depending on the period of time you're considering, this may have two different answers. You suggest trend is a term weak hands use. The greatest audited trader over a long period of time - with better results than Soros - that I know of is Ed Seykota. So if he discusses trend, is he a weak hand using flawed assumptions?

Often the line of least resistance will coincide with the historical trend but sometimes not. Detecting this is a key skill. But no, I didn't say I miss the opportunity to take points against the trend. If based on my level of understanding, I believe I can obtain points going against the longer term trend, I will try to take them in the short term, but I'll be realistic about the extent of that move, and have in the back of my mind the general conditions and what the longer term trend is and what the immediate trend is relative to my trade.

By definition the most profitable trade is entering at the bottom before an up move, this is obvious and you're correct. But that is just on one trade. If someone requires 5 attempts to pick that correct bottom, then it is not the most profitable way of trading. The number of attempts required may be about skill level, but it also may just be about the approach, and that picking exact bottoms is difficult to do at all skill levels. My attempt is to understand every single move. Of course I don't achieve it many times, and it is a hard task, but I don't just give up and hope the trend will keep me going. I am always willing to learn and improve understanding. And I agree with you about the attitude to always improve. As for the question "Why do we need to know", well it's a question. It doesn't pre-suppose that there is nothing extra that can be known, only that we can profit without knowing. Which I stand by. So why do we need to know? Does knowing about what weak and strong hands are doing guarantee every trade is a winner for example? Does it overrule the basics that I mentioned in my post? Is it more or less powerful so that it will override a 4 years+ trend? These are questions that are currently unanswered.

You ask what use is knowing the longer term trend for a daytrader? Lets take your point to its conclusion. What use is knowing the next 15 mins if you can't know the next minute? What use is knowing the next 1 minute, if you don't know the next few seconds? What use is knowing the next few seconds if you don't know the next tick? For my trading it does help in knowing which way the longer term trend is in my experience. Whether it does for yours, I don't know.

But this thread is not about me, and should be about weak hands and strong hands and how to detect them and their motives or intents. Are you willing to discuss that? If you are, I'm all ears, and we should get down to actual analysis, otherwise it's all empty words (from both of us). Of the last chart posted by piggybridges, I think I'm still the only one to give any analysis. My analysis may be flawed, it may not have played out like I suggested, but the discussion will only progress if we get to actual examples.

So pick a chart, and as a first question, how can we detect when buying is weak? Just this one question to get us started, and then the discussion can continue.

 

[Shakone]

Lets see if there is any life left in this thread.

Can we identify the difference between strong hands taking profit and strong hands entering a new position? If so, how?

 

[morgan_edge]

Lets see if there is any life left in this thread.

Can we identify the difference between strong hands taking profit and strong hands entering a new position?

I don't think so. I mean, I certainly can't!
Price moves up and down and I can't imagine how i'd be able to acertain who is on the other side of the trades, and whether they were a 'strong' or a weak hand.
(although maybe there's some nifty Depth of market tricks that im' completely unnaware of! )

 

[Shakone]

I don't think so. I mean, I certainly can't!
Price moves up and down and I can't imagine how i'd be able to acertain who is on the other side of the trades, and whether they were a 'strong' or a weak hand.
(although maybe there's some nifty Depth of market tricks that im' completely unnaware of! )

Well, just thinking aloud here...but if we believe in the existence of some professional strong hands, and we believe that these have an influence on the markets we trade, then these strong hands have some intent.

Now, if you are trading, do you act the same when taking profits as you do when entering a new position? In the same way, should we not expect there to be a difference if strong hands are taking profits or if they are establishing a new position? And if we can't detect at the time they're doing it, can we detect what they did some time after from the resultant behaviour?

 

[sonofcablemonster]

Well, just thinking aloud here...but if we believe in the existence of some professional strong hands believe thaccumulate ave an influence on the markets we trade, then these strong hands have some intent.

Now, if you are trading, do you act the same when taking profits as you do when entering a new position? In the same way, should we not expect there to be a difference if strong hands are taking profits or if they are establishing a new position? And if we can't detect at the time they're doing it, can we detect what they did some time after from the resultant behaviour?

Shak you should be a detective! When larger players enter/exit they have to be careful not to move the market against them. anything about 500 lots ish on the ES will take out a price level during RTH. So entering for them is about accumulating a position over a range of prices and exiting where there is enough liquidity to get out.