My new chaos findings implemented in forex trading

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Paul&Paul
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Flash crash on GBPUSD

Postby Paul&Paul » Wed Apr 25, 2012 11:10 am

Isn't it disturbing?
Look at the GBPUSD chart. See where it was some hours ago and what and how it was faring above and below 5.8664. How many times it tried to break from the range and finally
what the vector field orientation was pointing to. Look at those arrows directed downwards.
And suddenly a flash crash happened.

Just a few hours earlier I wrote:
HFTs are small in number but together with
intermediaries they are responsible for a disproportionate part of trading volume. We should not be misled by that small number of HFT entities.
There is a view that HFTs and Intermediaries generally provide liquidity while Fundamental Traders generally take liquidity.
However, sometimes the aggressiveness ratio of HFT can be higher than what a conventional definition of passive liquidity provision would predict.

It is important to know that HFTs tend to end each session
with a zero net position. They start with a zero net position as well.
It follows that throughout a session their liquidity provision changes dynamically and also that sometimes they will not trade at all. They impact the market not only by the way they provide liquidity but also by refraining from such provision or by sudden increasing the aggressiveness ratio much above levels for a passive maker and also by taking liquidity from the market.

Markets are different now than they were ten or twenty years ago. I would
say they looked more classical in the Dow sense then.

Some studies are devoted to very dramatic events like the flash crash from May 6 of 2010.

Now we have GBPUSD and its flash crash on April 25, 2012. Almost 100 pips from the top to the bottom together with a big gap.
A gap on such a liquid pair at this hour of the day?
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Paul&Paul
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The flash crash on GBPUSD

Postby Paul&Paul » Wed Apr 25, 2012 4:31 pm

The events of April 25 continue to reverberate through the financial markets.
The flash crash featured a big decline of the rate of exchange. The price has already retreated intraday.
There was a complete evaporation of liquidity in the marketplace. Who and why took liquidity from the market? What were the HFT doing at that time?
Those who want to support the idea of seemingly innocent (passive) market makers like HFTs and Intermediaries must take a deeper breath and think twice longer.
Some observers will be quick to offer explanations for the flash crash:
1. A fat-finger trade triggered a cascade of stop losses
2. Technical difficulties were alleged to have contributed to the free market fall
3. Some other currency/equity movements
4. A large purchase of put options by a hedge fund
5. A sale of 100,000 contracts by an unknown entity
6. A predatory practice called "quote stuffing" forced competitors to slow down their operations in order to catch up with the ovewhelming amount of data to be processed by their algorithms.
My analysis shows that the liquidity problem was slowly developing in the hours before the collapse. During that period oorder flow was becoming
increasingly toxic for market makers.
In a high frequency world, order flow toxicity can cause market makers to
leave the market, setting the stage for episodic illiquidity.
Is this anomaly to occur in future?
Are there any tools to monitor in real-time the likelihood of it occurring again?
Both the answers are YES.
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Paul&Paul
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It is much easier to see things when you observe

Postby Paul&Paul » Sun Apr 29, 2012 10:25 am

others wandering into trouble than when you are in it or you are about to do something.
Observers are more open to information than actors.
That is why organizations are better than individuals when it comes to avoiding errors.
Individuals do not have the power to impose orderly procedures.
Organizations can institute and enforce the application of useful checklists. They will make better choices when they trust their critics.
Who is your critic when you trade alone?

Paul&Paul
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GBPAUD is heading towards 1.5515=9.1299

Postby Paul&Paul » Sun Apr 29, 2012 11:46 am

GBPAUD is heading towards 1.5515=9.1299 of a trigger down.
Friday ended with a tone down.
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Paul&Paul
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GBPCHF heading higher

Postby Paul&Paul » Sun Apr 29, 2012 11:57 am

GBPCHF can go as far as to 9.1299=1.4792.
Friday ended with a tone up.
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EURUSD H4

Postby Paul&Paul » Sun Apr 29, 2012 12:08 pm

EURUSD H4.
The trigger up could not be found near the low 1.3000. It was found earlier and it expanded recently to 4.669=1.3265.
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Paul&Paul
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Dow up

Postby Paul&Paul » Sun Apr 29, 2012 4:17 pm

DJIA up at the end of last week. There is a semafor3 and a trigger down near the top, yet DJIA is climbing towards 13410/13414. The movement is doubly supported by 13091 and 13074.
The 13091 support is pretty evident but the lower UPO is more important for fresh long positions.
Two triggers up are seen only when the chart is squeezed.
Attachments
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Paul&Paul
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A trigger down on USDPLN expanded 14.208

Postby Paul&Paul » Sun Apr 29, 2012 5:14 pm

times its size.
USDPLN went to 3.1402 which is nice from the point of view od chaos.
Friday still ended with a tone down. On Friday we did not have any new trigger
up which could cause USDPLN retreat from the recent lows but maybe something crops up soon when the markets reopen for a new week.
In a broader picture recall that EURUSD accomplished an F on an H4 chart.
USDPLN did something remarkable too. Both these crosses travel in opposite directions.
It remains to see what is going on an EURUSD M30 chart.
Attachments
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Paul&Paul
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EURUSD

Postby Paul&Paul » Sun Apr 29, 2012 6:14 pm

EURUSD is not trending strongly.
The key selling area is seen near a UPO @ 1.3342 from the 3rd of April.
DJIA climbing higher is euro supportive in this cross.
The nearest UPO from the downside is at 1.3207. The nearest UPO from the upside is at 1.3252.
EURUSD is bound to return to them some time in future.

The target 1.3283=9.1299 is not all EURUSD can do. Another trigger up was there which at the same 9.1299 gives 1.3320.
The dark clouds over the eurozone have not produced thunderbolts as yet.
At the close of Friday EURUSD showed the tone up.
Attachments
eurusd29.04xx.gif
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eurusd29.04x.gif
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Paul&Paul
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GBPUSD

Postby Paul&Paul » Sun Apr 29, 2012 6:57 pm

GBPUSD.
We already know the reference levels from the topside.
Interesting is the fact how aggressively GBPUSD was lifted from the bottom of the flash crash. There are three triggers up there and their initial targets are marked on the chart.
From the downside we have two UPOs @ 1.6221 and 1.6134. The market is bound to return to them in future.
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