OK I am back and ready to share some of what I hope will be useful information with you guys and gals. Anyone who has been reading my Tutorials by now knows that I like to look at any market from an existential perspective. I sincerely believe that when you can wrap your mind around the fact that markets are mostly made of other human beings just like you and me trading it can help you interpret what you are seeing on a chart in a deeper context. So I am going to be talking about DYNAMIC traders and Technical traders and they are two sides to the same coin.
Why the F should you read all this in Alfred's Opinion
When you are familiar with the people around you then you feel more comfortable as a human being and when you can look at charts and see them to some degree at least as simply reflections of the actions of people trading along side you. this is part of what I use to keep my mind in a serene place during bets trades whatever you want to call them.
OK now lets pop up a chart and spot those evil dynamic traders.
OK first lets talk about what we are looking at here.
1. This is a one hour USDYEN chart
2. There are some Bollinger bands set at the default of 20
3. There is one Yellow EMA set at 21 just to not be to redondent
4. There is a Resistance line up top and my support at the bottom
Firstly lets explain the concept of the dynamic Verses Technical trader. There is a lot of talk about brokers taking the other side of trades in binary options and how it is demonized but first you have to understand that on a conventional market as you are selling an asset someone HAS TO BE WILLING to buy. As you are buying an asset someone has to be willing to sell. OK now you might be saying DUH Alfred get on with it at this point. I really want to explain that although now days we do so much with computers and automation none of this is possible without the fundamental elements of buyers and sellers willing to trade on a market.
To understand this concept completely you have to get the motivation of the dynamic trader. Also this will sound a bit like conspiracy theory but if you can get this then when indicators don't line up you can stay cool. When S/R lines don't hold you can stay cool because you will likely know EXACTLY what is happening.
The Technical trader: I am a technical trader and this means that I trade based off of S/R lines,indicators and Price action. When I am in a market and popular staples for me like my EMA line, Bollinger bands, Pivot points and S/R lines are working well my life is good. Now if I had my way it would be like this forever but there is one problem. The marketrs would stay locked in a predictable range and longer term institutional money would leave whatever that market was and when the money is gone there is no money for a little technical trader like me to make money.
The DYNAMIC Trader: I dont know if anyone here watches wrestling or not but there is a very famous wrestler by the name of Ric Flair and he is very flamboyent and of course has a lot of catch phrases. Back in the day he would come out and say to the audience " you might say to yourself what's causing all this wooooh it's the nature boy ". Ric Flair was always the heavyweight champoin and led a pack of guys calling themselves the four horseman. They kept all the belts and made things happen ( mostly bad things happen) to guys who got in the way of them keeping all the belts, prestige and power.
Dynamic trader(s) are the Ric flair's of the markets and they are needed like it or not wrestling or any story without an antagonist for that matter or ranging markets everyday over time want make any one of us money. Dynamic traders dont have a problem knowing where the market is going because they are the ones who buy or sell it into that new direction and range.
They are what's causing all this wooooh ( man I should have recorded audio for this so you guys can hear my impersonation of Flair lol ).
So what is the dynamic trader(s) problem if they can run the markets essentially? Well remember when I was saying that there has to be someone to take the other side of a trade? Even if you had the goose that can lay golden eggs you still need someone who is willing and can afford to buy them from you. Even if you found the so called Holly Grail of trading you still need money to go on the markets and purchase it's trade recommendations and there in is the biggest problem of the dynamic trader.
Now that we have covered all this lets look at the chart again and see people not just numbers and prices.
Firstly months now I've been talking about a long ( Call ) trade on USDYEN even big guys are doing it and making money off of it. So dynamic traders on a longer time frame have been accumulating buying USDYEN.
1. OK now do you see the technical traders following the 21 EMA trend down?
2. You see the Bollinger bands on the default setting trending down?
3. wait Holly smokes at 10:00 what happened to all these great tecnical indicators?
ANSWER: Dynamic traders wanted to unload some of their long positions because the technical guys were getting on their nerves attacking support so time to
A) spank them hard
B) flip their indicators on their rear
AND JUST FOR FUN
C) May as well sell them some of the currency they have been accumulating and take a bit of profits off the table while they are at it.
AT 10:00 - 11:00 they ran the price up crossing the 21 EMA. Now even the bravest of technical traders are worried because momentum breakout guys are even showing interest and the trend may change direction entirely ( DAMN INDICATORS ). Among them is a bold daring technical trader but one who understands the concept of technical verses dynamic traders. So now he ( or she ) is just waiting for the final sign dynamic traders often leave behind. Now 11:00 closes you see that wick and a few momentum or breakout guys jump on board looking for that new ride ( buying from the dynamic traders causing all this ) and they get a nice thump around the ear for their troubles as well. There is a phenom coined by Richard Wykoff called a ( buying / selling )clymax where the last of the unsuspecting buy into a market at the peak of volume and sadly price or sell off their assets at the peak of volume and sadly the lows of price because this is the point where large dynamic traders are willing to Sell or buy. Distribute part of their accumulated position or begin buying a position.
OK now you might be saying but Alfred that is all well and good but you just described a situation that is HOPELESS LOL. breakout guys got spanked, technical traders got spanked and indicators meant nothing. Now lets look at why some bold people say they trade with banks and institutions blah blah blah. Actually they trade contrarian as if they are on the side of the dynamic trader. Wick traders or PA lovers all around could wait for that wick and pounce after it is challenged.
There is more to a wick than meets the eye!!!
You say I see the wick at 11:00 Alfred no big deal why do they excite you so? Here is what I see there and hopefully someone will see it also. I see a point in time where for almost 2 hours dynamic traders were willing to buy and push the price up and then I see clearly after that a spot EXACTLY where dynamic large traders put on the breaks and finished what they planned in the first place and sold into the markets.
Again none of this is THEORY it is simply pointing out what is right in front of you when you look closely. This is why often if you can spot where dynamic traders came in and pushed in one direction or another and then either sold to those buyers or bought from those sellers often those SAME LINES will come back into play over and over again. OK if someone is from Missouri let me say it like this. There is no way that a PURE technical trader was buying into that down trending market all of a sudden and so if there are only technical and dynamic traders who is left? Also this is one of my favorite ways of drawing S/R lines at points when you see indicators out of whack that were proceeded by strong moves that suddenly reversed. These lines mark the work of dynamic traders. This happens in every time frame so when you wrap your mind around this conceptually it can benefit your trading in my honest opinion. When you see indicators like the Belkhayate and Ichimoku then you notice that they illustrate this concept very fine indeed.
More to it than just wicks if that is what you are thinking also look for breaks of (20,50) or (100,200 ) EMA. Look for Value charts at ( + /- 14 - 15) or ( + / - 33 - 35) on small 5M time frames and patterns that are unusually long and RSI that hangs above 70 - 80 ( where are the peaks on those charts ) and those are spots you can plan contrarian trades on the side of dynamic traders. You are happy at those levels and have a plan while others are cursing their indicator and looking for a new better indicator.
At this point I hope more people are starting to see indicators, PA, Fundamentals all have a place in your trading and provide pieces to the puzzle that is a trading day. That is all for now and remember when Alfred is Talking Markets you can take it to the bank!