03 November 2010

The Right Side of Money Flow

So how does one get on the right side of money flow ? It would seem to be impossible, which means what it seems like in the market, that those with the capacity to move the market have an insurmountable advantage. Essentially you are always trying to chase the market, by using indicators to show you money flow movements.

But these are indicators developed in the equity market where money flow is part of a computational system, even in day trading. That is to say there is more to hold onto, what the market was saying 14 periods ago is important, in forex it is not so important.

What I mean is, these indicators come from structure for equity markets and do not show you much of anything on forex, in terms of temporal structure, but they do in equities, where chaos hold structure together better (i.e. over time). That is why the 'Dave Wave' seems to reveal so magically, it is simply something which is native to forex structure.

This indicates to me that it is possible to use indicators in forex, but ones which are native to forex, or at least a set of equity indicators molded to the functional reality of forex. That is going to mean though that you have to add a lot of content from the market to your trading (or get a credit line of $100 million).

Forex structure is delicate intricate and changing and it is referential in this suddenly precise and deep way. That is the moment of optimization, the point of the search for value. At this point structure coalesces to something the trader can use, but at this time it is too late, unless you have leveraged yourself into the trade. That is what money flow or market maker structure lets you do.

The difference is that if you use money flow you are in some sense of control, unless larger flows overcome you or the market will not stimulus up anymore. The problem with market maker structure is that it is unclear whether it is designed to fake you out or not, this is an intensely antagonistic process.

But the indicators you are using will let you get onto the wrong side of it. That is what it is like, how many times has an indicator signal got you onto a losing trade ?

Structure forms in a real time basis, in equities is is more like money flows around structure. In forex it is that structure appears to suddenly form around money flow and that is your problem, because that is not predictable, that makes you chase the market, because these indicators pick up that structure formation and misleadingly tell you is is referenced to something earlier, that is why the market can flow in totally opposite direction to your indicator reading.

So you have to make that reference correct somehow, assuming you are not making that money flow.

But you do have an edge if you know what the market makers know and that is the patterns they make that causes the money to flow a certain way, that is why you see things like ‘00’ as particularly important in forex, they are repeated ways to make money flow. That is why I went into 1 min, but unfortunately that is a market best traded by an very advanced AI program.

This does exist. AI does not have the technology to trade like that yet. But it seems like there is a superstructure in forex, what the 'Dave Wave' seems to get at, and that is where you can make longer term trades, which are much more feasible for a human brain.

At the same time you expose yourself to great risks, risks which increase massively over time, of new ways for money to flow. That means your stop loss getting hit, worst but not so unlikely case, and in other cases, dynamically altering your trades once you enter.

Which starts bringing you back to the 1 min chart. It seems to me the best way to use these tools is as support for the brain to sense structure forming, for those bursts that will give you a decent bite of this apple.

It means you have to do what you are told not to and reject a lot of signals and in a way forget about confirmation, that means nothing (what exactly is it that you are confirming ?). And try and use indicators in such a way that they key in with the way forex works. That is time dependent, sometimes there is chaos from equities sometimes not, that changes things a little bit.

In any approach I am looking for that coalescing of structure, rather than looking for money flow as that is what you should probably avoid doing unless and even if you are causing it, as stimulus effects fade and trying to get at forex content in a structured way. The problem with systems is they ignore content because no computer program can deal with content the way a mind can, especially if it is supported.

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