General Trading Discussion Digest for Saturday September 23, 2017

2 replies from 2 authors in the "General Trading Discussion" community ... I think the broader implications are fascinating! My ears really pricked up on the Cybernetics course when James stated that what you think you... [Complete Currency Trader]() [General Trading Discussion]( [Post New Message](mailto:COMPLETECURRENCYTRADER-generaltradingdiscussion@ConnectedCommunity.org) [] Sep 23, 2017 started 2 days ago, [Michael King]( (12 replies) [Predictive or Indicative?]( [external link to thread view]( 1. [I think the broader implications are fascinating...](#m0) Michael King started 12 days ago, [Anush Mohafez]( (6 replies) [central banks positioned behind prime brokerages taking off volatility?]( [external link to thread view]( 2. [Anush, this is deep for a Saturday morning :-) ...](#m1) James Edward [] [top](#toca) [next](#m1) 1. [Re: Predictive or Indicative?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_58013747-bb6a-4c2e-9505-095406b55a3b@ConnectedCommunity.org?subject=Re: Predictive or Indicative) [Reply to Sender]( [Michael King]( Sep 23, 2017 6:31 AM [Michael King]( I think the broader implications are fascinating! My ears really pricked up on the Cybernetics course when James stated that what you think you see has little to do with your eyes, it is all in your mind and the way the mind interprets the light on the retina. Like the picture of the guy with the menacing glare could so easily be the most gentle soul with a headache. It truly is one big psychologist's inkblot, and if there is one factor usually missing from trading it is objectivity. For my own peace of mind, I selected a chart at random and drew up several of the usual Moving Average standards and sure enough you could plainly see how price always reacted to them so then I replaced all those MAs with random unheard of periods 29, 42, 63, 89,173 and sure enough you can see how price reacts to all of them in much the same way, so I had to test for S/R as well. I opened another random chart on weekly time frame and fully scrolled out so you really couldn't make out the individual bars. I placed a few horizontal lines completely at random then I switched to H4 time frame and zoomed in. It didn't matter how far I scrolled back, those lines always acted as support and resistance! I think everyone should try this experiment. I'm under no illusions, I've been living in a fool's paradise for years! This experiment clinched it for me - an absolute eye opener!  just look at the screenshot at how resistance becomes support - absolute 'proof'  that S and R is predictive! but they are just random lines! So draw a few random S and R lines, preferably blindfolded, hire a local chimp to throw a few darts at stock sheets and you could well be on your way to your first million! I also reconfigured my Fib levels to be random non Fib levels ie 0, 17, 31, 40, 55, 67, 85 As you can see from the second screenshot price also respects these levels and any other levels you might randomly pick! Coincidentally I've had the best  two weeks trading I've ever had. One loser and I'm not going to say how many winners but a lot! Divergence and Fibonacci levels mainly, and zero awareness of what is really going on in the market. Logically this really shouldn't be sustainable. and I'm not suggesting it will be.  At the moment its working like magic but if it does continue to show a profit there must be a reason but almost certainly nothing to do with indicators. There is just one other factor which is crucial - price must have plenty of breathing space, the thinking being that price will always revert to mean At it's basic level in all trading - price moves up and down and levels will always be hit but in the process it seems there is a lot of vivid imagination at work ------------------------------ Michael King ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-22-2017 12:58 From: James Edward Subject: Predictive or Indicative? Yes there's a reason trend trading has stood the test of time and been incredibly profitable in every market; it doesn't try to predict anything, it merely follows the price. Buy when the price goes up and sell when the price goes down. It works! ------------------------------ James Edward London ------------------------------ Original Message: Sent: 09-22-2017 10:36 From: Nigel Tuck Subject: Predictive or Indicative? Great discussion. James, I thought your example of S&R lines lacking integrity in Vegas where you took charts of varying timeframes and then put lines on them arbitrarily to then find S&R levels debunked this thinking for me once and for all. Add to that the fact the largest orders and volumes going through the FX market are utilitarian in nature made me reflect on the behaviour of prop traders I have known in days past. I know that traders would often trade on the back of large customer orders placed with the sales desk. This practice has been stamped out (along with the prop trader!) but made for some very successful trades and big bonuses. One slightly different angle is that of trend trading over the longer time frames. Many successful traders have just traded with the trend and made a fortune. I think it is market wizards where JS refers to one such trader that pinned the paper copy of a chart to the wall, looked at the trend from a distance, and positioned accordingly. S&R didn't feature in the thought process. Good weekend all. ------------------------------ Nigel Tuck Original Message: Sent: 09-22-2017 06:28 From: James Edward Subject: Predictive or Indicative? It's not just the retail forex industry that's based on myths. It's all trading, even up to the highest level. Traders, both professional and amateur, perform worse than random. As a group, including hedge funds, we'd all get better results relying on coin flips. We do worse than random because of the decisions we make... we actively do the wrong thing, nearly all the time. And you're right (Anush) about it being psychologically hard to give up a belief. Part of that is because of how heavily invested we often are in both time and ego/reputation. To discover that something you have spent many years believing in, turns out to be meaningless or false, creates huge discomfort and most people will simply ignore the evidence and prefer to continue in their belief. It's easier. Pivots are an interesting in this thread Michael. They were first designed for use in the commodities markets (I think it was commodities) and specifically used by the floor traders in the pit. So there was a market with finite participants, all in the same room and actually talking to each other. If they were all using pivot points and all collectively believed in them, they could have been a real phenomenon in that market. But put it in a decentralised digital market and ask yourself if they are relevant. A pivot point is just he high + low + close of the previous day divided by 3. Why would that influence the change of a price on a currency? And which pivot do you use (I mean from which chart). If the GBP is going to change direction, is doing so because of the pivot on the GBPUSD or EURGBP, or GBPNZD and so on (they will all be in different places). You can draw any random line on any chart, and find a story to explain why the price did or didn't do something near it, before it, or after it. When I was learning to trade and was reading advice from respected sources on all the usual trading "facts", it made sense, and appeared to work - partly because of the cherry picked examples, and partly because our eyes are drawn to the times it worked and don't see the times it didn't. I wanted to believe. But I would always ask, what would have to happen behind the scenes for the price to change at this line or another. As soon as I asked about what was happening in the market in terms of orders and participant activity, the "facts" became obviously nonsense. ------------------------------ James Edward London Original Message: Sent: 09-22-2017 05:34 From: Michael King Subject: Predictive or Indicative? Some great insights from all and thought provoking Yes the hardest obstacle to overcome is the 'evidence' that your strategy works when it's based on myth and, dare I say it - superstition The strategy I learnt seems to work, but I wouldn't pretend I know why, I don't even fully understand divergence but it's worse than that, the second major rule is  that divergence must be accompanied by 'missed weekly pivots' because as we surely all know :)  'price is naturally drawn toward missed pivots' I believe the explanation for this is that all weekly pivots are eventually hit, therefore we must 'logically' conclude that every time price catches sight of a missed pivot it will try to hit it. I'm told it will often fail but at least it might get half way to pivot, the point is it will always try. but I have never tried  this strategy without the missed pivot rule,  I suspect price may equally be drawn to hit pivots as well as missed pivots, in other words the price moves in a certain direction due to various market forces and there will often be pivot lines down there somewhere The reality may well be that any level will be hit eventually So distant pivot levels are not predictive, not even indicative, in fact on very many trades there are missed pivots above and below - so price cannot fail to be drawn to one or the other! Candlestick patterns seem to be the most telling, and ironically often do seem to work, but when you have two screens of different brokers, you see that perfect set up doesn't even exist on the second broker. Not surprisingly, highly rated indicators with buy and sell signals will routinely show an arrow on one screen but not the other and yet still manage to be highly rated on respected review sites and speaking of which, isn't it fascinating  how so many traders, sometimes hundreds, will rave about how their trading has been transformed by a certain system or indicator, while a significant number of reviewers report nothing but losers. Unfortunately, all such positive 'evidence' does have it's effect, along with all the usual cautions 'Never trade in March' ( can't remember why not ) 'never trade in July or August due low volatility'.  'Never trade Mondays or Fridays due manipulation'  - I have personally had plenty of great trading Mondays and Fridays. It seems the entire Retail Forex industry is based more on myth, magic and superstition than reality, but I'm not convinced that this is the sole reason for failure, as some do remarkably well with  their wizardry. We can't really get away from the Turtle trading experiment.  The organizers had made millions - they knew their 'stuff', but that stuff as memory serves revolved around a break of a moving average, or something like that. Some trainees went on to succeed and many failed. But failure or success was almost certainly not due to whether moving averages are predictive or not, but almost entirely due to the individual psychology of the trainees. I believe Anush alluded to this connundrum,  - when something seems to be working why fix it?  If I still get presents in my Christmas stocking, why would I want to listen to the rest of you telling me there is no obese guy climbing down my chimney every year? But regarding reality, I watched some of the Foundation course this week which I have had for a long time It seemed like new content! Am I really so forgetful or has it been updated? ------------------------------ Michael King Original Message: Sent: 09-22-2017 02:16 From: Anush Mohafez Subject: Predictive or Indicative? Really, very helpful Elias, thank you. ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland Original Message: Sent: 09-22-2017 01:27 From: Elias Saravanja Subject: Predictive or Indicative? It is NEITHER ! ; Market decides ! / It could be BOTH ! and at the same time , if proper money management is use ; Shakespeare's OTHELLO, spend a ton of time thinking on the peripheral of his question , before he concluded , asking , " BE or NOT to BE ? , yet another ? ! . Cheers ------------------------------ [elias []saravanja] [trader] eliassaravanja@gmail.com [yellowknife] [NT] [1 867 873 8634] [CANADA] Original Message: Sent: 09-21-2017 05:48 From: James Edward Subject: Predictive or Indicative? Great questions and discussion Michael. I think there can be confusion about semantics. Are certain conditions/patterns predictive or indicative? For me personally, I try to avoid talking about prediction because to most amateur traders, prediction often means certainty. They mistake the idea of being able to predict something with 60% probability as meaning it is certain to happen. Look at the Trump election... Experts were suggesting Trump had only a 30% chance of wining and 70% chance of failing. Most people took that to mean he had no chance of winning and that the experts got it wrong. No they didn't, they got it right. The prediction was probabilistic not certain. So that's why I avoid the term as much as I can. Indicative for me makes much more sense and I think helps more people accept what is really happening. Now are some indicators predictive/indicative in a probabilistic way? Yes. However, most people are not using indicators of any value, and those who are achieving success with an indicator, may be (usually are) attributing their success incorrectly to the indicator and ignoring the other factors. I'll use your example of divergence. You said it works 70% of the time and only has a couple of other minor factors involved. But is it actually the combination of all factors that really provide the edge, rather than the divergence itself? My style for example relies on strength v weakness. Is that my edge? No. I also rely on momentum. Is that my edge? No. I also rely on liquidity. Is that my edge? No I also rely on Volume. Is that my edge? No. Strength v weakness is perhaps 90% of where my edge lays and that is my "big" thing, but it is only when ALL the factors come together and are aligned, that I have a reliable edge. And actually, as I will post further down this, the real edge behind all of it, actually comes down to liquidity imbalance. Strength and weakness is the best indicator or where the liquidity imbalance is, and so I rely on strength and weakness more than anything else as my primary indicator, but the true edge that triggers everything is liquidity imbalance at the depth of market. Now to support and resistance. In forex, it is a myth. Completely and utterly in all forms. This, and everything else has to come down to what is actually going on in the market at a mechanical level. Forget charts. Charts display price changes. They say nothing about how the market works, or why a price changed, how, who changed it, or why. If anything is predictive or indicative, or has any meaning, it has to be relevant to the market mechanics. So what is support or resistance? I mean what is happening in the market...not what does it look like on a chart. What orders have to exist for support or resistance to exist and who has placed those orders and why? You should ask the same question for everything you see in the market. I'm going to copy some text taken from a video I put out this week as part of the cybernetics course. Hopefully this will put some of this in to perspective: Fundamentally, all markets are the same. There's a product, and there are people buying and selling that product. However, despite that fundamental sameness, every market is different. They each have their own rules, characteristics, etiquette's, and structures. Different people participate in each market, and people have very different reasons for participating in each market. A farmer's livestock market and Southeby's are both auction market places, but they are very different in the way they operate and why they exist. In trading, most people confuse markets with charts. But a chart just shows you changes to the price of the underlying product. That's all. It tells you absolutely nothing about why the price changed, or who caused it to change, or whether it is likely to change again in the future. My wife went to a livestock market last year with a farmer neighbour of ours, and she nearly bought a cow by mistake. She rubbed her nose without realising at that market, that was a gesture to signal a bid. When the auctioneer pointed to her to confirm her bid, she panicked and raised her hand to say that she wasn't participating, and that was considered a gesture to increase the bid increment by a factor of 5. Her friend had to quickly tell her to stand perfectly still and not do another thing. The friend on the other hand, was an expert. They bid on certain cattle and not others tactically depending on who else was trying to buy, how many people were competing, what time of day it was and how many cattle were left, who was selling and how much had already been sold, and so on. Our friend understood the market dynamics and operated like a pro. The same thing happens in financial markets, and most traders are totally clueless. They don't even realise what mistakes they're making, because they have no idea about the unique and intricate mechanics of the particular market they're involved in. A system is basically a framework that gives you a methodical strategy for tactically participating in the market. Let's just call it a set of rules or instructions for how to behave. For a system to be of any use, it has to be relevant to the market. If my wife's friend wrote down a set of instructions on how to buy a cow at the local cattle market, and I tried to use that to buy a Ming vase at Sotheby's auction house in Manhattan, it's not going to work. If a highly successful and famous trader has developed a system (a set of rules or instructions) to help him tactically participate in the pork bellies futures market, that has got absolutely no relevance to the spot forex market. None at all. The same as a system designed for use in the Dow Jones has no relevance to the copper market. The charts from all those markets will look the same because all charts display price changes; but why the price changed and how, will be different from one market to the next depending on why that market exists and who's participating in it and what their objectives are. And don't forget Apophenia and memory recall. We see patterns where none exist and give meaning to meaningless data. All humans do this. And then to reinforce how things "appear" we remember all the times it worked as we expect and forget all the times it didn't. If anything is predictive/indicative, it has to be relevant to the market mechanics and be nothing to do with a chart. What orders are in the market and why or how can those orders influence the future? In an auction market like forex, liquidity imbalances can predict the future price movement with up to 80% accuracy over a distance of 10 pips or so, or a time frame 7 to 10 seconds. Stanford university proved this. That's all down to market mechanics. No one has ever proved anything like that with patterns on a chart....because charts are not markets. I'm in danger of sounding confrontational.... I'm just rushing to get you a reply and add to the discussion before I head out in the next 10 minutes. Please come back to me with more questions, or challenge me on anything you disagree with or don't understand my point on. You've brought up a really valuable topic here. ------------------------------ James Edward London Original Message: Sent: 09-21-2017 05:00 From: Michael King Subject: Predictive or Indicative? I have been a little bemused by some of James' recent clarifications: Studies have shown that popular tools are not predictive. They may have value but they are not predictive. Would it be true to say that such tools and indicators may 'indicate'  where price is more likely to go but technically they are not predictive by definition? Perhaps I can give an example - Although I don't believe Divergence was alluded to, I will hazard a guess and assume 'studies' have proven that Divergence is not predictive. I trade a strategy however, that relies heavily on Divergence and is 70% successful, and in the 30% of cases where price completely ignores the Divergence, the next instance of Divergence is invariably successful. There are one or two other factors involved in the strategy but Divergence is the main factor. Many traders have been trading this system with very similar results over many years. I don't know if any studies have been conducted on Divergence or what the criteria of the analysis would be. But if you back tested  every instance of Divergence it is very likely that the results would indicate that Divergence alone is of no practical use at all in predicting direction. Would the Study however, take into account that you need to wait for a break of trendline after Divergence, in which case  there is a very high probability that price will move in the direction of  that break. I would consider that to be predictive but perhaps I should use the word 'indicative'? James did definitely refer to Support and Resistance as being non predictive and that really caught my attention. But he didn't say they were insignificant The usual belief which may be considered a 'myth' is that 'Support becomes Resistance' and vice versa. I have found this to be true more often than not and  whenever I have traded into nearby major support or resistance it has not usually worked out well. So would I be right in thinking that even if not predictive, major levels of support and resistance are highly significant and are best not ignored? or do studies show that they can be ignored with impunity? Sorry if I appear somewhat obtuse on this.  I would just appreciate a little clarification and am certainly not courting controversy. ------------------------------ Michael King ------------------------------ [] [top](#toca) [previous](#m0) 2. [Re: central banks positioned behind prime brokerages taking off volatility?]( [Reply to Group](mailto:COMPLETECURRENCYTRADER_generaltradingdiscussion_c56bdad7-dd13-4c32-bd93-2c08ceab553c@ConnectedCommunity.org?subject=Re: central banks positioned behind prime brokerages taking off volatility) [Reply to Sender]( [James Edward]( Sep 23, 2017 5:25 AM [James Edward]( Anush, this is deep for a Saturday morning :-) I'll try and keep it brief, and hope others join in. Firstly, yes, please do challenge my comments. I don't know everything there is to know about FX and there may be things I have not come across or considered. If I'm wrong about something, I want to know so I can correct it. First question is, do market makers manipulate the market? It depends what you mean by manipulate, but in terms of do they drive prices one way or another for their own gains... no. As with most things, the best ting to do is ask what needs to happen behind the scenes in order for something to happen. Start with the market structure. There is wide held belief that market makers are involved in accumulation and distribution. They accumulate inventory as prices are falling and distribute inventory as prices are rising. So they're buying when everyone else is selling and selling when everyone else is buying. They're the smart money doing the opposite to the crowd. People will show you pretty shapes on a chart where the price goes up then goes sideways, then goes down, then goes sideways. You'll be told this is the classic sign of accumulation and distribution. The analogy goes like this: Bill owns a widget store, selling widgets everyone uses. He's the only widget store in the town. One day, Bill, being a greedy kind of guy, decides to start a rumour that widgets will soon be in short supply. Soon after, more people started buying widgets in higher quantities. With more people wanting the widgets, Bill started raising his prices. Customers took this as a sign that widgets were in even less supply and more valuable so they started buying even more. Bill gradually increased his prices higher and higher as he sold more and more. After a few weeks the number of buyers is slowing down (almost everyone in town has widgets). Eventually Bill realises he is running low on widgets and will soon have none left, as well as no one left to sell to. So he starts another rumour that a big widget manufacturer is about to start making new widgets and the market will be flooded. So his customers now start selling their widgets back to him before their value falls. He soon has a queue of people trying to sell back to him in a hurry, and with so many people lining up, Bill quickly lowers the price he is willing to buy the widgets back at, and continues to drop the price further and further as more and more people panic sell to him. Eventually Bill has bought back all of his original stock at rock bottom prices and can start the whole cycle over again. It's a great story, completely believable, and totally nonsense. You see, Bill lives in forex town and he's not the only widget store. There's one next door to him called Barclays. When Bill raises his prices, Barclays undercut him to try and steal his customers. And Barclays aren't the only ones, there are 50 other widget stores, all competing with each other and trying to attract the limited supply of customers. The analogy of Bill did have some relevance in the past in other markets. Other markets have something called a specialist who all customers have to go to. He is the only widget store in town. But we're living in forex town and it's completely different. So right off the bat, for market makers to manipulate prices like the analogy above, all 50+ of them would have to work together and conspire and be prepared to share the customers. A bit like expecting Apple, Microsoft, Dell, Sony and all the other computer companies in the world, agreeing not to compete with each other. Ain't going to happen. The next thing to consider is the market makers business model in forex. I think people forget this point which leads to all sorts of myths and conspiracies. Market makers do not want to accumulate or distribute any inventory. The last thing they want is to hold any inventory at all. They're entire business model is based around having zero inventory. When they hold stock of a product (any currency) they are at serious risk of financial loss. You and I as speculators want to hold the stock so we can sell it later for a profit. The market maker is NOT a speculator. The ideal world for a market maker is the prices never ever change. Changing prices are the big risk to market makers. They'd love for it never to move. Their sole objective is to buy from one person and sell the exact same amount to someone else instantly before the price changes. Remember the spread; there are always 2 prices in forex, and we buy at the OFFER and sell at the BID. The market makers do the opposite and want to achieve that before the BID rises higher than the current OFFER. Re-read the home study course to remind yourself of their business model in more detail. So you have two reasons why market makers do not manipulate the market and drive prices up or down. Firstly, they are in too much of a competitive market and the other market makers will always try to undercut them. Secondly, they would have to change their business model from market maker to speculator. Now are FX markets manipulated by other people? Yes. Central banks of course try to manipulate prices as we've discussed. They do this via interest rats, taxes, etc, as well as quantitative easing. Commercial bank desks have also been caught front running customers orders and driving prices prior to the 4pm fix. Is any of this a conspiracy? No. Retail traders like to think of themselves as victims. It's convenient to blame the big bullies for our failures. "I'm not a useless trader, I'm just playing in a rigged game". Retail traders account for about 4% of FX volume. Too insignificant for anyone to try and move the price just to see us off. You're $100 stop loss isn't worth the $500 million risk it would take to move the market against you. Central banks can influence the price but are not invulnerable as we saw with the SNB. Commercial desks can drive prices in the short term as we saw with the 4pm fix and LIBOR scandal, but that was rare and extremely risky for them. They only did it occasionally when they had a massive client order to fulfil and assessed the risk to reward of front running that order. They weren't doing regularly for accumulation or distribution... it was pure and simply front running; hard to do, very risky, and now illegal. Is the whole system designed to screw people over (FX and/or other markets)? I personally don't think so. I think it's more a case of some people benefit more than others. Think of your own situation. You tend to do favours for your friends rather than strangers. If you're friends with a plumber, you might get "mates rates" and get a better deal than your neighbour who isn't friends with the same plumber. Is that system designed to deliberately screw over your neighbour? No, him getting a worse deal than you is a consequence rather than a design. I think most markets are like that. ------------------------------ James Edward London ------------------------------ [Reply to Group Online]( [View Thread]( [Recommend]( [Forward]( ------------------------------------------- Original Message: Sent: 09-22-2017 19:22 From: Anush Mohafez Subject: central banks positioned behind prime brokerages taking off volatility? Although FX manipulation was touched in this thread also: [Michael King: Predictive or Indicative?]( I prefer to have this discussion in the current thread as the subject title is more closely related to the subject itself making it more easily found by new members interested in the subject. Some strong facts were summarized previously supporting manipulation in FX seems rather difficult to establish.  At the same time there are individuals active in the market having a complete different approach & perspective and rather good results in their pockets as it seems.  Is that continuous luck only or some kind of form of the successful coin flip experiment we made in Brian's class last year? Most of you figured by now that I am following James his reasoning very closely and though I believe there are quite a bit of members like me in the community, we have experienced very little pressure against the argument that major manipulation is rather difficult to manifest in FX. Therefore, I am thinking of turning around the discussion, without knowing where it ends, trying to come up with some points and the hope that you come up with many more, why manipulation may or even does exist in FX.  May this help us eventually making better decisions in our trading? Potentially adjusting/implementing some other qualities into our trading tactics? It would be great to see as much as possible challenging ideas to James his perspective and again please back it up with some references, some kind of facts or 'scientific' discussion.  And also why not from complete other disciplines than investing as long as we find a match between the philosophy behind the argument and the FX environment? This is why I would like to direct the discussion to Pareto and his principle also called the 80/20 rule, which certainly most of you have already heard about.  Actually in finance people argue this relation to even be the 90/10 rule, meaning 90% of effects come from 10% of causes only.  From my own traditional trading business experiences (not FX related) I can certainly confirm that Pareto's principle exists.  Or was my mind fooling me? ;-) So why would not a tiny number of market makers be able to move the market in any direction they wish or at least when market conditions arise for them to play their odds and probabilities in pushing the currencies anticipated one way or the other to their advantage?  What are some 50 market makers across the globe executing through the 8 majors some 86% of the worlds currency demands ([Triennial Central Bank Survey Foreign exchange turnover in April 2016]()? Are those truly enough to guarantee honest competition? Where do most of them come from and what potential ties do they (may) have among their own peers?  Who are the individual shareholders of them?  Are some or more of them owned by the same group of people having specific interests?  Do the 8 majors not originate from a very specific cultural background that is so closely tight to each other that they have an inherent interest in maintaining some sort of status quo? In all markets we do see concentration, many markets are already oligopolized, there are existing true monopolies out there, which at university I learned is illegal.  At least it can be questioned whether such are beneficial to society at grand or not?  In the finance sector, we have recently seen that losses of large financial institutions were socialized whereas profits and large bonuses individualized.  Please don't get me wrong, my aim is certainly not a political discourse, and at the same time is there a chance of argument that top financial institutions, some of them owning central banks around the world and some of them having 100 years + financial business experience, may had the opportunity strengthening their competences and competitive advantages to a point an individual person does not know other than to consider cabal? Why don't banks do not charge VAT on most services given?  I assume every entrepreneur would love to service VAT free.  There are not many professions out there having this privilege.  Currency issuing institutions and central governments are tightly bonded in their needs to govern 'we the people' in many dimensions.  And whereas shareholders of currency issuers hardly change if at all, central governments have rather short perspectives and life spans.  Does that say something about the system we are living in and because of this do we find some correlation to our trading, or is this too far stretched? I will make a break here to see what your thoughts are on this topic. Have a great weekend and fun on Sunday starting your analysis for the coming week. ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland ------------------------------ Original Message: Sent: 09-12-2017 16:11 From: James Edward Subject: central banks positioned behind prime brokerages taking off volatility? Hi Dave, just got back home and don't have long so I'll have to make this a quick reply. I'm certainly no expert on central bank economic policy, so please research this further as most of my knowledge on this is from what I would consider less than thorough personal research. I would agree that quantitative easing is considered a good thing by economists for the reasons you pointed out (it allows quick access to funds to prevent crisis and also allow bigger and bigger investments by banks with little or no delay), hence it's the go to solution whenever an economy faces a dire problem. However, it is a short term solution that creates greater pressure and bigger problems further down the line. Rather than solve the problem, it merely delays it, AND adds to it. But any central banker and hand in hand with that, any politician, is mostly concerned with the near future. "Keep the status quo while I'm in power" and leave the S#%t storm for the next generation. Printing money in ever greater quantities is really just devaluing the currency. Exactly what the SNB wanted to achieve when they pegged the CHF to EUR. At some point, the currency is so devalued, you're using a wheel barrow full of cash just to buy a loaf of bread. We're not getting richer, our money is becoming less valuable, and the ultimate finishing point is a worthless currency. At that point, there's civil collapse and we re-set and begin again. Every society in history who has printed money in unlimited quantities like we are doing, has eventually collapsed. Now does that really matter? Probably not. In the end, money and it's value only has meaning in our collective imaginations. It's not real. Our financial system will collapse, but the sun will still rise in the morning, and we'll create a new financial system. The problem is the chaos that ensues in that transition period. I'm not a conspiracy theorist, but I do think more crashes are coming, each bigger than the last, and eventually total financial collapse. It seems to me to be a mathematical certainty based on the current structure of our financial system. It can only be prevented if someone has the courage to change the system, and I can't see any politician daring to convince their ill-informed population that change is needed; the middle classes are all too comfortable with things (no one likes change). It's not a major worry for most of us in the western world at the moment. The USA remains the worlds biggest military super power, and with that comes the ability to dictate how we value the dollar or else. Plus the US dollar is still the main world reserve currency. As long as those two points remain true, the USA can ride out any crisis better than any other country. But there is beginning to be a shift. The Renminbi came online as an official reserve currency last year, and several countries are already creating trade deals that allow them to by-pass the USD when exchanging currencies (Russia and India for example) which all serves to erode the greenbacks dominance. Any way, back to the original question; no, I don't think there's any shady manipulation going on behind the scenes of the fx market :-) ------------------------------ James Edward London Original Message: Sent: 09-12-2017 13:57 From: Dave Henderson Subject: central banks positioned behind prime brokerages taking off volatility? Hi James, Although i don't claim to know anything about fx manipulation so i don't provide any answers to the real question. I was lead to believe, through my understanding, that quantitative easing was considered mainly beneficial as it allowed quick access to funds to prevent crisis and also allow bigger and bigger investments by banks with little or no delay. I understand that essentially the asset that money is tied to these days is debt. Presumably the more debt a country (Bank) has, then the more money it has been able to loan and invest and therefore the more successful that country is considered to be. Clearly, how secure those investments are is the true measure of how successful a country or bank is, however it doesn't really make too much difference to the banks as in the event of a collapse the tax payer will be the bail out in the end regardless of where the liability lies. It would appear given my understanding therefore, that a bank that has a large quantity of money still available has not invested all it can and would therefore be considered less profitable than one that hasn't invested everything. Which would kind of explain why Britain and America appear to hold the highest debt. I only mention this James, as it kind of suggests that quantitative easing is considered by the higher authorities as a good thing, and limitless, even if it is ultimately only for their only financial gain and a chance to gamble with taxpayers money. Which is admittedly a concern to us but not the financial corporations. I did get some of my information initially from a known conspiracy site but after investigation from what seem legit sources seem to confirm this explanation. I will admit that you and my internet searches are the only info i have on financial knowledge and would therefore consider your input as critical on this as you have clearly done your re-search and are better at it than i am. if you have 45 minutes my main source of my info is at this link... [www.youtube.com/...]( , but as i say i did give it further re-search. Dave ------------------------------ Dave Henderson Original Message: Sent: 09-11-2017 12:22 From: James Edward Subject: central banks positioned behind prime brokerages taking off volatility? Great question Anush, It's revealing how the investor you spoke with suggested manipulation happened, but couldn't tell you how. Everyone loves a conspiracy :-) The reality is that central banks do manipulate the fx markets. They do so in a number of ways, none of which are behind the scenes or in any way secretive. Central bankers, like politicians, are some of the most incompetent buffoons imaginable (forgive my sweeping generalisation). They use indirect intervention such as interest rates and inflation to try and manipulate and influence fx rates. They also use quantitative easing (printing money). Both of these actions are very obvious and transparent. They may also try to impact capital flows by imposing taxes or restrictions for international transactions. If anyone can influence exchange rates, it's central banks because they're the biggest players who can afford more risk than anyone else. But even they can't do it without consequences. Look at the SNB when they pegged the CHF to the EUR in 2011. At the time they said they would buy Euro's in unlimited quantities indefinitely to maintain the exchange rate at 1.2. They set about doing this by printing new Swiss francs out of thin air to buy Euros. This was direct intervention where they participated as buyers and sellers like us - not as market makers/liquidity providers. At the time, many big hedge funds were besides themselves with joy, knowing full well this manipulation was impossible to sustain and sooner or later a big pay day was coming. In 2015 after amassing trillions of foreign assets (Euros) which many people view as fairly worthless in the long term, the SNB capitulated under market forces and un-pegged the currency. They certainly manipulated the market and did so for a long time, but it wasn't a secret and eventually they couldn't continue. FX is the fairest market of them all and the most level playing field. It's too big, with too many competing players to ever be manipulated for long. Yes, central banks talk to each other and almost certainly try to negotiate factors regarding interest rates and capital flows. But each country is in it for themselves and will do what's in their best interest, not their neighbours. Going back to my earlier comment about central bankers and politicians being incompetent; a bit flippant I know, but the reason I say that is because they are never interested in real solutions. Their only objective is to avoid disaster on their watch. Quantitative easing is an economic catastrophe waiting to happen. But if you print enough money for long enough, you can delay the next crash just long enough that it happens when the next guy is in charge, not you. They're not really fools, they're very intelligent and they know how to postpone the next financial crash with short term band-aids... but in doing so, they are ensuring the next one is even bigger than the last. ------------------------------ James Edward London Original Message: Sent: 09-11-2017 09:18 From: Anush Mohafez Subject: central banks positioned behind prime brokerages taking off volatility? Hi, The last couple of days I was talking to a Swiss institutional investor and we had a short discussion about FX manipulation.  Whoever has followed James his Master Home Study course realizes that FX manipulation is rather difficult to manage and more importantly rather risky for those pursuing it.  This is mainly due to the decentralized OTC structure of the FX market and some other major qualities that differentiates the FX market from other asset markets and this is another reason why many indicators probably working for other asset classes are basically useless in the FX market. Anyhow, in this discussion I asked the institutional trader to elaborate a bit more on his comment that central banks manipulate the FX market and how they would actually and exactly doing this?  Would they enter the market themselves as liquidity providers or market makers placing BIDs/ASKs exchanging currency in this way?  I would not see any other way than this, right?  If you see one, pls comment on this post... Without giving any direction on what actions are taken by central banks to manipulate the FX exchange rates he mentioned that a) central banks are very closely related to other central banks and communicate frequently, indicating that prices are discussed behind the 'hidden' curtain and b) that central banks position themselves very closely behind the prime brokerages, indicating that through guiding prime brokerages central banks guide prices in directions pre-determined. In one way I do see how central banks continually manipulate financial markets in many ways and I would also believe they would be ready doing this in FX if they had a chance.  Eventually, they are creating so much currency and debt that this in itself might have an influence and they would be rather unequal of blowing off many digital dollars to have set prices somewhere.  However, I still doubt that this is done in a very structured way and I would love to read from you guys what you think of this and please back it up as good as you can with some sound and evidence backed info... Best, Anush ------------------------------ Anush Mohafez Retail FX Cherry Picker Switzerland ------------------------------ You are subscribed to "General Trading Discussion" as {EMAIL}. To change your subscriptions, go to [My Subscriptions](. To unsubscribe from this community discussion, go to [Unsubscribe](.