What is considered an edge? - page 7

[democog]

Ryan L Johnson #:
 The CME simply doesn't publish stop orders, so it's impossible/illegal for anyone to collect that information. In contrast thereto, a retail CFD/FX broker-dealer operates as its own micro-exchange of sorts. In that arrangement, the broker-dealer takes the other side of retail traders' trades so that broker-dealer can almost certainly see all orders─including stops. That was the point that I made earlier about "what who has access to."

Yep, ok, but isn't this the reason Expert Advisors exist anyway? So, unless you are trading on a OTC broker with minimal capital (per trade), no one forces anyone to get exposed this way.. But anyway. this is not really the problem here, as the market direction is largely unknown, even when ones can see where most orders are placed..

greets

[Ryan L Johnson]

democog #:

Yep, ok, but isn't this the reason Expert Advisors exist anyway? So, unless you are trading on a OTC broker with minimal capital (per trade), no one forces anyone to get exposed this way.. But anyway. this is not really the problem here, as the market direction is largely unknown, even when ones can see where most orders are placed..

I was making more of a point regarding the potential for an OTC broker-dealer to manipulate its own captive market. That is all.

But yeah, if everyone having access to an order book had a consistent 100% win rate, there would be no losers in the stocks, futures, and options exchanges... which is impossible in any functional exchange.

[democog]

Ryan L Johnson #:

I was making more of a point regarding the potential for an OTC broker-dealer to manipulate its own captive market. That is all.

Heh I know, I was just "augmenting" your answer :)

[Ioannis Christopoulos]

Thomas Olof Gardling #:

First of all, I do not have this information anymore. I thought I made this clear when I said many years ago I had this information.

Also read when I stated that I lost both the information and my money for a completely different reason than losing it to the market.

Have I said that my EA shown here in mql5 have anything to do with what I am discussing in this thread other than that I use a grid system and that I get my trade conditions outside of the forex realm?

Seems like people here are reading what they like to read just to fill their own judgement.

I asked for the average win, the average loss, the sample size of your 99% win rate of your  edge, i ve got no reply.

I explained that, to support that you know the outcome and become100% certain,which is considered edge for you,  2 of 3 variables are needed, you talked about 1 variable. "cluster of stoporders"  introducing uncertainty, as you are not sure when the "BIG guys" will TP.

i asked "Where is the real 100% certainty edge?" you repeat for pills that retails shallow.

Seems like people here (and by people i mean you) are answering what they like to just to fill their own ignorance.

[Ioannis Christopoulos]

Ryan L Johnson #:
Grid trading... until it blows up.

Please explain how is that possible.

If you have the knowledge of the market structure,
and if you know that you are a retail trader,
and if you once had an ... "edge"
How on gods name you spend 500 $ to the same market that you DO know that big players are going to take your money?

Is that the ... what we call stupidity?

[Ryan L Johnson]

Ioannis Christopoulos #:

Please explain how is that possible.

If you have the knowledge of the market structure,
and if you know that you are a retail trader,
and if you once had an ... "edge"
How on gods name you spend 500 $ to the same market that you DO know that big players are going to take your money?

Is that the ... what we call stupidity?

Ioannis Christopoulos #:
Please explain how is that possible

The not so secret "secret" of grid trading is refusing to accept a net loss. Every trade on the grid is held open until price moves into profit. When an adverse move inevitably exceeds the minimum margin required, kaboom, the account is blown.

Ioannis Christopoulos #:
If you have the knowledge of the market structure,
and if you know that you are a retail trader,
and if you once had an ... "edge"
How on gods name you spend 500 $ to the same market that you DO know that big players are going to take your money?

There are a lot of utilities floating around that purportedly analyze "market structure." More specifically, the OP referenced iceberg orders. Anyone having access to an order book of an exchange can read, either programmatically or manually, the price sequence and contract volumes of limit orders to discern where the iceberg orders sit. Some OTC instruments (particularly, major spot FX pairs) have parallel exchange instruments. Some retail FX traders use the order book of those parallel exchange based futures contracts as a proxy for an OTC spot FX pairs order book. There are even some hedge funds that exploit cross-market arbitrage between FX futures and spot FX─arguably, confirming a correlation.

The general idea for the little guy, as I understand it, is to avoid trading in the iceberg where death by a thousand papercuts awaits. Ultimately, price has to leave the iceberg on one side or the other. Check the distance to the next one.

As a potential caveat, the majors in the wholesale/interbank FX market are highly and positively correlated with their futures "counterparts." In the wide array of retail FX/CFD broker-dealer feeds, not so much.

[Thomas Olof Gardling]

Ioannis Christopoulos #:

I asked for the average win, the average loss, the sample size of your 99% win rate of your  edge, i ve got no reply.

Maybe I'm explaining myself badly or we have some language barrier going on. English isn't my first language so it could be on me.

99 out of 100 trades were winners. The only time I lost or gained less was when I got greedy.

There were maybe 1-3 trades a week, depending on the market I was trading and where the clusters of stop orders was located on the chart.

The average move of the price was between 5 and 25 pips, I'm just estimating it right now because I don't have the numbers anymore.

I did not go all in on the trades, I averaged enough money. But as I explained before, sometimes I got greedy and lost or just gained less because of price reversing on me and I didn't close the trade in time.

Ioannis Christopoulos #:

I explained that, to support that you know the outcome and become100% certain,which is considered edge for you,  2 of 3 variables are needed, you talked about 1 variable. "cluster of stoporders"  introducing uncertainty, as you are not sure when the "BIG guys" will TP.

I knew that price would go a certain way once price hit the level of those stoporders, just not how far. But price never moved less than the average 5-25 pips, at least until the price reversed.

Ioannis Christopoulos #:

Please explain how is that possible.

If you have the knowledge of the market structure,
and if you know that you are a retail trader,
and if you once had an ... "edge"
How on gods name you spend 500 $ to the same market that you DO know that big players are going to take your money?

Is that the ... what we call stupidity?

My EA here seem to bother people a lot. It has nothing to do with anything I'm talking about in this thread.

But as I have said numerous times, I get the trade conditions for that EA outside forex and are not using any retail indicators for those trade conditions. The only thing I'm using retail indicators for is the grid system.

I can take down the EA if that helps people here.

Let me ask you a question.

How would you trade the stoporder information?

[Thomas Olof Gardling]

Ryan L Johnson #:

There are a lot of utilities floating around that purportedly analyze "market structure." More specifically, the OP referenced iceberg orders. Anyone having access to an order book of an exchange can read, either programmatically or manually, the price sequence and contract volumes of limit orders to discern where the iceberg orders sit. Some OTC instruments (particularly, major spot FX pairs) have parallel exchange instruments. Some retail FX traders use the order book of those parallel exchange based futures contracts as a proxy for an OTC spot FX pairs order book. There are even some hedge funds that exploit cross-market arbitrage between FX futures and spot FX─arguably, confirming a correlation.

Iceberg orders are split up by the banks, making them look like regular orders. If you get the information from where the order is coming from (the orders have bank info) you can see that the orders are adding up either on different levels or on the same.

This can be a spoofing attempt too, by deleting or moving the order milliseconds before they get hit.

You need to have the stoporder information to be able to trade these iceberg orders, else its just another day in the forex world.

Ryan L Johnson #:

The general idea for the little guy, as I understand it, is to avoid trading in the iceberg where death by a thousand papercuts awaits. Ultimately, price has to leave the iceberg on one side or the other. Check the distance to the next one.

Yes, those iceberg orders are like a brick wall absorbing every market order that comes its way.

When you see price stall during news and large real volume going up at the same time, that's what an iceberg order looks like. 

[Ryan L Johnson]

Thomas Olof Gardling #:
If you can see where most stoporders are located, you can choose the best place to trade them.

As democog already said, that is illegal market manipulation in regulated jurisdictions.

Thomas Olof Gardling #:
This can be a spoofing attempt too, by deleting or moving the order milliseconds before they get hit.

That is even more illegal market manipulation in regulated jurisdictions. Specifically, you might want to review the EU Market Abuse Regulation (MAR) and the Swedish Securities Market Abuse Penalties Act (2016:1307). Also, see the primer below:

Can a Market Maker See Your Stop Loss?

Yes. A market maker broker can see your stop loss because it is recorded in their internal order management system. This is simply a technical reality of how market maker execution works, not necessarily evidence of wrongdoing.

The more important question is what the market maker does with that information.

In a well-regulated market maker environment, the broker uses the aggregated knowledge of where client orders sit to manage its own risk exposure. If a large number of clients have stop losses clustered below a certain price level, the broker knows that if price reaches that level it will need to handle a large volume of client sell orders. This information is used for internal risk management purposes.

In a poorly regulated or unethical environment, a market maker could theoretically use the knowledge of where individual client stops are placed to deliberately push the price to those levels, triggering the stops and profiting from the resulting client losses. This would constitute market manipulation and is illegal in regulated jurisdictions.

What About ECN and STP Brokers?

The situation is different with ECN (Electronic Communications Network) and STP (Straight Through Processing) brokers, which route client orders directly to external liquidity providers rather than taking the other side themselves.

With these broker types, your stop loss is typically held within the broker’s system until it is triggered, at which point it becomes a market order sent to the liquidity pool. The external liquidity providers do not see your pending stop loss order before it is triggered in the way that a market maker can.

However, large institutional participants in the interbank market do have access to aggregated order flow data. They can see where large clusters of orders are sitting at certain price levels, even if they cannot see individual retail orders specifically. This is the basis of the broader stop loss hunting behaviour discussed in market structure analysis.

Does Regulation Change Anything?

Regulation matters significantly in this context. A broker regulated by a reputable financial authority is subject to rules about how client orders must be handled, what conflicts of interest must be disclosed, and what constitutes market manipulation.

Regulated market makers are typically required to execute client orders at the best available price and are prohibited from deliberately manipulating prices to trigger client stops. They are also required to have systems that manage the conflict of interest inherent in the market maker model.

Unregulated brokers operate without these constraints, which is why the question of whether a market maker can see and act on your stop loss is much more concerning in an unregulated context than in a regulated one.

[Thomas Olof Gardling]

Ryan L Johnson #:

As democog already said, that is illegal market manipulation in regulated jurisdictions.

And yet this happens every day. 

People here need to stop being so gullible of what is happening in the market they trade. Do you really think you have any chance if not using any fix or inside information?