Speculative Positioning in the Majors

[Nonpiker]

Trendz,

If you start tracking that data you will typically notice that it tends not to change that quickly.

[Gamma_Jammer]

Originally Posted by Trendz

The reality is that when everyone piles into the trade one way like what happened on friday with a strong dollar rally the smart money sees this and reverses the gains swallowing a whole chunk of retail traders. Your conspiracy theory is not so ludicrous is it?

And btw, who do u work for?
Trendz

Trendz,

I absolutely guarantee that the 'smart money' that you refer to, when they trade, do not care one jot about how the retail market is positioned. I'm not going to reveal who I work for on this site (this is meant as no offence to you, I would just never do that, having been the victim of identity fraud in my time), but I have at various times worked for a derivatives prop firm, on the fx desk of a large bank and on the currency desk of a large fund manager.

At no point during the 12 years that I have been in the market have I ever seen anyone make a trading decision based on the retail market. This sort of trading simply doesn't show up on the radars anywhere. Trust me on this one.

GJ

[Trendz]

Ok guyz you make fair comments on this one especially as i am fairly new to forex. I am just trying to understand the market dynamics. I do believe however that positioning in the market has alot of value, maybe not the retail side then?

[Gamma_Jammer]

Originally Posted by Trendz

Ok guyz you make fair comments on this one especially as i am fairly new to forex. I am just trying to understand the market dynamics. I do believe however that positioning in the market has alot of value, maybe not the retail side then?

Definitely for sure the positioning of the specualative wholesale market players is something that influences the market at times. I will often look at that report when data releases such as non farm payrolls are due. What you tend to find in this sort of situation is that the bigger the positions that are out there in the market, the more lopsided the response to surprising data is.

So if the whole world is long EUR/USD, and some poor US data comes out, more often than not the reaction will be relatively muted. This is for two (completely related) reasons.

1) A paucity of EUR buyers: Everyone already has the right position on, so no need for panic buying.

2) An abundance of sellers: Any spike is likely to be at least partially capped by these same longs taking profit.

Of course, if the US data that comes out is GOOD, then the reverse situation applies, and usually with a much more pronounced reaction.

So in summary, I would use this data to have a guess at the 'weak side' of the market, and plan accordingly. Hardly rocket science, but maybe something for the newbies to think about.

GJ

[Hayek]

NFP is released at 8:30am ET on Fri, but you are unable to read the CFTC COT report of that Tue in the week until 3:00pm ET on Fri. I don't know how you can speculate the market positioning before NFP release.

Well, you may use the report for the previous Tue, which means there is 7~8 trading days between this report and NFP. The positioning in the 7~8 trading days can change dramatically without you knowing it. So upon the NFP case, I think you are only able to get a very "rough" picture of the market which can hardly be traded with.

[Gamma_Jammer]

Originally Posted by Hayek

NFP is released at 8:30am ET on Fri, but you are unable to read the CFTC COT report of that Tue in the week until 3:00pm ET on Fri. I don't know how you can speculate the market positioning before NFP release.

Well, you may use the report for the previous Tue, which means there is 7~8 trading days between this report and NFP. The positioning in the 7~8 trading days can change dramatically without you knowing it. So upon the NFP case, I think you are only able to get a very "rough" picture of the market which can hardly be traded with.

Hayek

Applied to retail traders you would of course be correct. But I never said that this was something that was instantly accessible to most traders. I merely explaineda little of how I personally use the information available to me, and one or two things that affect the decisions I make.

GJ

[Gamma_Jammer]

Originally Posted by Hayek

So upon the NFP case, I think you are only able to get a very "rough" picture of the market which can hardly be traded with.

Sorry, just noticed this bit. I have to disagree with you here. It seems to me that you're looking for someone to just come along and tell you that such and such a number is good or bad, and that EUR/USD is going to go down, or up. The market simply isn't that obvious much of the time. If it was that simple everyone would be making money.

In my opinion, the whole art to it is trying to figure out who is holding a strong hand, who is holding a weak hand and who is about to have their shirt removed. And if you hold this to be true, then any info of this type is potentially valuable.

But it's not simply a case of if this... then that..... You have to weigh up all sorts of conflicting factors. Postioning is simply one more piece of the puzzle. I personally think that the reason that so many retail traders choose to trade entirely technically is that they can get a book with what looks like all the answers. It's a kind of safety blanket, but for me, there are always always always three pillars on which I would base my decisions. Fundamental info, technical info and what I like to call 'context'. That basically means anything from rumours that are taken seriously, to structural stuff (fixing trades etc), to market positioning etc etc. As far as I'm concerned, you need all three.

My $0.02 as usual.

GJ

[Hayek]

Originally Posted by Gamma_Jammer

Sorry, just noticed this bit. I have to disagree with you here. It seems to me that you're looking for someone to just come along and tell you that such and such a number is good or bad, and that EUR/USD is going to go down, or up. The market simply isn't that obvious much of the time. If it was that simple everyone would be making money.

In my opinion, the whole art to it is trying to figure out who is holding a strong hand, who is holding a weak hand and who is about to have their shirt removed. And if you hold this to be true, then any info of this type is potentially valuable.

But it's not simply a case of if this... then that..... You have to weigh up all sorts of conflicting factors. Postioning is simply one more piece of the puzzle. I personally think that the reason that so many retail traders choose to trade entirely technically is that they can get a book with what looks like all the answers. It's a kind of safety blanket, but for me, there are always always always three pillars on which I would base my decisions. Fundamental info, technical info and what I like to call 'context'. That basically means anything from rumours that are taken seriously, to structural stuff (fixing trades etc), to market positioning etc etc. As far as I'm concerned, you need all three.

My $0.02 as usual.

GJ

I may use the wrong words and I shouldn't say "which can hardly be traded with". That may mislead you. I never try to start my trade solely and simply based upon IMM positioning.

And I understand the "art" you described to spy the strong/weak hand of market. Actually I have done analysis on IMM positioning for quite a period. However, the defect of COT report is obvious that it is lagged and outdated to the current situation. The stong hand may become weak hand from Wed to Fri, so that the report on Tue can give you a "wrong" information to finish your art. Of course, with your experience on the market you can guess how big the difference will be between Tue's positioning and Fri's positioning. When the fx rate does not move too much, you can suppose the two day's positionings are similar, for example, Euro FX 5/24 and 5/27. The efficiency of this guesswork is depending on your experience and your luck. From this angle, it can also be called "art".