Stop Loss Hunting and Dancing with the Smart Money in Forex Trading · Djamal Adib

Stop Loss Hunting and Dancing with the Smart Money in Forex Trading · Djamal Adib

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markets speculation and risk this  is the Chat With Traders podcast We are on episode 247 and I am Tessa  your co-host of chat with Traders   it's been way too long and it's about time that we  have a discussion on Forex Trading but this is not   your average Forex Trading discussion this is an  episode that I am especially excited for you Forex   Traders out there and for non-forex Traders like  myself because I got a few important key takeaways   that I didn't expect today our host Ian conducts  an exciting interview with Djamal Adib some Forex   Traders may be unaware of how stop-loss hunting  and Market manipulation is done by the smart money   like many Forex Traders ex stockbroker Djamal  Adib experienced early losses which compelled him   to study the inner workings of Forex Trading and  how stop loss orders are hunted by the smart money   Djamal spent four years pouring over thousands of  charts of different time periods and programmed   his carefully back-tested algorithms resulting in  him winning an international Forex competition he   shares his enthusiasm and much wisdom of the  opportunities and dangers of trading Forex and   why you need an edge as a side note Djamal Adib  will be joining us in a live discussion inside the   chat with Traders Community scheduled for November  16th where he and Ian will continue this Lively   discussion on Forex if you'd like to join this  private online membership Community go to the chat   with Trader's website and then inside the menu  bar click on community we hope to see you there   Now ladies and gentlemen without further  delay we are so pleased to present Djamal Adib Al uh like to welcome you to chat with Traders  and love to find out a little bit about your   background kind of what got you into the financial  markets yeah thank you so much Ian it's a true   honor to be on this podcast I'm very excited so  my mom is German and my dad is Iranian that's   where my name comes from yeah so yeah I grew  up in Germany I went to high school there I was   always a very driven person very proactive you  know I was president of the student council and   all kinds of things I graduated from high school  with like a 1.3 average which is equivalent to   like an A plus I went to uh study a Bachelor of  Science in economics in maastriched and also at   Woodworth University in Spokane and yeah I  did a master of finance and also after that   at attic business school in Nice France I went  also to um Harvard summer school after that and   during my studies Ian I already did several  internships you know at investment banks for   example I was at Goldman Sachs in London I was  at the Bank of America Merrill Lynch in London   I was also at the Sal oppenheim in Frankfurt  and to make a long story short you know um I   did my master thesis which was about Freckle  finance and I graduated I worked as a stock   broker and investment manager and then for the  last 10 years I basically traded Forex full-time   and both you know manual and automated and um  and to be honest this is a great point in time   for a Forex interview because as you know in the  stock market is coming down as expected we had the   crypto crash so more people will look at Forex now  I think so you have experience with equities and   I'm curious what led you to focus just on Forex  yeah that's a great question that's correct so   um you know when I was a broker I was trading  a lot of equities as well as options on stocks   and I liked it a lot you know what happened  is I started to create own Forex systems in   my free time you know back then these systems  were quite rudimentary I mean if I look at what   I'm doing today you know it was really like just  some very basic statistical systems you know like   uh not very complex and what happened as well is  Ian um there was this one client as I remember   you know and he used to call now and then Place  Forex trades and I saw everybody doing all kinds   of things you know buying equities trading ETFs  bonds Etc options and this particular gentleman   he was like you know sniping placing Forex trades  and most of the time there were also good trades   and I kind of got hooked you know like um I  I started to research myself about Forex and   I I really you know found out that this is my  passion within the financial markets you know   um that's basically how it happened yeah what  could you share about what what do you think   the advantages or opportunities available in Forex  that might not be available in the stock market uh   some I've heard some Traders argue that well you  know Forex has a very limited number of choices   of what you can do and with the stock market you  have thousands of different equities you can trade   and there's more opportunity for inefficiencies  uh how do you respond to that yes I'm I mean and   that particular topic you know gets us straight  into it so that's that's right so on the one hand   yes we know that the foreign exchange markets are  the world's largest financial markets you know we   have to remember that you know like the daily  transaction volume in let's say euro dollar can   be five Six Trillion US dollars that means that  if you add up all stocks in the world yeah we   have many days where the transaction volume  in in Forex far exceeds you know the global   stock markets so it is a massive massive Market  it's open 24 7 uh well 24.5 it closes on Friday   and opens on on Sunday night it's very liquid the  transaction costs are low we have lots of movement   so when you look at those factors Ian all of that  looks like really really attractive for trading   doesn't it you know like you think come on I mean  this is really what you want if you want to you   know actively trade a financial Market but as we  know on the other hand you know there are certain   things which you know like show us that something  is off so for example in when you look at the 10   biggest hedge funds in the world right now you  do not really find a single fund which is like   completely dedicated to Forex you know so like  there may be a pod based funds which you know   have certain teams doing Forex strategies yes but  you know we don't really have a massive uh fund   which is specialized in trading Forex only in  particular why is that why do you think that is   that's a great question and that the answer  to that is to make a long story short and   that's what we're going to focus on today  I guess is Market manipulation see in so in   that team we still had the big ethics fund which  was called FX Concepts it was managed by John   Taylor and you know this fund it did very well  over decades it had 14 billion on a management you   know so it was big but in 2013 it went bankrupt  and to make a long story short Ian what's going   on in this market and that's also why experience  Traders do not want to touch it and they are   right in that sense the market it has a very  particular structure and very particular Dynamics   I'm completely specialized in that and I hope  that I can really shed some light on that today   um and you know like uh the reason for the  bad statistics which we know for example that   you know over a four months period 84 percent of  Traders trading Forex loose if you increase this   by another four months we're talking more like 95  percent of Traders lose money in Forex so you know   what I mean these are the harsh statistics so  this is a bit of a fact check and also you know   as you know you have like I think 250 podcasts  so far very few on Forex isn't it yes very few   so you know the reason for that is that first  of all as a price taker in this market without   specific knowledge on the foreign Forex Market  structure your chances of success are very   very low because you need to understand how the  so-called smart money algorithms actually operate   um what kind of principles they apply to the  market every single day you see like and please   also understand these kind of topics like um they  are inherent to the market itself all the broker   manipulation for example comes on top of that you  see we can talk about that later as well but what   I'm focusing here right now is the actual price  action why does euro dollar you know move like it   does and go up and down like it does why does  the price action look so erratic to Outsiders   who do not understand that market you know I can  explain in detail why that is the case and by the   way I should also say clearly that you know I have  been publishing a large part of my work already   for four years so you know I have this YouTube  channel uh you know I have over 630 videos there   live trades life analysis you know it's called  SME FX so you're free to go there if you want   to you know know a bit more about all that but  you know what I mean like you know it's not that   I'm here since yesterday I've actually decided  already some years ago to to publish that kind   of work and to show the technology which which  we have the charts which we have with leading   information and you know at this point Ian around  a thousand people have been following my work and   many of those have actually become good Traders in  their own right you know they have been also using   that that website I created and you know I'm very  proud of that work you know also by the way I'm   still working on this book you know maybe in the  next two years I will finish finally finish it I'm   so sorry it takes a lot of time because most of  the time I'm trading you know trading is always my   priority every anything else I Do by the side but  but what I'm saying is look as a little disclaimer   I will make some big claims in this podcast But  please understand everybody who listens to this   first of all there's a lot of public evidence out  there yeah like the newspaper articles where you   know it's exactly explained which kind of entities  got fined for Forex rigging you know there's even   a statement by the US Department of Justice  explaining how certain entities have engaged in   in Forex manipulation so first of all don't take  this from me you need to you know if you do your   research and you find a lot of content also on my  on my Channel about that you will see that this   is basically how the how the market works also  Ian you know I would like to emphasize straight   away you know one has to understand that this  kind of Market manipulation or however you want   to call it is also necessary to a certain degree  like Forex would be different if you know these   entities wouldn't be doing what they do I don't  want to get too far off topic but you know if you   take a historical view on things you know when you  go back decades you can see that in all financial   markets you know to some degree we always had  you know like certain things going on you know   by market makers you know by the by the sell side  you know in that in that context you know and also   by the way there's not necessarily even a conflict  of interest regarding the market structure because   people have to understand when we talk about  the dump money yeah if you wouldn't mind me   interrupting here just because I I'd love to get  into that uh shortly I'd like to bring it back to   the your background if you wouldn't mind and then  um you're in 2013 I understand you created a your   Forex firm yeah so what's happened is you know um  I was still a broken investment manager I I got to   know you know certain people they were um founders  of a big gaming firm and you know we got to know   each other and they said are you interested  in you know focusing on trading I said sure   what happened is you know we actually created two  funds one of them was supposed to be a stock and   option fund but it never really got operational  unfortunately it would have made a fortune because   it was just before the you know big bull market of  the last decade but yeah it wasn't launched so we   launched however like a small Forex fund and you  know I started basically uh focusing on on Forex   spot trading and at the beginning back then you  know like uh it didn't it go very well because you   know all the systems I had put together they were  not really you know consistent so you know it was   at a point where I was like oh you know this is  not as a thought however what happened then Ian is   um but you know first of all I got to know with  you know some really good people some really good   programmers one in particular I'm not sure whether  he wants his name mentioned but we worked together   and we started working on tools you know which  analyze certain uh data for example position   data limits data order data you see and we were  really just tinkering it's not that we understood   how this works you see it's I should also really  be humble and say that I was you know I was very   motivated to get to the bottom of this I really  wanted to understand how Forex actually works and   as soon as we started you know uh experimenting  with certain tools we quickly realized you know   it was like a true aha moment I was like okay wait  a second here we have those positions here we have   certain orders accumulated and then you know the  move goes exactly goes against those positions   then through the accumulation of uh orders on  the other side so it didn't take long until I   realized okay this game can be correct and you  know like we need to you know work hard and you   know like really really you know improve our tools  and and get to the bottom of this and that was a   multi-year process Ian you know I worked like  crazy you know like if I commit to something I   really you know work hard and that's basically  uh what I did you see and and then you know the   more we uh realized what's going on you know the  more now I have to explain also in that context   you know I took a very radical approach in I said  you know what first of all I just will observe how   this Market structure unfolds you know I will not  come with any ideas or theories how it should be   no I was simply observe how it unfolds and then in  the second phase I will basically analyze what's   going on and then in the third step I will you  know try to derive general rules from that you   see like it was really necessary because many  things which I will also explain today are a   bit counter-intuitive for example maybe we jump a  bit into that if you don't mind in stop hunting no   you wanted also to talk about stop hunting my  understanding is that you you created you got   into programming algorithms is that correct well  so uh no I should be more precise So within the   last four years I also created fully automated  strategies so my own trading Argos yes but but   that's basically covering my automated Forex  Trading but regarding the um creation of the   market causality this Market structure technology  basically you know um I paid also programmers to   you know implement it you know to to build it so  that enable once the tools were good enough and   and we fine-tuned and everything then I was able  to formulate the complete market causality and   you know to formulate also those principles  you know how the mechanics actually unfold   in real time and then of course then enables  you to also predict uh price moves you see so   um that's basically you know like uh the sequence  uh how it works so so in a nutshell to summarize   first I really you know uh um did the complete  market causality and then at the later stage   I also developed a fully automated trading  hours myself you see once you started   implementing these fully automated  systems uh how was your return and   um drawdowns impacted uh by using these trading  systems versus prior when you did things manually   um yeah I mean that's an interesting Quest uh so  regarding my own trading I I moved more and more   to automated systems so I used to be like a fully  manual Trader and I still you know trade manually   uh you know many of my trades are documented on  YouTube you can you can watch them but I just   basically directly trade the market causality  yeah so I I wait for certain setups let's say   it's a post stop on uh set up or you know like  a squeeze move whatever it is and then I traded   them now when it comes to my automated trading  I basically Incorporated certain principles from   the market causality into those strategies yes  but the strategies themselves are still kind of   um statistical you know what I mean so it's not  that they need all the information which I use   for the manual trading and as you can see like  maybe also in the future another time we can   also talk in detail about the automated systems  you know how they need to be set up you know   it's it's also topic on its own but yeah I mean to  answer your question so you know my my strategies   in my bot portfolio they all have like a great uh  relationship between like you know net profit and   maximal drawdown like I would say as a general  rule regarding these kind of uh trading Bots   if you can achieve you know like a net profit  which is uh two three or four times higher than   your maximal drawdown you know then you are on a  very good way the next thing of course then is to   try to limit the the length and the depth of any  drawdowns but what you do is you have a portfolio   of different strategies of course and then there's  also a bit of diversification across you know   markets time frames uh strategy Styles Etc you  know so it's a big automated trading in is also   a big passion of mine and you know I'm willing to  talk a lot about it but maybe you know first we   cover the causality because that's really how the  market itself works you see so my understanding in   2019 you won an international Forex competition  that's correct so you know that is also quite a   story and I would argue that my whole path is  quite an outlier you know like all the things   that happened you know they are quite unique and  yeah that's correct you know there was a forest   competition um I was contacted uh we were invited  to several locations in Europe uh there was a   group of Traders all doing Forex and yeah there  were different stages I think three stages I won   this competition also because I use the the market  causality and you know that that was also very   very interesting experience uh for sure right um  so do you just did you create one program within   the market causality or did you create multiple  programs for different uh market conditions   okay so regarding the automated strategies the  Bots I I run like uh at least eight different ones   so it's like a strategy portfolio yes so so these  are like eight um different uh trading strategies   but regarding the causality you see that's  a good chance now for for me to explain that   there are like very defined setups you can trade  as a price tag on the buyer side you know using   the market causality that leading information  I've defined them very clearly yeah for example   let's say there's a dump money switch and the  dumb money goes from one side to the other and   the major stops are cleared and you know like the  market snaps into the opposite direction and you   know other very defined setups now it's important  to understand the market causality in it's not a   strategy or anything it's how the market really is  you know like how you play it or how you trade it   whether you do it manually or whether you do it in  an automated way you know that's kind of another   chapter you know in this context so also within  the market coastality there are different setups   such which are tradable now I have shown over the  years on my channel like the setups I successfully   traded but you know there are more setups than  that and that's also something I've learned uh   just the last two years also by you know other  Traders using that and coming up with their own   approaches you know like that there's some degree  of freedom because to be very precise you know   they are Traders they don't want to do day trading  they would just want to place trades every few   weeks so they go to the higher time frames you  know like the four hour chart the day chart and   for example they just wait until the dumb money  really goes significantly on one side they do the   trade and they just write the move you know like  like similar to traditional Trend following and   if you look at euro dollar recently for example  you know or which went down so much against the   domini longies or you look at dollar Yen which the  reverse which went up so much against the Shorties   you know these these Traders they did very well  just riding the move over over days and weeks   you know because you could literally say how the  money for whatever reason kept on trading on one   side so you know like so that's for example one  way of trading it but there are also people who   who love you know day trading and and more high  frequency Trading for that of course you need to   be more advanced you need to have more experience  and you wait for very particular setups yeah for   example let's say you know like um you see that  you know there was a news announcement and the   dumb money goes very strongly on one side and you  know the the market will retest the low let's say   against the longest these kind of things can  be you know very tradable so you mentioned   a lot about dumb money so we could call that  ignorant money and so for new Traders so what   aspects of Forex Trading is most challenging for  new Traders and how do how can we mitigate this   yes that's a great question um first of all allow  me to emphasize Ian yes we say the money but we   do not mean that in any disrespecting way because  these are all very intelligent people smart people   but as you said yourself they suffer from an  informational disadvantage that's it all if   we play poker now Ian yes and you have cards  and I have cards on their cards on the table   if there's a player who can see our cards and who  can also decide what the next cut on the table is   you know what I mean that creates an informational  Advantage for that player that makes us the dump   money and that makes that player the the smart  money so allow me you know to use a chance to   emphasize look they are very very intelligent  people around the world dedicated people   but unfortunately you know by not understanding  how the market structure actually works they   never have a real chance in successfully trading  Forex you see and that by the way that brings us   back to our discussion from the beginning you  know that's the reason why experienced Traders   tend to stay away from Forex knowing that you  know these things are going on they know it   intuitively you see what I mean and um that also  creates this complexity and difficulty regarding   uh Forex Trading so so to answer your question  regarding new Traders look and I feel strongly   about this you do not need to you know study  economics or you know read a lot of books I mean   the fact is you know that uh there's a massive  gap between economic theory and reality yeah   and regarding you know books right now there are  no grades you know books on on the actual Forex   Market structure out there I hope I can change  that at some point the best thing you can do   um and really the last thing I want is this  here to sound like a sales pitch but you know   if you would ask me my honest answer would be you  know watch first of all all the videos I have for   my channel start with the educational videos  understand all the things such as the dominant   positions the stop hunting how news announcements  are used or abused how there are short-term games   as well watch all these videos yes study it try  to understand it then maybe watch some of the   live videos to see how this can be traded then  you know like uh at some point maybe subscribe   to the charts first do demo trading yeah for a  few weeks it's minimum you need to get a feeling   for how all these things unfold in front of your  eyes you know and then once you have passed all   that then you can think about you know going live  and actually trading that in the internet there's   so much wrong information and when you see also  people's comments you know on Forex Trading you   know don't you see often the comment yeah it's all  about discipline don't you see that often yes oh   yes definitely I disagree with that it's not only  about discipline yes you need discipline but it's   no way enough to have discipline you know you  need a proven Edge next to discipline if you do   not have those two components your chances of  being successful are close to zero that is the   reality and you know the problem is Ian we have  this industry out there which promotes you know   all these all these different companies they're  selling indicators they're selling EAS you know   they they sell courses they do whatever and they  try to you know draw this picture that everybody   can just you know go and open an account and start  trading and make money that is not the case you   know and that's also by the way why you know I  decided to make all of this also public I always   think Ian of this retired engineer you know who  maybe has Savings of 20300k maybe more maybe less   whatever the amount is he goes to the internet  you know he sees all these advertisements by   Brokers by you know uh trade seating companies  but whatever it is and he thinks come on how   difficult can it be you know like how difficult  can it be to you know create a system where my   predictions are higher than 50 and these things  they end most of the time in a horrible manner   you know these people they end up getting caught  into this Loop they lose all their money they you   know they they get frustrated so question for you  have you tested out the commercially available   program trading uh options out there and I if you  have what is what are their greatest strengths   and weaknesses compared to a professional Forex  system for example yeah so I have tested pretty   much everything over many years in so you know  we're talking about 10 thousands of hours I've   tested all kinds of commercial indicators as well  commercial EAS as well all these things yeah I   mean already a long time ago my advice is clearly  everybody listening stay away from commercially   Ace first of all you know the problem is that  this trading Bots which are sold online they   show you all these great curves and the reality  is that most of them are based on some kind of   marketing gear system so they create some stable  return just to completely blow up and I find that   very very wrong you know like it's misleading  people it always ends in a horrible manner you   know like and don't fall for it if you really are  serious you know about automated trading then you   need to create a strategy yourself nobody can  do it for you and let me be honest here it is a   multi-year process you can't expect and you have  to do it also in the right way you know what I   mean you need tick data you need to incorporate  a variable spread slippage commissions you need   to test your strategy over different data sets you  know you need to change and adjust your strategy   so to be honest with you we're talking about you  know a few thousand lines of of code most likely   and and you know what I mean like it's a complex  process now personally I love that and I have done   that you know like and my recommendation even  to surely manual Traders is really to do some   testing even if it's not your intent to create  an automated strategy or to to you know automate   a large part of your trading you will learn so  much just by actually testing several strategies   you see I see so are the commercially available  products out there are they user friendly enough   for newer traders to um program in different  scenarios uh so they can test out uh their ideas   unfortunately the general answer to that would be  no I cannot recommend you know anyone to to buy   you know a commercial bot and then you know to to  just test it a few weeks on demo and then to test   it live because and you know what um it's also  difficult to explain but for some reason if you do   not understand every single part of such a complex  strategy for some reason also you know you're not   in a position to know uh whether for example this  is the right Market condition for an automated   strategy or not you see like so I I have to be  very honest here and warn people because you know   like of course that's what many people are trying  to do you know they think come on I put down a few   hundred dollars and I buy you know some strategy  uh you know online and you know I can use that to   to trade so in in the vast majority of cases this  will not end well however of course at the same   time I should also say I'm sure that somewhere  around the world you know they may maybe one   Bots which is commercially available which is not  too bad and if somebody really you know invests   work to understand every single component given  that the creators are willing to disclose those   components that is you know maybe that can also  work for someone but you know what I have seen so   far Ian in the industry is not great and you know  and that's also maybe one of the themes like I I'm   very interested in showing reality I don't want to  sell people any dreams you know look if you become   a doctor Ian you have to go through so seven years  of hard studying you know after that you have to   you know go through like all this learning as a  practitioner now of course everybody can open a   trading account and place some money you know it's  not something where where their legal restrictions   but the complexity especially when we talk about  Forex is high that means to summarize that part if   you want to trade profitably consistently you know  you need a proven Edge like for example the market   causality it needs to be something very you know  sophisticated which actually gives you an edge it   can't just be some simple statistic statistical  system next to all you know the other things such   as you know like discipline mindset etc etc that  needs to be a given if you then dedicate yourself   you know to to Really commit yourself to the  Forex Market you have a chance and look I'm in   a position today Ian to say yes I mean like I have  guided people through that you know successfully   and you know like the the few people who know my  work you know some of them do very very well and   you know I'm very proud of that but you know  you need to really be realistic regarding your   expectations yeah the Forex Market is one of the  most difficult financial markets to trade that's   a reality yeah so you would you would suggest  that newer Traders or people who don't have   much programming experience just simply don't  get involved with these commercially available   program trading uh options is that correct that's  correct so either really create your own strategy   from scratch okay and you don't need to be able  to program okay find the programmer you like and   you know pay him to create a strategy you put  together otherwise the risk is that you get   caught up in the actual programming and you lose  the view of the strategy itself you know the big   picture that's a big risk and you know like really  go down that path and create a strategy and in the   best case a handful of strategies which you know  are consistently profitable that means Ian would   show you a good Equity curve over let's say the  last uh eight years for example yes so that that   can be drawdowns yes there can be flat periods  all of that but over let's say the last eight   years including you know like variable spreads  uh slippage and all that the the the curve needs   to be stable if you are able to reach that then  you know you can demo test it Forward test it   and if the strategy Works life as it does uh in  your testing you have a chance that you can take   the strategy live so can we get more specific  save uh when we talk about dumb money and smart   money is there a noticeable difference between  how the dumb money and the smart money put on   their positions and Placer stops okay that's  the great question and the answer is yes it's   not only a difference it's literally the opposite  okay and maybe I start with a very simple example   um you know like there are these uh uh principles  everybody seems to believe for example you buy a   market you place your own stop below the recent  low now this is the worst thing you can do you   know what I mean I mean you're setting yourself  up to just be short-term stop hunted yeah so   all these things people believe for whatever  reason tend to be completely wrong and that's   by the way why the statistics are so harsh as  we discussed at the beginning now let me give   you a little hint already the dump money tends to  trade reversals so if you would ask me Jamal can   you please give a very simplistic example I would  say well most of the time the money tries to enter   cheaply into markets so trade some kind of mean  reversion strategy you know where they expect the   price to go back to some kind of mean some kind  of average and most of the time that results in   a failed reversal and the price going further  in the previous Direction cleaning out the lows   and the stops which are placed there by the the  money buyers and even doing so in an exaggerated   fashion until you know like the ones who try to  trade reversals again and again and again lose   again and again and again I see in your videos  uh you show these green and red position bars   uh which you say represent dumb money positions  uh where can we see the smart money positions   okay that's a great question so what you see  mainly on the charts is basically the the dump   money uh trades yeah they are their positions  their stops their the different types of stops   we come to that in a second uh we do not directly  see the smart money I used to have one indicator   which was actually showing um certain activities  by the smart money but by a by reverse engineering   the market it's not even necessary to directly see  the smart money believe it or not all you need to   do is to understand uh certain principles which  is you know like only a handful of principles you   need to understand um the actual Dynamics and I  would like to talk about that in a second at least   one specific example and you know that's more than  enough to you know like but to avoid being stop   hunted yourself to avoid being position hunted  to avoid getting lured into the market and ending   up with a horrible position which which in the  worst case ends up blowing your account you see   um so maybe let's talk about an example Ian so  yes let's just what you see I mean on the 5th   of September I sent you a chart of euro dollar  on the forward time frame you remember and you   could see already then that you know there were a  lot of dumb money buyers trying to buy the market   expecting euro dollar to to reversal up and many  of those guys actually place the stops below the   low you remember yes and and then when you look at  the screenshot from yesterday uh you know of euro   dollar you see that it went all the way down to  0.956 so it actually what happened in the days in   between more and more long is kept on buying euro  dollar and what happened the smart money I was   pushed euro dollar down again and again creating  dollar strength and then taking out all the stops   until today until like three hours ago where  we had a little bit of shorties coming to the   market and guess what there's a little pullback  in in euro dollar right now 0.964 you see but  

um so let's talk a bit more in detail um let's  assume we have that scenario from the 5th of   September let's say you know it's euro dollar  let's say the market is full of down money longies   yes now let's assume here that above the price  let's say back then 1.01 or whatever it was there   is a big stop Target yeah so like a big yellow  line no stop Target so uh are we talking about how   many uh Traders have put their stops in at very  similar levels exactly so let's assume it's the   same Market structure like like on the screenshot  that long is in euro dollar and let's just assume   that above the price you know like let's say 40 50  Pips away there is a big stock accumulation yeah   so where where a lot of stops accumulated here's  the thing Ian and that's also counterintuitive   the smart money algo has no reason whatsoever  to directly push euro dollar up and take out   the upper stock because if they would do so in all  this stuff money longings which are already in the   market and the positions are above the price they  would temporarily get into profit isn't it yes   so so you know like that's the reason why in such  a scenario that smart money will not take out even   a big stop accumulation if that would imply that  some of the dumb money positions would get into   profit well wouldn't it wouldn't they look at the  size of the Longs and the size of the shorts and   determine okay well uh you know if we push up  the price then the longest will be profitable   but if the size of the longest is relatively  small compared to the those who are short and   have a big you know many stops at a higher level  uh are the does a smart is a smart money tempted   then to just say okay that's okay we'll we'll let  some of the um longies make some profit and we'll   drive up the price to uh hit these stops forcing  the shorts to cover their stops and if that is the   case does a smart money calculate the amount of  money necessary to push up the price to trigger   these stop losses and do they ever come into a  situation where hey it's not really worth it they   calculate the amount cost to push up the price  and then they back away because it's too expensive   okay that's an excellent comment and you are  exactly right that's exactly how it is so   um that's right exactly like you say so and that's  also where we get to a bit more advanced topics   such as the dub money tolerance so there is some  that money tolerance around the price otherwise   the the market would move as much as it did but  let maybe let me give you a very good example   to to explain this this point which you have uh  talked about now because that makes it I think   very clear let's assume Ian exactly like you  say we have domini long is in the market yeah   there is this uh stop above the price yeah of the  dominatories now let's assume here that uh we have   a big news item let's say U.S unemployment being  published yes yes now now guess what let's say   the unemployment rate is way lower than expected  two percent lower than expected so what does the   smart money do they push euro dollar down against  all these longings taking them out and pricing in   this let's say economic plausibility to the  outside world because it looks like come on   the dollar got strong against the Euro because  unemployment in the US was lower than expected   therefore euro dollar went down isn't it right  that makes sense now but let's now take the   opposite scenario where the news result is  suddenly much worse than expected okay so   unemployment is suddenly two percent higher than  expected so they would need to let your dollar go   up you know and have some dollar weakness in order  to price it in now in this scenario we discussed   we said we have longest in the market so those  longest would win so but we also said there's a   stop above the price so guess what Ian they go  up they quickly take the stop out which was in   the upper side like 40 50 Pips of the stories and  what do they do in they instantly go down again   and that's a typical price action we see these  days and that by the way is the reason why you   don't have news Traders anymore on Forex because  the willingness exactly like you said before Ian   the willingness of the smart money to either  go after the dominant positions or to go you   know after a specific stop area or to create some  economic possibility of course fully depends on   the amount of you know like the dumb money as well  as you know the the overall Market structure it's   exactly like you said and also what you what you  said in the the second sentence is true as well   there are scenarios where you know the picture  is not clear enough and by the way that these are   the cases where we as conservative Traders stay  away because we are not at par with the smart   money yeah we are not 10 steps behind them like  the money but we as causality Traders are still   two or three steps behind the smart money so we  wait for very clear situations whenever there's   a scenario like the one you described where you  cannot clearly see which of the factors will be   prioritized by smart money I was we don't risk our  capital I see would it make sense for the for the   dumb money to not use uh regular stop-loss orders  and just use Mental stop losses because by using a   regular stop loss they make their intentions known  and puts a big bullseye on their forehead for the   smart money to run their stops unfortunately even  the answer to that question is no because if you   do not use a stopping a trading your downside  is unlimited so one single move could blow your   account you know you you have to use stops one  way or another to protect your downside you know   but what you say excellently you say it because  many people come to that conclusion and guess what   that's a trap in itself because if you don't use a  stop yeah eventually when there will be some move   which is so unusual remember for example the Euro  swissy and and you know the so-called flash crash   thousands of Pips in movements Etc where you where  you put your whole account at risk so the solution   to that is not to not do stops however I have to  say in all fairness that why I also recently more   and more promote using stops yourself and actually  going for balance risk return Etc there are people   who trade the causality and they do not place a  stop order in the market however Ian they are they   either already place a hedge so let's say they  want to buy euro dollar they already place a I'll   stop below the price where you know their Position  will be hatched or if they don't even do that they   will use very low leverage in you know like that's  another thing you can you can destroy any strategy   by over leveraging yeah even even the causality if  you don't use reasonable risk parameters you can   still mess it up right and curious where where  does the uh smart money hang out I mean I've   heard of this thing called Dark pools do many of  their transactions and and their positions if we   had access to the dark pools could we see their  positions in there yes so um yes so first of all   um think about the smart money Players as some  kind of cartel they will not trade against each   other it wouldn't make any sense similar to the  prisoner's dilemma you know in economics they   will not end up trading against each other their  algorithms are aligned they don't need manual   intervention this is all automated this is done by  you know like programmers there they use certain   things such as dog pools and other things I'm  sure to align you know like the overall uh Market   making process let's say and uh you know they  have price control and please again I would like   to emphasize that don't take it from me you know  I mean I've done a video where I have summarized   it and I've put together some use articles and  all kinds of evidence you see but I can tell   you right now in if you talk to any senior uh  professional from the industry whether it's an   investment bank or whatever they all know exactly  what's going on and again allow me to emphasize   once more Ian it all of this may be necessary  to a certain point because think about it Ian if   you would be a market maker and you just earn the  spread between the bid and ask would you take the   full price risk I mean there is no perfect hedge  neither you see like it's intuitive that you know   there's some control also on the market by certain  entities you know which provide liquidity as it's   called you know if you ask me it has never really  been different also in historical terms in in any   financial markets you know like the difference  is Ian that these days you know we went through   a whole phase of algorithmization of automation  that's the difference you know like the market   is efficient in the sense of the fact that it's  a fully oiled machine and they what they do works   very well for them and it's very repetitive you  see and and to come back to our discussion at   the beginning please if you are a novice and you  listen to all that understand this is why you need   to understand how this works if you want to to  trade successfully because otherwise you simply   fall victim to to those games which are playing  as simple as that can retail Traders ever get   access to seeing dark pool activity and therefore  adjusting their trading strategy retail Traders do   not really have a chance to get access to any  of that I mean I offer to to see my charts on   the website you can subscribe it's called mkweb  and you see my charts live with everything on it   you see that seems to be the best the best chance  they have and please understand again Ian you know   I'm a full-time Trader I created this product  because that's what I would have needed myself   when I started out you see if I when I first  started out in Forex had this tool I would have   been the happiest man in the world it didn't exist  so you know I created it and by the way I created   that after I I published you know these principles  because I started around four years ago publishing   screenshots and predictions and all that and then  some people said okay Jamal we got it but can you   offer something so I had to go back to the drawing  board you know uh put together a plan to to you   know make it possible that people can see that  chart and and trade them you know so that was the   whole process then it took a lot of time because  you know as I said before I'm trading first of   foremost so I did that kind of by the side but  yeah it's completed and and and people can use   it but look I mean uh the the pot message here  is that uh there is this there's an informational   Advantage by by these players um if you do not  uh put in the homework you're easy prey you know   and and there's no simple solution to that if you  say okay you know what I will just not use stops   so I can't get stopped out what happens you will  eventually end up on the dhamani side and you know   you will have a big drawdown and what happens then  Ian people try to average down they try to trade   at cheaper prices and the whole downward spiral  gets worse and worse and worse does a typical   Forex Trading platforms allow traders to see  where all the stop losses are and at what levels   not really I mean as far as I know the last time  I checked which is a while ago I mean they're   out there there are different uh commercial uh  offerings you know like uh you know like there   used to be like Services where you could at  least see let's say uh some stops or something   unfortunately and this is not enough and maybe  explain that because that brings us also to the   next Point um look stops in particular Ian yes  they are important but they are not the dominant   Factor as such because guess what if you have  a clear Target above the price yeah let's say   you have a big medium term stop accumulation yes  you know that eventually it will be taken however   on average I would estimate that around 8 to 10  counter moves will be implemented by the smart   money I was before they do the actual main target  run you see I call this pre-main run counter move   you understand that's maybe something we should  explain a bit because then it's also where people   can get a flavor and that's also where things are  a little bit counter-intuitive because look most   of us if we see a big line on the chart and we  know okay the price wants to take that level we   tend to stay okay abide towards the line but no  if you want to be more sophisticated and accurate   you need to understand things such as the time and  range principle the smart money Algos in and not   in a rush they do not need to quickly take out  any stop for that matter you see like they have   all the time in the world so what do they do they  make sure that any of the money positions which   are placed in front of that Target are what I call  priced in there are counter moves against them   sometimes the market goes flat for 10 hours just  to make sure if there any day Traders you know   whatever who try to trade towards the other Target  they close their position before the move you see   now it's important to understand by implementing  those principles such as the pre-main Run counter   principle and the time and range principle  and so on by implementing them constantly   they make sure Ian that on the Dominic side no  matter whether people bought or sold or whether   they trade reversals or breakouts or pullbacks or  whether they are scalping as the collective not   individually but as a collective they lose you  see and that's that's hopefully something which   is now you know also a realization for people  listening to this because it's also counter to   it if emo you would say come on I mean first of  all when we look at the naked price chart there   are big trends they exist there are breakouts  which you know like are followed by a proper   move there are reversals whether Market suddenly  completely changes Direction these things exist   on on the naked chart but you know one has to  understand how the mechanics are because the   price is just the output from the market structure  not the other way around so just as uh summarize   the word stop hunting is a word that you use to  describe a cartel-like action of smart money that   concentrates their trades to push the price up or  down to hit stop losses which will then trigger a   cascading sell-off for example which will push  the price down further and then thereby enable   the smart money to flip their positions at a  profit is that accurate that's correct that's   exactly right so that means that the stop targets  are kind of the Final Phase these are the moves so   the the price moves towards those Target levels  they are kind of the last phase where the smart   money finishes up you know because first of all  Market participants who have the stops at those   levels they get kicked out at a loss yeah the ones  who didn't do stops they may get over leveraged in   the worst case they get a margin call the ones  who who try to just hold over you know they may   get into a deep and long long drawdown so that's  exactly right we often see these days Ian that   the market goes through the target level and  then once by the PIP almost the the target has   been cleared they snap back up you see like that's  that's typical house key moves we see a lot these   days this is why you know like Forex is destroying  so many simplistic systems you know the ones who   try to trade Trends they get whip sort the ones  who try to trade reversals they suffer from uh   reversals over and over again you see like this  erratic price action which looks you know very   irregular to like the outsider is the result of  these kind of constellations as simple as that to   the point where sometimes and again please watch  all the videos I posted over the years it's very   repetitive you see these things often I could  capture the camera you know how the price goes   exactly to the Target and then snaps all the way  back up once the target has been cleared there is   no way for for someone sitting at a naked price  chart you know to to cope with that if you ask   me I see can you give us a specific example of  what you look for to enter and exit from a trade   sure so um that depends on you know like which  kind of setup I'm I'm trading I mean let's talk   about uh a few specific examples so let's talk  about maybe the post stop on trade because you   know this is an easier setup to trade so that's  in a situation where the market overall is rather   ranging there is a clear Target the Target gets  taken out the price of a shoots maybe a little and   then the price falls back into the range this  can be tradable because you know like you can   see in front of you that the job is finished the  stops have been cleared the smart the dump money   goes also to the opposite direction you know so  they that's the other thing like most of the time   when you observe the causality life you will be  surprised how well the smart money Argos tricks   work you know like they work over and over again  you know sometimes by simply drawing a certain   pattern on the chart let's say you know like they  draw like a double top so people for some reason   think a double top is you know a place to sell  the market and then suddenly you know there's a   big strong price bar to the upside and what looked  beforehand as a double top doesn't now look as a   like a double top at all you know like it looks  just like you know some messy messy price action   you see so I see and that's a direct result of  there being a lot of stop losses right above   that double top uh for them to trigger and if  there wasn't those stop losses there for example   or say the amount was very small would the smart  money say hey it's not really worth fooling with   this here that's exactly the point and that's  the reason Ian why of course if you look at the   historic type of course you find double tops and  double bottoms you know and double news of course   you find these patterns but like you say exactly  like you said the only reason why these patterns   then were successful is because you know either  the smart the money was again on the wrong side   you know or the job has been completed the main  target has been cleared out you see it's that's   exactly right so now to come back to your to  your question so one particular set I would be   for example to to wait and you know demonstrate  the counter moves after the stop run but let's   talk about a second setup the so-called the  money switch because right now when you look   at zero dollar you see this nice move up and as  you if you would see my charts you would see that   the damn money you switched from long to short so  within the last eight nine hours we suddenly have   sellers that money sellers coming into the market  the red bars that is the only reason why right now   as we speak euro dollar is going up against those  shorties such a setup I call it the money switch   because the money literally switches from one side  to the other can be for example a tradable setup   what we typically do in those cases is we wait  at least until the previous low has been cleared   which has happened here by the way so the low euro  dollar around the 0.9566 level had been cleared   and then the price comes back up to the range  and that money sellers keep on coming into the   market in that case you can buy and and trade the  actual that money switch this is a second example   but allow me to give you a third example which  is very relevant looking at the recent weeks yeah   which is a squeeze and I feel very strongly about  that one because people are so confused when you   look at dollar Yen Ian of look at since Feb this  year it went up 3 000 Pips isn't it yeah it was a   big move uh you see like they went up and up there  were only two pullbacks even you know apart from   that it was like a strong move to the upside now  that's a typical squeeze move and we actually have   a separate indicator that's the indicator you see  on the on the bottom of the chart you know where   the squeeze itself gets shown this indicator  shows you overall it's the dump money overall   rather long or rather short and is it increasing  in that direction and this is a typical squeeze   move that means for whatever reason Ian the  that money keeps on selling it to the market   over weeks in this case which is crazy and the  price goes up now you can as a causality Trader   you can trade that but you will of course trade  in expensive prices there that's something where   people sometimes have a psychological barrier and  again it looks like counter-intuitive because you   see a shot which already from went from the lower  left corner of your screen to the upper right and   then you decide to buy it you know after it came  up so much but you can absolutely do that if you   are a causality Trader you can enter expensively  into the market and write you know the next time   it Pips up and you know and then personally  also I recommend yourself in those cases to   use a clear stop just in case you know that that  for example there's a money switch or you know   that money leaves the market all of a sudden and  the price actually turns you know you you just   get out you understand I see so uh on your videos  I noticed that you have these position bars where   you show where the smart money is and then uh  both long and short and then the stop levels   do you adjust your trading strategy such that you  will wait until those stops get cleared out first   um do you take that into consideration well I'm  obviously experienced so I also trade towards the   targets so so so it allowed me to elaborate if you  know and that's actually also a good strategy if   you see you know first of all Ian it's important  that three different types of stops okay there   are short term stops there medium term stops and  they're long-term stops on our charts you see the   medium term stops as orange and yellow you see  the short-term stops as blue and the long term   stops as pink to make a long story short Ian the  most important stops especially when it comes to   actually trading those moves themselves are  the medium term stops you will see quickly   that eventually those medium term stops get taken  out you know after the smart money I was did what   they what they had to do you can absolutely trade  those moves however as I said before you have to   take into consideration that for each of those  Target runs towards the target on average there   are there's a number of counter moves literally  to the opposite directio

2022-11-08 21:30

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