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  1. #1
    Rookie Member

    Hot Market Structure and How to Profit from the Inefficiency Prediction !!!

    Hi traders! I am starting a new thread on some very interesting and still experimental topics like market structure and inefficiency prediction.

    My view on the markets is based on a general form of prediction of the momentum and psychology of the other participants. It is not possible to know exactly the thoughts of all other participants but it is possible to see if there is misbalance between buyers and sellers. These situations are rare but if you catch them it is much easier to trade.

    The market structure is very complex and include very short term participants and also longer term traders that make their decisions on daily and weekly charts. By the way the market behaviour is fractal. This mean that short term moves could be replicated on longer term scale and that they are suchlike. This finding could make the whole picture more easily predictable and understandable. Does somebody know more on

  2. #2
    Master Member Bogdan G's Avatar
    Ok, I'm interested. How do we predict the market inefficiency and how do we profit from it?

  3. #3
    Rookie Member
    We could predict market inefficiencies when we have a great disproportion in the power of bulls and bears, especially when one group of market participants has played their cards. For example when we have strong bearish movement in relatively short period of time (several hours) we could know that the power of bears is decreased and the power of bulls is increased. That means that if we have bullish sentiment, but short term prevalence of bears, we will have a high probability setup for call binary option. Opposite if we have bearish sentiment but short term bullish spike we could trade with high probability put binary options. That strategy is counter trending but it exploit the short term inefficiencies and also the simple fact that 85% of the time the market is in ranging conditions.

  4. #4
    Specialist Member runneroption's Avatar
    I agree with you wallstreet that this strategy works most of the time, but there are still market conditions when the market is strongly trending and when you will lose money trading this strategy. Probably these conditions could be avoided by using some MA filters, but that is not guaranteed because trending conditions appear from nowhere most of the time and you couldn’t spot them much in advance.

  5. #5
    M.J
    M.J is offline
    Veteran Member M.J's Avatar
    Quote Originally Posted by wallstreet View Post
    We could predict market inefficiencies when we have a great disproportion in the power of bulls and bears, especially when one group of market participants has played their cards. For example when we have strong bearish movement in relatively short period of time (several hours) we could know that the power of bears is decreased and the power of bulls is increased. That means that if we have bullish sentiment, but short term prevalence of bears, we will have a high probability setup for call binary option. Opposite if we have bearish sentiment but short term bullish spike we could trade with high probability put binary options. That strategy is counter trending but it exploit the short term inefficiencies and also the simple fact that 85% of the time the market is in ranging conditions.
    In our world, we call it retracement. And yes, it is likely to happen after quick bullish or bearish move. But if it was "that simple", every body would have traded retracements with 100% success or at least 90% success. For binary options, it becomes tricky as timeframe of retracement is unknown. Retracement may happen immediately after the quick bullish or bearish move (for example Gbp/Usd last week) and may happen after some time (for example Eur/usd last week). So we cannot trade based on assumption that market will always retrace immediately.

    Your idea of disproportion in power of bulls and bears looks very similar to idea of imbalance in strength of currencies. If we dig it more, it will lead to concept of correlation, I think.

  6. #6
    Specialist Member RCox's Avatar
    Quote Originally Posted by M.J View Post
    In our world, we call it retracement. And yes, it is likely to happen after quick bullish or bearish move. But if it was "that simple", every body would have traded retracements with 100% success or at least 90% success. For binary options, it becomes tricky as timeframe of retracement is unknown. Retracement may happen immediately after the quick bullish or bearish move (for example Gbp/Usd last week) and may happen after some time (for example Eur/usd last week). So we cannot trade based on assumption that market will always retrace immediately.

    Your idea of disproportion in power of bulls and bears looks very similar to idea of imbalance in strength of currencies. If we dig it more, it will lead to concept of correlation, I think.
    This is not true. There are a lot of Fibonacci techniques that take time factors into consideration, and can help in determining the length of time that will be seen in the retracement.

  7. #7
    Veteran Member hchandra's Avatar
    Maybe explanation with chart and real time trade will make it clearer,

    That means that if we have bullish sentiment, but short term prevalence of bears, we will have a high probability setup for call binary option
    Opposite if we have bearish sentiment but short term bullish spike we could trade with high probability put binary options.
    Basically it means whenever there is spike to other side then we will counter trade it (Actually we follow the major trend) and expect price only temporarily move to the other side and will continue the initial direction. How do we determine if the trend haven't changed?

  8. #8
    Veteran Member Dan21's Avatar
    Quote Originally Posted by RCox View Post
    This is not true. There are a lot of Fibonacci techniques that take time factors into consideration, and can help in determining the length of time that will be seen in the retracement.
    Fibonacci techniques are good way to make predictions of retracements. They allow showing properly the significant levels which are highly probable retracement levels. I know that there are some techniques that use time factor in calculation. The greatest time trader is of course William Gann which used in his trading career many advanced time trading methods and techniques.

  9. #9
    Master Member Bogdan G's Avatar
    Quote Originally Posted by wallstreet View Post
    We could predict market inefficiencies when we have a great disproportion in the power of bulls and bears, especially when one group of market participants has played their cards. For example when we have strong bearish movement in relatively short period of time (several hours) we could know that the power of bears is decreased and the power of bulls is increased. That means that if we have bullish sentiment, but short term prevalence of bears, we will have a high probability setup for call binary option. Opposite if we have bearish sentiment but short term bullish spike we could trade with high probability put binary options. That strategy is counter trending but it exploit the short term inefficiencies and also the simple fact that 85% of the time the market is in ranging conditions.
    This is not market "inefficiency" or "inefficiency prediction". So, are we going to start talking about inefficiencies and how to make some profit out of it?

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