I have been trading GBP/USD for sometime. I understand and see effect of most events, news, economy figures …etc. But from time to time I notice an unexplained, quiet, sudden, big change of price reversal. My hypothesis is that some banks and private firms manipulate to avoid major losses to their own assets.
I mean if a bank with billions of GBP stocks it will try to curb on USD value in small successive bursts or large one-off burst offering cheaper dollars to the market.
Or am I wrong?
Have you looked for consistency in the time of day these tend to occur?
No consistency of time but seems completely random event. As I said sometimes one sharp progressive reversal with no significant pullback or sometimes bursts of smaller reversals with underlying pullbacks.
At the end the price is back to where it was almost as if the attempts failed.
Sound like liquidity grabs to me. Do you have any examples you can post so I can look at my chart to see if I can add any context if possible.
Here is an example 29 Jul 2022 GBP/USD with USD non-stoppable.
I assume the smaller pullbacks are small liquidity grabs.
So you mean the larger pullback is a big grab. But it doesn’t happen that often like the small ones.
OK I’ve had a look and I can only offer my opinion on it but the context you need is to the left. On the 27th there was a sharp move up. Looking at the day this was a Wednesday so my guess would be FOMC caused the move. The move left lots of imbalances in price which at some point would be used to recapitalise before price moved higher. Price consolidated and then came down to fill in some gaps before moving higher and then on the Friday we saw a London and NY sell off day. You can see the manipulation in price sending it higher around 7am before an 8am sell off. This drop was sustained for a few hours and then the so called “London Lunch” period saw a small retrace before NY session (around 12pm) continued the move down closing in the gap created by FOMC. This would have allowed buy orders to have been filled and this allowed for a classic “London Close” reversal (around 3pm). All these times are GMT+1 for my by the way.
The move down on the Friday cleared out the lows formed on Thursday and thus stops and ran down into the demand zone/order block left by pre-FOMC manipulation. If you scroll along to the 3rd August you can see another move down to fill in the imbalances left by the London reversal on the 29th.
This is how I view the markets anyway but hopefully it helps you to understand at least these sharp moves.
consistency is really important in trading life as well real life.
Personally, I think you are reading too much into this. It looks like your chart example is on a 5 min timeframe and this is like studying the market moves through a microscope,which misses and distorts the bigger picture.
If you look at the 29.7. on the daily timeframe then the day’s range is totally normal. This day happened to be a “doji candle” type of move where something triggered a speculative move in the down dirction - which was short-lived and the market then returned to its original position within an ongoing upmove.
This is not uncommon in markets, especially with pairs that are widely traded. It is worth remembering that there is a huge core of speculative traders that are looking at the short term moves and that causes these kinds of snap reactions to news etc. This is why markets are so quiet on national holidays when the speculative crowd are not in the market.
This is also one reason why the daily chart gives a more realistic picture of the true underlying direction as its close excludes the day-traders and all the intraday fluctuations disappear into one candle.
Sorry but I am not after daily trend. That is pretty obvious. Why not monthly or yearly. I see some unexpected
reversals and trying to make some sense. The price changes every tick but I am focused on 2 or 3 minute span.
Of course I realise you are not looking at the daily trend, but you said:
My point was that these so-called “unexplained, quiet, sudden, big change of price reversal” are not anything unusual and not due to any inexplicable or unexplained phenomena. They are simply the erratic and somewhat random price behaviour that occurs intraday depending on the ebb and flow of orders accross the entire global market.
When you step back and look at the daily chart you can see that the 29th was just a day like any other.
No point in looking for reason in the random activity of the markets on minute-based charts…
I see the effect of economic figures and I see how they clearly affect price movement quickly (on 3 min chart). This is followed by pullbacks which are small reversals. It is unmistakable, not random. The small pullbacks are random. My observation is that sometimes the price moves as if there was some underlying news but upon analysis I don’t see any. I follow analysis of my broker and it does talk about “manipulation”. So just wanted to see opinion of the forum. To say all intraday changes are just random is only true for small changes. I am focused on those larger changes without underlying visible events. The daily movement is the net effect of intraday changes.
Randomness is not in the mathematical sense, it is in the unpredictability of the extent of movement in the microscopic world of minute-based charts. You are looking for sense in a world of non - sense.
Sure, all moves have a reason behind them. Some are obvious such as economic releases but others are not. There are so many varied motives behind activity in the forex markets, whether it is speculative, import-export funding, international company acquisitions, pension fund portfolio changes, etc, etc.
The point is that what you are calling large moves on such a micro scale are actually just fly-dirts on the main trend and have no significance at all.
To talk of manipulation on such a small scale is pretty meaningless. These markets are so vast with trillions of transactions every day that it is impossible to imagine that any one, or group of, entities can shift it on their own. And, of course, there should be a reason behind that and it certainly wouldn’t be to collect the fistful of dollars from a few retail traders! Manipulation (apart from possible broker internal tactics) is generally part of the conspiracy theories practice that is a modern trend these days - and is often spouted by beginners as an excuse for their losses!
But randomness in your situation is because you cannot determine when such moves might happen or even when they turn out to be small or big until after they have happened. Because you cannot know the driving forces behind such intraday volatility. It might be a big order, or it might be something someone important says, or a sudden event, or someone sells a bunch of twitter shares, etc, etc.
That is why such small timeframe moves are often referred to as “noise”. They are big news to the microtraders, just opportunities for the swing traders, and totally invisible to the longer term investors.
Exactly, nothing random about it. More you look more you will see the patterns and will notice that these are all drives for liquidity.
Lately in the trading community, there is a buzz concept… “liquidity voids”
Market not only moves when big corporations put on a lot of orders, it also moves when no one is trading… In fact, I think markets move so much during news because actually no one is trading during news. So the only orders in market during news is the largest of the largest corporations, not even the medium to big banks are trading during news. So price moves from order block to order block of the largest corps, swinging like waves in Hawai.
Say price is at 1.80 and you sell 100 lots at market… so maybe there is a liquidity void, and between 1.80 and 1.10, only 50 lots are available as counterpart. And there are 150 lots available at 1.09. Price will smash the 1.09 level with a very low actual trading volume, No manipulation, no nothing… just liquidity void
You’ll also see a larger spread in your boker’s quotes because of this phenomenom
Interesting. I always asked myself how on earth price moves so fast during news. Though I am skeptical about empty effect as I don’t now how price is generated by banking system. All I can say it might be some secret algorithm.
Well stated by the poster above a out Liquidity voids .
As time passes you will see these areas resting above and below equal lows/highs
Frequent price changes are another feature of the foreign exchange market. You have no control over it. You can only improve your knowledge and skills to deal with it.
