Shalva Kutelia.
Shalva KuteliaProvided these algos have studied the markets long enough and refined their approach to maximize profits, what is the theoretical threshold after which they will not allow anybody to profit substantially if at all (assuming such a scenario is possible)?
If the algos become aware that you as a trader are aware they are aware of you being aware of them wouldn’t they just mimic your behavior and move a step up? Surely there is a limit to how many variables one can calculate in their mind at any given moment and I don’t think it can be more than what a quantum computer with just a few qubits can do.
Also, wouldn’t outsmarting the markets make you mimic them in return and thus become corrupt? I mean if the algos do the opposite of what’s rational it would appear they ultimately want completely unpredictable chaos where if you look into the abyss the abyss also looks into you.
What do you guys think?
Tim TimI guess you could say retail traders are so small they don’t bother worrying about them. It wouldnt even be enough out of their profits to notice.
Shalva KuteliaAre we trading against other guys or some sort of self-adjusting artificial intelligence though? It’s truly astounding how they manage to win no matter what you do leading me to believe there is some entity that learns on it’s own, that plus how in the world is anybody supposed to manually and seamlessly incorporate this many rules into an existing model keeping in mind that no trading system lasts forever?
Whether it’s other people or a machine behind the learning makes all the difference because the goal of a machine is maximum efficiency. It’s unthinkable to imagine that a human would be able to read others this well.
Tim TimProbably not. I would say with enough capital and some advanced spoofing techniques you could creat a simple enough system to move price. Maybe some machine learning but I don’t think it would be some AI system.
I would say its probably brute force then some element like an AI.
Shalva KuteliaSo.. are you telling me one can totally conceptualize the entire manipulator model ?
enbyus1Correct me if Im wrong but there would be no Market stability. Wild west so to speak. EUR/USD would be 1.05 Bid; 1.095 offer. No one would be able to trade it and the SM would not be able to take advantage of such conditions. DM tolerance is factored in.
Shalva KuteliaThinking of it that’s actually a profound idea, not only would a 100% accuracy discourage anybody from trading and make the manipulation too obvious but there’s also the part where you can’t curve fit true randomness in people’s choice so there must always be space to wiggle otherwise the model becomes less efficient, I guess that answers it, thanks Brent
FractalFreakHi Shalva.
Yes, the COMPLETE “market making” process of the SM algos is fully automated. Yes, there are of course specific “thresholds” which determine certain action. For example, a large accumulation of positions (i.e. 400 on the scale) will influence which move is prioritized next. Yes, the SM manages to simultaneously “lure” in new DM traders as well as “killing” the current ones. I find that particular point very fascinating. But think about it through the “MK lense”; if DM longies enter “above” the upper H4 band for example, thinking that the “previous high is now broken and momentum will continue”, then the SM does an H4 reversal down, placing these longies into DD, this right after they just took the LTS of the older DM shorties from before (and who led the SM to push the market towards the upper band).
Yes, to the “outsider” all FX markets look like complete “chaos”. There are whipsaw moves, dirty trends, unclear support and resistance levels, plateaus, failed reversals, uneven pullbacks, mixed with strong trends, rather even consolidations etc.
In that sense, FX is “efficient”. However, the MK trader “sees” what is going on behind the curtain and understand the “causality”.
Also remember the “anti-learning principle”, the DM has no real chance to “learn” by simply watching the naked price action. Because once they see a “head and shoulders pattern” unfold, but the other time they see the EXACT same price action with the opposite outcome, this because the DM was literally on the opposite side this time. The SM algos DO TAKE into consideration what the current “occurrence” of such price patterns is and makes sure that all major ones approach a 50-50 probability. That is quite an interesting topic I have not elaborated on a lot, but it is not super complex neither.
Shalva KuteliaHi Djamal,
That was an excellent unpacking and explanation, particularly the 50/50 part, I’ve noticed a lot of things like that but until they click together it’s not much use obviously, it is a fascinating topic indeed although mind-bogglingly intimidating at first. I suppose I attributed more to the algos than they deserve.
I have another question then: can’t we reverse engineer everything that’s going on and automate it and how accurate a predictive power can we have in principle?
In the bigger picture, that is with both the people and the algos moving the markets, how much of previous tick data is taken into consideration by the algos for, let’s say, support and resistance levels? I mean, are the markets intrinsically fractal and manipulated or fractal because they are manipulated? Is there even such a thing as financial markets without manipulation on this planet?
The way I see it right now in terms of hierarchy is like this: Fractal unpredictable nature -> market manipulation -> manipulated partially predictable nature that DM participants take for fractal unpredictable nature and on top recursive feedback into the algos in the form of no easy money principle and the like.
Trying to separate natural phenomena from the manipulation here to elevate myself a level above the markets and see what’s going on ground up.
Thank you
Admin SMEIf one performs a long-term test of “patterns”, such as head-and-shoulders, flags, penants etc. one will indeed find that the mode price data is added, the more the accuracy of any of these approaches “randomness”. So whether there will be a “bullish” or “bearish” breakout. It depends on the DM positions (and stops etc.).
However, what is impressive is that such components are incorporated in addition to the main principles. Previous tick data is always incorporated by the algos.
Shalva KuteliaI think that answers my questions, thank you so much
FractalFreak“I mean, are the markets intrinsically fractal and manipulated or fractal because they are manipulated?”
Hi Shalva,
this question shows that you thought deeply about the MK, well done!
I am surprised that this was not asked earlier.
So this would be my answer:
It is a bit of a “egg-chicken-egg” situation. Around 70 years ago, when the markets were not manipulated (in the same way) as today, the price action used to be (multi-)fractal.
The reason for that is that out of the “chaotic” process of financial markets, some “self-organizing” order established itself in form of fractal properties.
The price started to get “self-affine”, to show volatility clustering and to even have “long-term memory”. That is often the case when you have a system that is first unorganized and chaotic, but then “settles” down on such properties (i.e. see examples from nature, such as plants, organisms, etc.).
Now,
obviously, the SM Algos took all that into account and incorporated that “fractality” into their “market making” mechanisms. That in itself was not complex; as we know, some Dm accumulation on one time frame will impact all others etc.
Also, remember that the fractality itself has nothing to do with “direction”. For example, a pattern which breaks either to the upside or to the downside can of course be fractal in both cases.
So the answer is yes. First markets were fractal, then at a later stage (when the algos took over the game), that fractality was continued.
D
Shalva KuteliaHi there, thank you, you are really good at crunching data and this is an extremely interesting.
I see, no fractal ever truly settles though does it, especially not with new actors entering the market all the time but that’s where all the information, both direct and oblique, on how to trade programs new traders into acting in a predictable manner so then algos utilize all sort of gaslighting tactics to give any approach a random distribution, even more, if the majority of market participants are unaware of what’s going on they turn this into a feedback loop hence the word “corruption” I used earlier instead of a natural self-organizing process moving towards iterative stability, this overlays with everyday life so much one could apply trading principles anywhere. The smart money boldness concept to me really is just them taking what was already there, continuously reiterating it to fit the manipulator’s agenda and presenting it as the original – something George emphasizes by quoting Stephen Hawking that “The greatest enemy of knowledge is not ignorance, but the illusion of knowledge”. It’s very obvious what’s going on here though judging this kind of behavior is inconsequential, exposing it in my honest opinion certainly should be welcome by anyone who is not an agent of the system and is aware enough.
I would argue actually that fractality has nothing to do with the direction of the market since I have this Fourier extrapolator indicator and sometimes, when it predicts a very steep move in either direction and that direction coincides with other currency pairs within a day or two the price is extremely likely to spike (though not before it moves in an opposite direction). This was not a random indicator I use since any pattern is a fractal and any fractal is self-similar motion therefore there just have to be cases of high level of predictability due to accumulated momentum that has to eventually reveal itself no matter what.
It’s so amazing that you’ve mentioned market’s “long term memory”, clustering and “self-organizing” as that’s how anything would’ve been created in the first place including ourselves. I’ve had a lot of success (in demo admittedly, H4) just opening the charts once and knowing where the price will generally move right away without analyzing anything, it’s clearly not a big deal for the subconscious so give us a feel of what’s going on if we just tune in and are not distracted.
FractalFreak“Hi there, thank you, you are really good at crunching data and this is an extremely interesting.”
Thank you, Shalva.
“It’s so amazing that you’ve mentioned market’s “long term memory”, clustering and “self-organizing” as that’s how anything would’ve been created in the first place including ourselves. ”
That is exactly right.
“I would argue actually that fractality has nothing to do with the direction of the market since I have this Fourier extrapolator indicator and sometimes, when it predicts a very steep move in either direction and that direction coincides with other currency pairs within a day or two the price is extremely likely to spike (though not before it moves in an opposite direction).”
Yes, if you like, post it in the forum.
“The smart money boldness concept to me really is just them taking what was already there, continuously reiterating it to fit the manipulator’s agenda and presenting it as the original ”
That is correct.
“The greatest enemy of knowledge is not ignorance, but the illusion of knowledge”
Exactly.
FractalFreakIn that sense, the market is an ever-evolving (multi)fractal.
That is the best “mathematical” description I guess.
Shalva KuteliaYes, I think that is describing the case well and, thank you for the confirmation.
