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