We would like to share our ideas about one of currently effective tools for the currency market analysis with you and also introduce you its slight modification. Next comes a discussion of portfolio of Forex orders provided by one of broker and displaying data on true support and resistance levels: sometimes it’s called an “order book”.
Nowadays the portfolio of orders is one of the few tools providing a trader with truly useful data, which greatly simplifies the process of making trading decisions. In contrast to various indicators, which are generally meaningless, the book of orders displays quite real data on trading positions and open orders of traders.
The portfolio of orders ranks with such analytical tools as volumes, options, and open positions of traders, but it has a single advantage over them: it displays data coming directly from the Forex market. However, data of a single broker doesn’t reflect the entire trading volume, doesn’t it? Yes, it’s really true. However, being the largest broker, its data can be compared to the results of exit polls in the elections, which usually show a true alignment of market forces within a minor margin of error.
First things first. The data provided are split into two groups:
- Open orders, which include: Stop-loss, Take-profit, Buy Stop, Sell Stop, Buy Limit, and Sell Limit. Simply put, all these orders are pending: upon hitting their levels by the price, a new position will be opened or an already open position will be closed.
- Open positions – their name speaks for itself – are all the open trades at the time of the chart snapshot was made.
To figure it out completely, let’s make several trades and see how they could be displayed in the order book:
- Let’s assume that we have quite recently opened a Buy trade (it is losing now) and set Stop orders for it. Here is an example.
- Let’s open a second trade – Sell trade (now it’s in profit) – and set Stop orders for it. Here is an example.
- Let’s assume that the price is moving within a channel 300 points wide. We set Buy stop and Sell stop orders outside its boundaries in the hope of its breakout. Here is an example.
We would also like to note that a single picture doesn’t show historical price data: it displays one moment and represents a snapshot of trading activity as of a certain date and time.
After studying these pictures for one year and a half, we made a remarkable progress in understanding the market, realized principles of pricing and current trends, and also learned the nature of every currency pair. At that we would like to note that most of us cannot find any regularities after we’ve seen these pictures on the official website for the first time and studied them. Additionally, traders have no patience to “look into” the portfolio of orders every day, since data are provided for the period of 1 day. To avoid these inconveniences, the modified version of the portfolio offers historical price data over the last 3 months and also the possibility to evaluate the portfolio of orders in more details at intervals of 20 minutes, but not 1 hour as with a primary source, between the chart snapshots.
You’ll not be able to understand it quickly: it requires a little time to examine it. We’ll only give you a hint on which direction to look for an answer to this question:
- Maybe, all of you heard such a phrase: “The price went to trigger Stop Losses and came back”. Well, Stop Loss orders are placed here.
- Here is another phrase all of you might heard more than once: “The price goes against the crowd.” At that, opening trades only with the ratio of open positions has little effect. This is the case, where the chart of open trades can tell us about alignment of the market forces and indicate direction of the trend.
- It is obvious that most traders lose their money in the currency market. If we monitor the dynamics of open trades, it becomes very clear that winning trades are closed faster than losing ones due to a pathologic desire to “wait out” a loss – see the proof of it. Maybe, is it worth cutting losses in the bud (this is more like a trading advice), thereby getting the edge thanks to not joining the majority group?
In conclusion, the contemporary market is similar to a whale eating helpless plankton. The same is true for lonely traders not having access to the valid market data: they’ll be eaten by major players (“market makers“). Unfortunately, a few brokers provide a shared access to such data: the only data shared by the overwhelming majority of brokers is the “ratio of open positions”. We hope sincerely that the number of brokers willing to provide data of this kind will only grow!
► Other tools: Ratio of Traders’ Positions as an All-In-One Tool.