Trading is a n-person game. To be successful you need to know what the guy on the other side of your trade is doing. If you don't know it you're the pig and pigs get slaughtered.
The smart money is supposed to lure less informed traders into the wrong side of a trade and then knock them out. Once the marketplace has been cleared from the vermin, price may move quickly.
:dance3: I would like to find out more on standard setups for traps.
Some known examples:
(1) the classical bull or bear trap -> false breakout from a final trading range
(2) the sting (lower low or higher higher after news release, which is used to clear out early countertraders)
(3) the 2B / turtle soup setup, which is a new high or low after a trendline break on lower volume
:unsure: For today I neither trust my eyes nor my data, can anybody check this, please?
Today, larger traders have been trapped themselves,as they bought ES all the way down from 1200 to 1190. The cumulative delta shows an increase of about 34,000 contracts during the 6 minutes that it took to take ES 10 points down. Do I read the chart correctly? Do I have correct data? Anything wrong with my reasoning? I checked the spread between ES 06-10 and S&P500, see second chart below, so I don't think that the net buying was done by arbitrageurs only. The Euro moved down a bit following the downgrade of Greece and Portugal, but not as fast as the S&P 500.
If there was buying at the ask, who were the passive sellers or distributors ?
The chart below shows 4 divergences between price and cumulative delta of bid/ask. Each of the divergences potentially trapped a bunch of traders and thus extended the price move during the divergence. Does anybody have an indicator that detects this type of divergence? Can you confirm my findings?
:gossip: Anybody who wants to comment the price action versus bid and asked traded volume?