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SSI on USD/JPY

Posted 03-10-2010 at 09:21 PM by Tekmnd [Show Appreciation] What's This?
Updated 03-11-2010 at 09:18 PM by Tekmnd

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The is a chart of price verses SSI on the USD/JPY pair.

The line is the price. The left column is the shows the price on the pair.

The shaded area shows the positions of retail traders.
When the shaded area is pointed up, the retail crowd is long.
When the shaded area is pointed down, the retail crowd is short.

The number on the right column is the ratio of long to short. So if the shaded area reads 3, it means 3 retail traders are long for every trader that is short. When the shaded area reads -2.5, it means 2.5 retail traders are short for every trader that is long. Etc

READ THE COMMENTS ON THE CHARTS AND LEARN FROM THEM

Cheers
Tek

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	I'm Speachless. Great work! Thanks
	Posted 03-10-2010 at 10:34 PM by talolard [Show Appreciation] What's This?

Okay,

Let me start by saying that I don't know s**t about the SSI but I'm open minded and willing to learn. Anything to help me tackle this beast they call forex will help. Now with that being said... I'm looking at your charts a little differently. Maybe I'm completely wrong, but here's what I'm thinkin'

Using chart #1 as an example. How do you know that they are reversing their long positons and going short instead of just closing out their longs for a profit as price rises. I'm figuring, as price rises, more and more people begin to take profits and or withdraw their interest assuming the market is too high. Then it shows a dip where retail traders are short but shortly after the dip the price begins to fall. That makes me think that more and more people are shorting the new highs. Then there is another small area where it appears the retail crowd is buying into the weakness. shortly after the shaded dip, you see the market rise again. Now, it does look like between JAN 11 and the 25 that a lot of traders were on the wrong side. Then, their appears to be huge long interest at the beginning of FEB. at the lows where the market shoots up again. Then, there appears to be a HUGE dip at the end of FEB. where the long interest is the highest and the market is near the lows. Isn't that the smart way

.. Now even though the chart ends there, my guess is that it went up after that, no?

Let me know. Happy Trading

Ektrader

Posted 03-11-2010 at 02:45 AM by Ektrader Ektrader is offline

Updated 03-11-2010 at 02:49 AM by Ektrader [Show Appreciation] What's This?

	that is pretty amazing that the retail crowd tries to call these tops and bottoms based on no evidence. good work, tek. i used to be skeptical of the ssi, but now i'm a believer, even though it's not my favorite weapon.
	Posted 03-11-2010 at 02:54 AM by kylefoley76 Updated 03-11-2010 at 02:57 AM by kylefoley76 [Show Appreciation] What's This?

	Evidence? Happy Trading Ektrader
	Posted 03-11-2010 at 03:40 AM by Ektrader [Show Appreciation] What's This?

	Someone needs to explain how the SSI is calculated. I don't think selling to cover longs and short covering are counted. I think it's those positions that are standing (open positions) that are used to calculate the aggregate value. Tek?
	Posted 03-11-2010 at 04:35 AM by forexer [Show Appreciation] What's This?

	Yep, It's open positions, not buying or selling. So you know that they are long or short, and as you can see, they are always wrong. It's really amazing.
	Posted 03-11-2010 at 07:09 AM by talolard [Show Appreciation] What's This?

	okay
	Posted 03-11-2010 at 07:33 AM by Ektrader [Show Appreciation] What's This?

Hi EK

First, don't focus one period of one SSI graph.
The fact that the open retail positions are almost always going the wrong direction is not just now, it is all the time. It is not just the Usd/Jpy pair; it is every single pair, all the time.

Let's focus in on the first graph that I commented on (the left side is framed in red)-

Just before that graph starts, price is heading down, yet the retail long position is at it's highest. As soon as price begins to head up, the retail long position begins to close out.

If you study SSI verses price graphs, you will see this is a constant thing- as price trends, the retail position will attempt to go against the trend, and when price reverses (finally going in the same direction as retail traders), right afterward the retail crowd position will reverse again so they are in the wrong direction. This isn't occassionally; this is almost every single time price reverses on every single pair.
This is not profit taking, it is traders attempting to call tops and bottoms.

__________

Now, lets look at the next graph down.

You see a thicker shaded area pointing down, a thin one up, a thin one down again, and then a thin one up (trying to make sure people are looking at the same graph).

See how price begins to head down, and as soon as it heads down steeper, the crowd goes long.
However, price does actually reverse and go long, so the crowd also reveres again and goes short pretty much the same day.

Quote:

"Then it shows a dip where retail traders are short but shortly after the dip the price begins to fall."

I'm sorry, no it does not

Then it shows the retail crowd reverse to a mostly short position as price heads up the steepest for 2 weeks.

Quote:

"That makes me think that more and more people are shorting the new highs."

Yes, they are trying to call a top.

---------
Jumping down to the next graph- price tops out.

At the time, SSI was just above 1, so while the majority was long, it was almost 50:50 long to short ratio.
As price begins to head down, the retail crowd begins loading up on long positions. The more price heads down, the more they go long.

Quote:

Now even though the chart ends there, my guess is that it went up after that, no?

Yes, that is very easy to look up. Yes, price went up after that, and yes, you guessed it, the retail crowd closed out their long positions at the same time.

_________

If you cannot see the attempts to call tops and bottoms in this example, it is because price has been ranging lately. If you were to go back to the end of last summer you will see price trended for a bit. It shows more clearly then.

Let me show a chart of USD/CHF from last summer

As you can see, the price had been on a solid trend down for 6 months! (only 4 months show on chart).
Almost the entire time, a very large majority of retail traders had been long trying to call the bottom.
In the areas price is dropping the steepest are the areas where the retail crowd had the most long positions.
----------

USD/JPY last fall.
Look how price is heading down steep for a month as the retail crowd goes more and more and more long.

But don't just look at that part of the graph. Look how the retail position is almost an exact mirror of price the entire time-

Going out 2 more months. Price still heading down, retail crowd still trying to call a bottom

________

Euro/USD last summer.

As you can see again, price is almosty an exact mirror of the retail position. For two months price trends up as the retail crowd goes heavily short. Except the few times price went down and the retail crowd went long.

Cheers
Tek
Learn Forex for free! Practice live forex trading with real time charts and live price feeds for free while you learn. Get a totally free virtual trading account here- Free forex demo account | Forex practice account

Posted 03-11-2010 at 07:42 AM by Tekmnd Tekmnd is offline

Updated 03-11-2010 at 09:18 PM by Tekmnd [Show Appreciation] What's This?

	Tek your post was epic. Especially the USDCHF one. You cannot oppose the fact that the herd is mostly wrong.
	Posted 03-11-2010 at 08:14 AM by forexer [Show Appreciation] What's This?

Okay, I see what you're saying. I guess I'll look into it further.... I understand more than anybody that the crowd is usually wrong. But then I had to think, Damn... EVERY SINGLE TIME!! EXACT MIRROR!! Naturally, I couldn't help but think tha'ts strange. But like I said i can't say you're wrong because I don't know anything about it. Anyway... Thanks for the info and clarification.

Happy Trading

Ektrader

Posted 03-11-2010 at 08:21 AM by Ektrader Ektrader is offline

[Show Appreciation] What's This?

Quote:

EVERY SINGLE TIME!! EXACT MIRROR!! Naturally, I couldn't help but think tha'ts strange.

Gotta admit- the mirror thing is pretty interesting huh?

This is why I started studying crowd psychology. I wanted to try and understand why the crowd constantly goes the wrong way.

By the way, if you use open option orders the same way as SSI (as a contrarian indicator), you will find that option traders (and therefore the traders of the underlying security) are also, as a group, constantly wrong on direction.

Cheers
Tek

Posted 03-11-2010 at 08:36 AM by Tekmnd Tekmnd is offline

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	So are option sellers right more than they are wrong ? HErd that most option buyers suck.
	Posted 03-11-2010 at 08:39 AM by forexer [Show Appreciation] What's This?

Hi Forexer

Sorry, I wrote that before heading out, so I didn't explain it very well.

No, what I am saying is that option traders are usually incorrect, so it is a great contrarian indicator (a 'go against the crowd' indicator).

When the open positions show very heavily in one direction, there is an increased chance that price on the underlying will go the other direction. It isn't totally consistant, but it is another tool that can be used to guage price direction.

Cheers
Tek

Posted 03-11-2010 at 11:01 AM by Tekmnd Tekmnd is offline

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	Tek, i just can't see how this information can be usefull since both price and SSI say the samething somewhat in a different way. It's like looking at the EUR/USD vs USD/CHF. Or USD/CAD vs DAX. Do i miss something ?
	Posted 03-11-2010 at 11:22 AM by trendisyourfriend [Show Appreciation] What's This?

Maybe my question was not clear. Tell me, is SSI only used to assess price direction? As EK said if EVERY SINGLE TIME!! WE HAVE THE EXACT MIRROR, what gives? I mean you just need to draw a trendline and *voila you have your answer since EVERY SINGLE TIME!! WE HAVE THE EXACT MIRROR. As a daytrader, i am more interested by tools that would reveal divergences or differences than similarities. I am still unsure how SSI can help a daytrader. We have a good case with the USD/CAD as price is stalled at an area of support. How can SSI help you in this particular case ?

Posted 03-12-2010 at 05:43 AM by trendisyourfriend trendisyourfriend is offline

Updated 03-12-2010 at 05:46 AM by trendisyourfriend [Show Appreciation] What's This?

Hi Trend

Sorry, I missed your other question.

How I use SSI is to quage price direction. Because the retail crowd is usually wrong on direction, if SSI is positive, there is an increased chance price will go down that day. If SSI is negative, there is an increased chance price will go up that day.

I won't fight it. Unless SSI is near 1 (meaning there is close to an equal number of longs to shorts), I will not take a trade in the same direction as the retail crowd (I will "Fade" the retail crowd).

For shorter time frame traders (scalpers), SSI can be used to determine the overall trend for the day. I
t doesn't tell you when to get in or out of the trade. However, it does tell you the direction to trade in, or at least the likely overall trend for the day.

Cheers
Tek

Posted 03-12-2010 at 07:20 AM by Tekmnd Tekmnd is offline

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Sorry, missed this-

Quote:

We have a good case with the USD/CAD as price is stalled at an area of support. How can SSI help you in this particular case ?

If SSI is positive, price is more likely to break through the support and go down. If SSI is negative, price is more likely to bounce and go up.
Because the retail crowd is usually wrong on direction, they are probably wrong here as well. Furthermore, the more the retail crowd feels price is going in one direction (the larger the SSI number), the more likely price will go the other way.

See what I mean?-

Cheers
Tek

Posted 03-12-2010 at 07:25 AM by Tekmnd Tekmnd is offline

Updated 03-12-2010 at 07:29 AM by Tekmnd [Show Appreciation] What's This?

my personal experience to validates SSI.

I would like to share, my personal experience to validate SSI.

Last years when the E/U was bullish, I can't tell you the countless time I shorted against the trend.

As a former heard, the thinking of my subconscious mind, was to hit a big lick so to speak. Thinking a couples of down days was a possible reversal, I I'm going to short, (Wow. This is going to be a big move I thought) only to see price continue in it's bullish trend.

I would hold my position thinking I would come back, and my losses would not be to bad. Dumb, it never cam back. (So I took the $19.00 class, after many failed attempts, and learned to stop trading against the daily trend.)

This is why, I am sill bullish on the E/U, now.

Until a clear bullish trend is established, I stay bearish, and limit my lots on up moves when day trading. @ any time it could, resume its bearish trend, so I trade cautiously.

Bottom line it is a subconscious issue, that is why the are all ways wrong!!!

Posted 03-12-2010 at 07:32 AM by larryfolson larryfolson is offline

Updated 03-12-2010 at 07:35 AM by larryfolson [Show Appreciation] What's This?

	maybe the reason why the retail does this sort of nonsense is because they're looking at the rsi. just a thought, i haven't researched it.
	Posted 03-12-2010 at 07:55 AM by kylefoley76 [Show Appreciation] What's This?

	Tek, my timing was good regarding the USD/CAD scenario. Of course, the news helped a bit to break the support. In the Forex market if you trade in the same direction as the 200 MA you should trade in the right direction most of the time. The SSI and 200 MA (daily) must be strongly correlated. Have you checked this ?
	Posted 03-12-2010 at 08:54 AM by trendisyourfriend [Show Appreciation] What's This?

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