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The 4 Corners of the Market

The Four Corners 

The coordinates, the four coordinates: the North, South, East and the West encompass all possible directional changes; any instantaneous mutation and permutational changes. In short, any possible changes are captured by one of the coordinates.  This is a principle that is applicable in many disciplines- geology with wind directions and changes; with any object that moves along a plane. Any movement that happens vertically or horizontally is destined to reach one of the coordinates.  It is a principle that is applicable to the markets too. 

Our experience, tried and tested knowledge of the markets, spanning over two decades has helped us unearth four categories of strategies that cover the four fundamental modes of movements that the price of assets- the price of the currencies of countries move.  These are market making, event trading and strategic trading.  These strategies have formed the bedrock of the stages of our UTC programme. Put simply, Stage 1 is the entry level stage.  In stage 2, we hope that traders would have understood the most important tenets in market making- the parameters and the limitations. In Stage 3, Liquid Markets intends to discover traders that would have perfected their abilities at understanding and recognising the most important news items in the trading calendar and macroeconomic events that are significant enough or expectedly significant enough to change the pendulum of currency pairs.  In Stage 4, you will be conversant with advanced strategic and arbitrage trading.    

Stage 1.  Inexperienced, novice or unlearned entrants at this level must observe their markets.  It has been set up to help participants become more familiar with price movements, training their senses to recognise patterns and fine tune their thinking to the frequencies and timings of FX price movements. 

Stage 2. Market making. All things- including the prices of currencies operate on the basis of supply and demand.  It is elementary mentioning that as demand for a currency rises, (with constant supply), price of a currency rises. The reverse is also true that as supply increases (with demand constant), the price of a currency should fall, ceteris paribus.  Market making means providing liquidity in the markets.  Being profitable with this strategy.  If you take a sample of the pattern of prices of an FX currency over time, you will discover a distribution of prices that are not random.  From this distribution of prices, statistically significant parallels can be drawn.  Averages (the mean) can be known. A standard deviation from averages, discovered. Variances changes from standard deviations can also be discovered.  Therefore, whenever a price goes away from the mean in a significant way, you can expect prices to return to the mean (average).  This is call mean reversion. Put simply, traders should train their eyes to spot ranges.  Success at this stage is small and consistent incremental gains over time and not big variances in the balance sheets, lucky punts! 

Stage 3.   Event trading.  All successful traders at this stage would have developed the knack of deciphering qualitative information (words), sifting through them to discard what is noise from what is normative information from what is expected to move FX prices from the qualitative information that actually causes changes in the prices of FX currencies.  Over time, the very best traders will have honed their senses in such a way that the only difficulty they will have at this stage is being able to separate the information that is expected to move prices from the qualitative information that actually causes prices to change momentarily or in the medium term.  Traders in Stage 3 must principally be able to spot breakouts– and be able to profit from them.  Tip: expand your sources of information. Discover tips to be tipped for the top!  

Stage 4.  Strategic trading. Traders can be successful in the long term, if they are disciplined enough to follow the guidelines and parameters set out in Stage 3.  However, there are a class of traders that are apt, adept, sharp and malleable enough to Stage 4, by developing further strategic options in their trading arsenals. Enter strategic trading.  Traders successful with strategic trading are somewhat unlimited in their approaches. They aim to attain small gains extremely frequently. Highly quantitative and mathematical in approach, they are equipped with approaches from physics and are able to apply highly sophisticated laws in physics like normal law and polynomiality in a pragmatic way.  Traders and institutions aim to profit from inefficiencies in financial markets over various continents and exchanges aiming to profit across time and space.  Stage 4 traders or trading institutions never follow general market trends because they change their pattern of trading behaviour frequently seeking an edge, an unfair advantage over the rest of the participants in the markets.  It is elementary to have a stable internet connection with low latency and high bandwidth connections for traders.    

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