Forex Trading Training: The Essence Behind Trading Techniques

Where do the various phenomena in trading come from? What indicators are closest to the nature of the market? Different interpretations of these two issues have derived different trading techniques. While many people continue to explore technical indicators or fundamental information, they often ignore another completely different but crucial factor - people. Furthermore, it is human behavior.

More attention is paid to the behavior of market participants in the "Wyckoff Theory". He attributed the changes in the entire market price to the result of the joint action of market participants, specifically divided into three states: main capital guidance, public following, and disorderly entry and exit of public funds. This kind of market perception may be particularly widespread in the stock market. In the futures market, although there is almost no financial power to dominate the absolute market, the analysis of trading behavior still plays an important role in some aspects so that we can better predict and grasp the market.

What I want to share with you today is the analysis of trading behaviors worthy of our attention in the futures market, specifically expressed from the three aspects of positions, basis and book receipt inventory.

Position change analysis

Changes in positions of related products and positions of different contracts will be affected by different factors. The increase or decrease in positions most directly reflects the attitude of the participants. The analysis of changes in positions can identify the views of most funds in the market on future trends, and can even capture a series of important information such as the trends of main funds.

From what angles should we pay attention to positions? The two aspects of position distribution and main positions may give us a more comprehensive vision.

Within the same variety, the position distribution of different contracts reflects the distribution of long and short forces in different time stages of the variety contract. There is a certain regularity in this situation, and the distortion of the distribution pattern of positions in near-, medium- and forward-term contracts provides congenital soil for sudden market movements. Trading under this situation must pay great attention to the evolution of the general trend. At the same time, there is also a time pattern in the process of traders moving positions, and changes in this pattern will become rare trading opportunities.

The long and short position lists and classified position reports released by the market every day provide us with the possibility to grasp the main trends. By examining each aspect of the transaction, gaining insight into the likes and dislikes of the main funds will provide directional guidance for our transactions. According to Wyckoff's theory, the analysis of the main funds' intentions can allow us to prepare for a rainy day and also allow us to seize the opportunity.

Analysis of Basis and book Receipt Inventory Changes

The change in the basis of a futures contract is determined by the holding fee. A positive basis refers to a near low and a far high. The basis of the far month contract is larger due to the high holding fee. Therefore, when the futures contract has a basis inversion, it is likely that the spot price is in a tight state. At the same time, imbalances in the position structure may also lead to changes in the basis structure. It can be seen that abnormal changes in basis differences indicate abnormalities in the futures-spot relationship, thus providing good intertemporal arbitrage opportunities for transactions. Not only that, the abnormal basis of the same product in different markets also provides clues for cross-market arbitrage.

book receipts and inventory are another important factor that reflects trading behavior in addition to basis. Changes in book receipts are reflected in inventory, and changes in inventory affect prices. It is not difficult for us to know that the analysis of inventory changes directly affects our judgment of the market. Inventory is not as simple as we think. Its changes are not a single increase and decrease pattern. Sometimes inventory is just a means for institutions to regulate prices. During the inventory analysis process, we need to pay special attention to the following three points:

1. The number of canceled book receipts

2. Changes in large book receipt reporting

3. Inventory regional distribution and changes in incoming and outgoing warehouses

The analysis of the behavior of market participants goes beyond this. Any evolution that is contrary to conventional changes reflects the abnormality of various financial forces in the market. Identifying such opportunities can greatly improve our trading results.