Example: They have a reason to get in the market, lets say long, and it’s a huge ass order. If they just hit the buy button right now, they will most likely shove price up through the roof as they buy out seller after seller at various price levels. If, on the other hand, they buy in at an area of high liquidity, then they can get in without driving price up as much, as there are more sellers at this level. When you see price bouncing on a level several times, this is often times one huge order that is taking several moves to work into the market. You are seeing support form. These levels form when price touches a point where the banks think there is sufficient liquidity, and they buy until all sellers are gone and price climbs to a certain level. Then they let price jump around for a while, do its thing, and come back down to the level again. They buy once more, taking out all of the sellers and spiking price up. They do this until their order is worked in.
I in no way play the market like this. I do not have orders nearly as large as they do to work in the market. I simply identify potential concentrations of order flow (in much the same way they do), but I have structured a strategy based on the reactions in those areas that I can take advantage of.
Now, I could ramble on this topic forever, but there is just too much and honestly I do not care about half of you that much anyway.
Sorry. If you want to understand this stuff, then get reading. The information is out there. It is no secret. There are tons of concepts and market characteristics that can be explained by bank (and others) behavior. What I described is extremely simplified and dumbed down. Hopefully, however, this clears up a few things.http://www.forexfactory.com/showpost.php?p=2385665&postcount=83
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