How Banks Trade The Forex Market

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The Banks view the Forex market from a different perspective than the regular Forex trader. A regular Forex trader trades as much signals he gets from his analysis and keeps opening trading transaction frequently, this most times lead to over-trading. To be sincere, these approach exposes our account to more risk, as if the market is not risky enough. I believe a good strategy shouldn’t give more than 2-3 entries in a week. Strategies that has these methodology has been proven to have more consistency over time. I’m often mystified why so many traders struggle to make consistent money out of Forex trading. Most people now see Forex trading as a form of gambling. Well i don’t blame them, the answer has more to do with what they don’t know than what they do know. It all comes down to understanding how the traders at the banks execute and make trading decisions.



Did you know Bank traders only make up 5% of the total number of Forex traders with speculators accounting for the other 95%, but more importantly that 5% of bank traders account for 92% of all Forex volumes. So if you don’t know how they trade, then you’re simply guessing or let me say a gambler. You see what you don’t understand is that these banks got precision in their trading methodology while most retail traders don’t. First let me expose the tradition about Forex traders in institutions. They don’t sit there all day banging away making irrational trading decisions based on the charts. Most of the time they are simply transacting on behalf of the banks customers. It’s commonly referred to as ‘clearing the flow”. They may perform a few thousand trades a day but none of these are for their proprietary book. They actually only perform 2-3 trades a week for their own trading account because they know how the market structure works.




You see bank traders don’t sit down glued to the system all day long looking for opportunities every now and then trying to scalp the markets. They have a perfect timing they come to analyse the market and do their trading transaction. They are extremely methodical in their approach and make trading decisions when everything lines up, technically and fundamentally. That’s what you need to know! Its a pity most traders base their trading decisions on just one methodology but a bank trader knows if the two approach of trading synchronizes (both technical and fundamental analysis), then he has a better chance of winning most of his trades. When i look at some traders clumsy chart and see how they’ve painted it with so much colorful indicators, i wonder how they see the market clearly and analyse it.




Bank trader’s charts are always clean and simple. All they want to know is where the key critical levels such as demand and supply zones are, some traders also regard it as resistance and supports. Don’t forget these so called indicators most retail traders rely on were developed to try and predict where the market is going. The bank traders are the market. If you understand how they trade then you don’t need any indicators. They make split second decisions based on key technical and fundamental changes. Understanding their technical analysis is the first step to becoming a successful trader. You’ll be trading with the market not against it.



The key aspect to their trading decisions is derived from the economic fundamentals. The fundamental backdrop of the market consists of three major areas and that’s why it’s hard to pin point currency direction most times. When you have the political situation antagonizing the central bank announcements currency direction is somewhat disjointed. But when there are no political issues and formulated central bank policy act in accordance with the economic data, that’s when we get pure currency direction and the big trends emerge. This is what bank traders wait for, as we all know, knowledge is power. Most retail traders lack the knowledge and understanding of how currency markets work.



Do you know that most times the market is in a ranging mode waiting for fundamental news report to to explode price movement by breaking or rejecting demand/supply zones and thereafter forms trends.There is a lot of money to be made from trading the economic data releases. The key to trading the releases is twofold. First, having an excellent understanding of the fundamentals and how the various releases impact the market. Secondly, knowing how to execute the trades with precision and without hesitation. If you can get a control of this aspect of trading and have the confidence to trade the events then you’re truly set up to make huge capital advances. I am not saying its going to be that easy but with constant practice, dedication, persistence, consistency and focus, one can achieve this.



After all it is these economic fundamental releases which really direct the currency market not your so called indicators. Sometimes i wonder why most retail traders think Forex is structured by just technical These are the same economic releases that central banks formulate policy around. So by following the releases and trading them you not only know what’s going on with regards central bank policy but you’ll also be building your capital at the same time. However to balance the equation of success in this approach, you need an extremely comprehensive capital management system that not only protects you during periods of uncertainty but also pushes you forward to experience capital expansion. This is your entire business plan so it’s important you get this down path first. Your risk to rewards ratios, you entries and exits all counts.



From here it just takes a simple understanding of the key strategies to apply and where to apply them and away you go. Trust me you will experience more capital growth then you ever have before if you know how the bank traders trade. Many traders have tried to replicate their methods and I’ve seen numerous books on “how to beat the bankers”. But the point is you don’t want to be beating them but joining them because the simple truth is no one can beat the markets.That way you will be trading with the market not against it because the market doesn’t respect gender, religion, race, educational status etc .




So to conclude let me make this straight: There are no miraculous secrets to trading Forex. There are no special indicators or robots that can mimic the dynamic Forex market, so do not let anyone fool you. You simply need to understand how the major players (bankers) trade and analyse the market. If you get these aspects right then your well on the way to success.









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