Trading currencies require a lot of patience and a thorough understanding of the intricacies and not just relying on luck. Although the success rate of forex trading is a mere 5%, there are enough reasons to justify why the remaining 95% fail! Banks play with larger volumes of capital and are responsible for manipulating the market to a larger extent.
Thus understanding their open positions and trade entering strategies can prove to be beneficial. Bank forex strategies are therefore helpful in identifying potential positions and whether a particular move is profitable.
Banks follow a general rule when it comes to manipulating trading positions. Although the methods are iterating in nature; they make sure that consistent profits are obtainable.
In general, currency market works on the basic principle of buying and selling implying that there should be appropriate demand and supply for currencies in question.
In other words; there’s always a counterparty to every transaction that traders involve themselves in. Some of the celebrated bank forex strategies are:
Unlike the smaller volumes of trade that retail traders choose to initiate their trading with; banks and financial institutions occupy a bigger position when it comes to trading currencies. In other words, they occupy a massive volume of the obtainable positions.
These are considerable enough to affect the market over a longer period. Hedge funds accumulate in these zones and over a longer frame; they create a potentially secured position which they later sell off.
Consolidation is enjoyed by larger financial institutions owing to their capability to obtain significant volumes. Traders can track this potentially profitable bank forex strategy which might shape their trading decisions altogether. This helps traders identify the market trend and sharpen the accuracy levels.
Experts are of the opinion that a retail trader’s move is predictable and this is exactly what the financial institutions put into use. Thus for a bank to sell their EUR/USD, there’s always a counterparty willing to buy the same amount.
This is why most of the traders use the same strategy sets towards combatting fluctuating nature of currencies. Hence outcomes turn out to be similar, and since banks are aware of this; they may trigger buying pressure from the retail traders.
This leads to the downfall of currency market since banks can affect/change the currency prices because they hold a larger volume. Thus it is advisable to look into large market movements and fluctuations. The first mover disadvantage of trading currencies against a large volume may be disastrous, hence the need to trade against false pushes.
- Understanding market trends:
Banks tend to ‘manipulate’ false positions after they successfully accumulate a larger volume of trade. This is why entering the market at the correct timing is tremendously important. Forex traders should aim to enter the market at the distribution phase of price movements.
Thus the easiest way to profit is to enter the market at a position when banks have finishes accumulating their position.
Utilizing bank’s strategies towards accumulation and manipulation of larger trade volumes, traders can successfully move the ball to their flavor. Understanding Bank forex strategies are extremely significant particularly because banks expect traders to buy/sell depending on larger fluctuations.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.