Forex trading like banks

Forex trading strategy used in banks is what most professional traders (if not all) use in their day to day trades. You may already know that there is more to the forex market than anyone can tell. At the very beginning of you career as a forex trader, you were not bothered about patterning your trades like the banks; you probably did not know that the banks trade in a certain way that is different from that of the retail forex traders. Practice account is not enough to get any forex trader to the top; and so is trading experience with non result producing strategy. Retail traders are more in the forex market, but the banks drive the forex market. This is why retail traders should strive to trade the forex market like the banks, and drive the forex market as well.

WHO AND WHO TRADES THE FOREX MARKET?

So the banks trade the forex market? Yes, they do. As a matter of fact, there are some others that trade the forex market asides the banks and individual investors. Here is a general rundown of the different types of traders found in the forex market

  • Individual investors

  • Investment managers and hedge fund

  • Corporations

  • Central banks

  • Banks

Of all these groups of investors, the bank is the most powerful when it comes to how much volume of trades that goes on in the forex market. They control about 90% of the forex market at all time with a peculiar strategy. This is to say that the banks control the forex market, and anyone that patterns his or her trade after that of the banks will be among the controllers of the forex market. The short of it is that they hardly lose.

THE BANK METHOD OF TRADING THE FOREX MARKET

In every transaction they make in the forex market, the banks make use of three specific step strategies to make profits. The three step strategy include

  • Accumulation

  • Manipulation

  • Distribution

STEP ONE: ACCUMULATION

First, the banks enter the market by accumulating a certain position over time through tight range bound periods. These periods are termed as consolidation or range bound markets. This time of entering the market enables the banks to discretely accumulate a position over time and at a good overall entry price.

STEP TWO: MANIPULATION

This is the point where individual traders sentimentally enter the market because they see that many other are doing so. The banks know their numbers in the market, and they know how many individual traders are following their path. They are sort of leading them on while they continue to enter their positions.

STEP THREE: DISTRIBUTION

This step has to do with what can be referred to as false push; an extension of the accumulation period. This, to most individual traders, looks like a good time to enter the market, but it is not. The reason is that the banks, at this point, sells off their accumulated positions to the surprise of others.

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.

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