If you still have not realised who are the biggest players on the Forex market, you should start thinking about banks right now. It actually does not matter if we talk about banks, various institutions, governments or hedge funds, the most important thing is that they have huge amount of money to trade. If you trade in your hobby, or you want to make some extra income or you want to trade full time and make living out of trading, you still not going to make a chart moving in your favour. Banks can.
Look how strong was this movement, who’s behind it ? Try to guess.
How do we determine this movements ?
This is the harder part, however, really useful for trading. Imagine that you are a bank and you want to open a position on Forex market with 1 billion dollars. It sounds quite easy but is it ? For us traders it is very easy, you just need a device, internet, money and proof of your identity. That’s basically all you need. Than you can open a position which takes like 1 second to open. But banks need to fine a perfect spot for opening a position where the order can be fulfilled.
So the bank needs to drive the price through “our” stop-loss to open new spots for their positions for example.
Banks vs traders
We can say that banks are trading against us, but on the other side, this fact can be used in our favour and we can trade “with the bank”.
Look at the picture above, where you can clearly see that the price was doing upper moves and than broke through possible stop losses which were most likely below the previous higher low. Than the price moved down even faster and stronger until it started to stop down mainly caused by taking profits. At the end you can see how the huge position was done and the price went up strongly.
This is absolutely the same example just on different graph and in different time. But look at both pictures and you will clearly see that it is absolutely same movement with the same end. Interesting right ?
If you practice and start looking for this type of movements caused by large institutions, your trading will change rapidly. You will not only see a chart, but you will also be able to understand what is behind the movements and with a really good practice, to trade with them 🙂