Observations claim that the transactions these institutions make account for more than 70% of the total daily volume the foreign exchange market generates. And that more than 30% of the same trading volume in the foreign exchange market comes from a participation of just two major banks.
Considering the fact that banks control such a large percentage of the market, it makes studying them and knowing how they operate a big priority for us as traders. Understanding the conditions that need to be present in order to open a trade or to subtract profits off a trade, is highly important because it causes movement in the market, movement that we can & should take advantage of if we understand why it is happening. We know that the one thing which causes a large percentage of retail traders to enter into trades is a trend; therefore all we need to do to figure out when the bank traders are probably going to enter the market is look for a currency which has been in a trend for a long time.
We can't pinpoint exactly when the banks will enter into trades because determining the duration of a trending market will depend on the time-frame being observed and information which we don't have access to, such as how many buy/sell orders are currently coming into the market.
Despite this, at least we have a guideline in place which we can use to get an idea of when they are likely to enter their trades i.e. after the market has been moving in one direction for a significant length of time. below is an example of how market makers signal a change in market direction, which is swing lows or swing highs that form a similar price levels
No comments:
Post a Comment