Let’s trade like bankers do
This forex strategy is not about magic indicators that will give you the best signals and you will make loads of money. It is about understanding the fundamentals in forex trading and learning who is driving the market.
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Many beginners start their trading journey with the wrong question: “How do I make money with forex trading?” Instead of watching lame videos for magic tools, you better search for answers to the following questions: “What is money?”, “Who creates money?” , and “Who is trading currencies?”
You need to work on your foundations. Otherwise, you are building a house of cards. Sooner or later, you will be blown away.
Who moves the prices?
As a beginner in forex trading, your first task is to understand who moves the currency prices. Second is to discover the reasons behind any decision on the trade desk. When you have the answers to those two questions, your chances of making profit on the market will significantly increase.
On the frontlines, the price makers sit on the banks’ forex desks. You may have heard about the big boys on Wall Street and the investment bankers. These guys are responsible for 93% of all forex volumes. So, if you understand how they trade and how they make decisions, you will have a huge advantage.
Usually, the bankers trade on behalf of their clients, and they place only a few trades for their own trading account. These few trades are the most important, and the bankers’ performance is judged by them. It is all about the bonuses at the end of the year, and these guys need to make the bank tons of cash or they are gone.
How the bankers trade
If you are a forex trader at one of the big banks, you must know everything about everything. You must be on top of your game. There is no point knowing the US job data after the release. You must know the NFP numbers upfront. Thus, the bankers get the information first.
For example, if the Nonfarm payrolls are projected to add 235K new jobs, that number is already priced in. The bankers will be looking to determine whether the real numbers will miss the expectations or will upbeat the projection. If the actual report shows 265K new jobs, you would expect the U.S. dollar to gain value.
Bank traders do not look for shooting stars on the chart to make decisions nor do they use technical indicators. They only look for information. Lagging indicators will not give you valuable information; they will confuse you. The bankers only use price action for their entry and exit levels.
Understanding key support and resistance levels is crucial for your trading. Usually, retail traders use technical indicators to predict where the market is moving. However, the bankers are the market. If you know how the bankers trade, you don’t need lagging indicators or crazy chart patterns to predict the market.
The big boys keep their charts clean, place only key support and resistance levels and listen to news wires. Political events always come first, and they are the big price movers. Second are the important economic releases, such as the jobs numbers and inflation data. These numbers are important because they influence the central banks’ rate decisions.
The forex traders at the investment banks must know everything about the central banks’ policies. If interest rates are about to increase, the value of the currency will also appreciate. When the central banks cut rates, then the currency loses value.
Your forex strategy
Your strategy should be focused on obtaining the most valuable information. You need to closely follow the central banks’ statements and the important economic releases. You must also understand the political events likely to influence bankers’ decisions. Being a successful forex trader is not an easy job.
Of course, you also need good money management skills to protect yourself when the market is against you. You can’t expect to win every trade, but the point is to lose small and win big. That is what makes real traders different: they are not scared to lose because they know the game and they know their moment will come.
To summarise, you need to find the key levels on the chart and have all important information in your head. These elements will help you make decisions and will stop you from simply guessing where the price will go.
You may have watched many videos trying to present the banks as your enemy and somehow you need to find a way to fight them. On the contrary, you should not fight them; you should join them. Trade with the market and don’t be a follower.