I have named this article, ” Watch the tricks that the banks play.” If you have noticed, the Forex market is a trillion dollar spot market and the bulk of that money is not coming from retail traders like you and I. It’s not coming from a bunch of guys who discovered Forex trading over the Internet. The majority of the money, something like 99% of it, comes from huge global banks and businesses. These global banks and businesses are the true rulers of the Forex market. When you see a price move in the Forex market, it is because one of these big dogs is making a move.
Many new and some old traders never truly learn what they are up against. They falsely believe that all they need to do is learn a few things and use the right indicators and they will be golden. They are gravely wrong in this belief. What they really need to learn is what the price action says about these large banks and businesses. If you can’t read price action, then you will always be a rookie trader who only wins due to chance and the upside of variance.
Stop leaving everything up to change and do what the pros do. The pros follow what the banks do but following the banks isn’t always easy because Forex is a zero sum game. A zero sum game is where one person has to lose for the other person to win. How does this relate to watching the trick that the banks play? This relates because when a big money player needs to buy or sell a huge amount of currency, they can’t simply do it at one time, they have to do it in micro-steps. These micro-steps are why you see so many fluctuations during the mostly quiet times of trading.
If these banks were to try and buy a currency pair at one time, the other banks would put up a fight and try to make sure they pay a higher price. This is part of the gamesmanship of trading. These banks have to figure out how to put on their trades without anyone notice.
Banks like to buy when the market is either at tops or when it is consolidating. When a trade spins around on you that looked like it was moving in a specific direct, you just got caught up into one of the banks tricks. They often set up false run ups in price to have the novices lose their money, they are always trying to take your money.
If you spend enough time watching price action, you will develop a feel for what the banks are doing. You will see how they accumulate during consolidation and take profits during expansion. Once you know what to look for, it becomes fun to see the trick and tactics that they use to make money and that they use to set other traders up.