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Forex Tell it Like it is | Part One | The Game

Currency Trading is just really the largest "money game" on the Planet - played by loads of all different people and organisations around the World.

We have really 2 main sections - you could say "them and us" - with us being part of the retail section or community - ie individuals - not working for Banks or Hedge Funds, commercial organisations etc - but instead just for ourselves. "We" only account for approximately 5 to 8% of the total FX market  - whereas just 5 very large banks account for anything between 55 and 70%. 

That leaves something like 22 to 30+% of the market being made up of loads of commercial businesses and even governments etc - not just Hedge Funds or small Banks - but even car manufacturers and massive international global businesses who are trading in anything up to 200+ countries around the World.

Not everyone participating is wanting to make a gain - many transactions happen everyday - what ever the price of the currency pair is - ie - when you go on Holiday to the US or the Far East etc - you transfer your pounds or Euros into dollars or Yen etc - and accept the best price transfer you can get at that time of the transaction etc. If I am say buying a holiday Villa in Spain and the transaction as to be completed by end of the month - I have to accept the Pound/ Euro exchange rate - ie I cannot wait another 3 or 6 months and save myself say £5000 simply because the pound has strengthened again the Euro etc etc.

As I am sure you know every day multi Trillions of dollars are transacted. The middlemen - ie brokers etc will always make their money out of their cut of the deal - many individuals nowadays use specialised companies as they know they can get a better rate than just using their high street bank.

Now here's were it gets interesting - the currency market once you take the transaction cost out of the equation is a "zero- sum" game - basically there as to be participants willing to sell a currency for others to buy it - and the price of a currency will therefore depend really on good old "demand and supply".

We now have a basis for the "Game"  - ie buyers want to buy at a cheap price - sellers want to sell at a high price - basis of any business model .

Large Banks want to make Large Profits - expected - but for this to happen it means there will be other participants in the market who will lose out - ie make a loss on their transactions. Sometimes it does not matter - ie If I am buying a villa in Spain at a real knock down price ( say the owner needs a very quick sale ) I am not bothered at paying an extra £1 -3K on the currency transfer on a particular day if I have bought the property at say £20 -50K below market valuation - as I think I have still got a good deal.

You could say its all "swings and roundabouts" etc - but lets now go back to the "them and us" scenario - ie commercial organisations and retail individuals  - we both want to make Profits - by basically buying at a lower price and then selling it at a high price etc

Unfortunately - retail traders are the real small fry - maybe the least knowledgeable and also under - capitalised and easily swayed by false sentiments

We are like the "mugs" or the "easy pickings" in this "money game" - simple because we will be set up and misinformed - or deceived - or basically "lied" - to take wrong decisions and bad trades.

First rule of playing the FX trading game - Only believe a proper experienced retail trader who is on your side - ie someone you can trust 

Why should you believe Banks - Hedge Funds - Brokers - commercial traders etc etc - they want you to lose your money - so they can have it.

How do they deceive you ?

There are just so many ways - I could write a complete book on it - anything from false sentiment on charts to false information and basic lies etc etc

A typical example is when a Bank says - this next 3 months we are going to heavily sell the Dollar. What they don't tell you is that they are only going to do that after price as gone up  another 500 or 1000 pips - yes they will then start selling heavily - just after you have been stopped out ;-)

So How do we stay in the "game" and actually make a positive return on our capital - ie profits ?

Technical analysis - Fundamental analysis - Luck - etc etc - is just not enough on their own - you need to be "streetwise" - business savvy etc - you need to think that so many other traders want your money ( as their profits) and so expect to be tricked and get to understand "gameplay"

I spent 25+ years in many businesses at Senior Director level - both large and small and so was used to "business gameplay" before I got into FX trading approx 14 years ago.

I hope to delving into this side with more blogs in the future on this forum

What's nice is now - There's no restrictions - "I can say it how it is "

Whether you agree or disagree is with you ;-)

Good Trading

Regards

Peter

FXCoalface
Forex Trader,
Previous Contributor: FXstreet, T2W, Forexmosgate, Forexmospherians.com
Currencies: Various: Intraday, Scalp,
Senior Technical Market Analysis

Comments

  • Good writing...looking forward to see next part...:)

    Regards

  • Thanks Peter,

    A wonderful post with some great Trading Tips and information, glad you shared an interesting read which hits home some salient facts regarding institutions and the individual. Highly recommend following and looking forwards to reading more.

    Have a great weekend.

    Best Regards,

    Sir Gissa

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"Keep a Record of the Business or Currency Pair Traded. Reasons why the Trade was taken. When was the Exit. How and why the Trade turned out the way it did"

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"We all know we will never be 100% Accurate with 100% win rate over 100's or 1000's of trades - but as long as your winning pips and money - add up to a lot more than your losing pips and money - then "Bingo" you are successful winning FX trader"

"I figured this was a legitimate break, so I went on the hunt for evidence, so here in succession is the list of clues I used to make my decision:

Rejection of market and weekly pivot at ema confluence.

Complete and broken head and shoulders on 1hr time frame.

Broadening formation on daily with test and rejection of 200 day ma

Bull hinge on daily and Renko stochastic.

Positive momentum on 5min, 1hr, 4hr and daily chart"

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"Forex Market analysis relies on two types of analysis much like Stock Markets:

Technical Forex Market Analysis views the data on a chart and considers that the News and Data is built into the Price already (economic, political, social, sentimental and psychological). Various tools and indicators will be used by technical traders, for instance MACD, Bollinger Bands, Moving Averages and more.

Fundamental Forex Market Analysis also uses indicators, for instance reports, Gross Domestic Production (GDP), Retail sales, Consumer spending, Industrial Production, Consumer Price Index, Commodities, Economic Calendars, Balance of Trade levels which could identify Trends between other Nations and more."

"Short rapid bursts and quick glimpses of an entry, trigger activated, trail in place and exit strategy and plan already set. Within a blink of an eye, instinctively the buy/sell button is pushed. The hammer falls and clanks decisively, echoing, sparking, like steel upon steel and the trade is executed. A Traders heart beats on with perfect set up, closely aligned with strict parameters, ready to continue the attack or recoil on a wire. Wrap the profit and then stand down, ready for the next hunt"

"When we are talking about sentiment it is very hard to say that this sentiment will prevail another 6, 9, 13 hours. Sentiment is not a constant line. Main trend is bearish, tech picture on daily is bearish, even intraday neutral. Nobody restrict to play long eur short usd position with the target at 1.12 or even 1.1361, this is every traders individual choice as always"

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