Market Demographics and Forex Turf Wars

In order to trade the Forex successfully, you need to learn how to play defense first – offense comes later. Traders need to be able to marginalize risk in order to maximize Reward – it is vital that the trader understand this and understand it well.

Let’s talk about Market Demographics and who’s on the field

The first guys we need to know about are Banks and Macro Accounts – these are the THE MARKET CHANGERS, The Big Money Players, and the Big Money Makers -circle these guys because they set the direction of capital flow and they deal in BILLIONS OF DOLLARS.

Suffice it to say that neither you nor I have the money to compete against these guys. Instead, we need to acknowledge and respect their presence and be completely aware of what these guys are doing. Mainly we need to know if they’re trading in unison or whether they’re at war with one another.

Next we need to know when one side has taken over and follow that side – the winning side; can you recognize it? This battle can be very, very volatile – don’t choose sides until the winner is declared; otherwise your chances are less than 50/50. That ride could take you 150 pips up and 150 pips down – you don’t want to be in that dog fight.

Instead, we need to know when it becomes evident that one side has won and the other side has moved over to the majority direction – that there is now a consensus and one-directional flow. Once we identify this consensus, we follow the flow.

Who else is on the field?

How about you? If and when you’re ready for real money trading, consider yourself to be part of the field as well. More than likely you’re amongst another sector of traders; Small Capital Retail Traders.

Although Small Capital Retail Traders trade individually in hundreds to thousands of dollars (very few in the million + dollar category) there are two distinct sub groups – (1) the winners and (2) the losers. I say ‘distinct’ because what you need to know about these guys is that more than 95% of them are consistently losing money.

Let me say this another way; less than 5% of them are consistently making money. That 5% understands – as described previously - what the Big Money Players are doing. Make no mistake; trading the forex is no easy feat when you’re a Small Capital Retail Trader.

Which group are you in? I hope you’re one of the consistent money makers but in case you’re not and you want to be – you need to know everything the winners know … and then some.

For example:

  • As stated above, we need to know when the battle of the titans is over and the majority of capital flow is moving in one direction rather than both long and short. 
  • We need to have precise trade entry execution with extremely minimal risk in the order of 10-20 pip stop losses.
  • Our reward targets need to be in the order of 100 to 300 pips or greater. 
  • We need to develop a laser-focused mindset in addition to having the required education to take advantage of these movements consistently.
  • We need to understand that the forex is a 24 hour market and that the Big Money Players are trading a full 24 hours per day, in shifts, in three totally different parts of the world. A trader who does not understand this can get run over like a Mack truck.
  • In addition, we need to understand how to take advantage of large market movements created by the Big Money Players while maintaining our physiological well-being.
  • Furthermore, we need to get the forex working for us rather than becoming a slave to it.

In future articles, we’ll get down to the nitty-gritty of why most people lose at trading the forex, plus a whole lot more about this market that you have likely never heard before.

Teaching what you need to know.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.