Expanding on the Concept of Profiting with Forex
I suspect that when the average newbie trader or less experienced trader looks at the Forex market they see it as a fabulous opportunity to make money or to take their accounts and make a fortune in the largest market in the world. When you look at it in this light you are not seeing it objectively you are seeing it the way you want to see it.
The market is composed of many different player but it is important to realize that the FX market is basically run by the commercial entities that trade it in large sums. These entities are either hedging their exposure by taking a number of positions in a variety of currencies so that they will not lose too much of their capital by operating in different countries. You know most of these entities as multi national corporations like for example Wal-mart. With stores and operations throughout the world this corporation is exposed to many different currencies on a daily basis. There is this prevailing thought that they really don't care about the transaction if they exchange one currency pair to another. Yet this is precisely why they take the positions they do.
To minimize losses.
The institutional traders compose another portion of the market and they are usually providing liquidity or making the market. This allows their clients or the retail person to trade upon the market.
The question that generally comes to most traders when they are day trading is, "am I seeing the real inter bank market". If you are not asking this question you should be.
The simple answer is "NO" you are not.
You are not seeing the true interbank market because essentially there is NO central exchange where market orders are settled at the end of the day. That is what makes FX interesting and why you cannot trade FX traditionally.
As a result of not having this centralized exchange like say the Chicago Mercantile Board of Exchange which is where futures and options positions are settled daily there is no such entity in the Foreign Exchange market.
What does that mean?
It means that you are under the influence of the market makers where they can make the market whatever they wish. That is why leverage is a trap and why position size is so important to your survival.
We have a tendency to look at the markets where a 100 pip move is a big move. In short, it is not a big move at all. If you were an entity that was holding a few trillion in derivatives then possibly a small move of this nature might be catastrophic to your portfolio but that is the point isn't it. Ratcheting up the leverage is exactly the same concept. You margin becomes at risk under smaller moves in the market.
The FX market is measured in pips which is a thousandth of a cent. Not much when you think of it and it is not.
This is why the market makers have quite a large degree of flexibility to move the market to much farther distances than you would think that they are able to do. Rest assured they can. Rest assured it is a market that 'IS NOT TOO BIG" for one entity to control. This is another reason why risk management is so important and why you must look at the market in a way where a currency weakness or strength means very little.
There is a lot of misinformation out there and I will do my very best to guide you to ongoing profits.
To profit in this market you must be patient enough to allow the positions to work for you and confident enough to allow your positions to run.
The market is composed of many different player but it is important to realize that the FX market is basically run by the commercial entities that trade it in large sums. These entities are either hedging their exposure by taking a number of positions in a variety of currencies so that they will not lose too much of their capital by operating in different countries. You know most of these entities as multi national corporations like for example Wal-mart. With stores and operations throughout the world this corporation is exposed to many different currencies on a daily basis. There is this prevailing thought that they really don't care about the transaction if they exchange one currency pair to another. Yet this is precisely why they take the positions they do.
To minimize losses.
The institutional traders compose another portion of the market and they are usually providing liquidity or making the market. This allows their clients or the retail person to trade upon the market.
The question that generally comes to most traders when they are day trading is, "am I seeing the real inter bank market". If you are not asking this question you should be.
The simple answer is "NO" you are not.
You are not seeing the true interbank market because essentially there is NO central exchange where market orders are settled at the end of the day. That is what makes FX interesting and why you cannot trade FX traditionally.
As a result of not having this centralized exchange like say the Chicago Mercantile Board of Exchange which is where futures and options positions are settled daily there is no such entity in the Foreign Exchange market.
What does that mean?
It means that you are under the influence of the market makers where they can make the market whatever they wish. That is why leverage is a trap and why position size is so important to your survival.
We have a tendency to look at the markets where a 100 pip move is a big move. In short, it is not a big move at all. If you were an entity that was holding a few trillion in derivatives then possibly a small move of this nature might be catastrophic to your portfolio but that is the point isn't it. Ratcheting up the leverage is exactly the same concept. You margin becomes at risk under smaller moves in the market.
The FX market is measured in pips which is a thousandth of a cent. Not much when you think of it and it is not.
This is why the market makers have quite a large degree of flexibility to move the market to much farther distances than you would think that they are able to do. Rest assured they can. Rest assured it is a market that 'IS NOT TOO BIG" for one entity to control. This is another reason why risk management is so important and why you must look at the market in a way where a currency weakness or strength means very little.
There is a lot of misinformation out there and I will do my very best to guide you to ongoing profits.
To profit in this market you must be patient enough to allow the positions to work for you and confident enough to allow your positions to run.
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