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#1 Sept. 30, 2009 07:09:00

pdpickens
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institutional versus retail trading

IMO,

there is no contest between the two in terms of more sophisticated trading models, market clout, and results.

chart patterns.

indicators. etc.

are a waste of time.

banks control 85% of the daily forex trading volume and significantly influence market direction.

banks own and rule the markets-make no mistake about it.

retail traders have been in the forex markets going on 9 years. the banks and institutions with their sophisticated trading models and unbeatable market clout have been at this game for over 40 years.

how do we beat the banks,? I don't know.

sure some of us will make a few dollars here and there, but thats about it.

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#2 Sept. 30, 2009 14:24:00

jarod
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institutional versus retail trading

quote:
Originally posted by Joe Bob:

how do we beat the banks,?

Easiest thing on the Planet.

1- Hedge (protect your front and your back, always)
2- Scalp (steal and run)

[Big Grin]


Jarod 'le dimwit trader' aka 'le snake spotter' aka 'le provocateur' aka 'sulphuric acid'.

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#3 Sept. 30, 2009 14:48:00

Xaron
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institutional versus retail trading

We don't have to beat banks, they do it by theirself. [Wink]

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#4 Sept. 30, 2009 14:49:00

js5020
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institutional versus retail trading

How do we beat the banks you ask,,,, you dont, plain and simple. So the answer to your question is also simple,, trade with them not against them, and you get to beat the ones that arent trading with them. Trade the trend, or a method that you have proven successful over time or a strategy that isnt really affected by the price. There is money to be made in this, but it isnt easy and no one just hands it over just because you put in time, effort and tossed some money at it(not being rude, just honest). There are many ways to win and just as many, if not more to lose, you have to sift through things and find what works for you and the pair/s your working with and be ready to adapt when things change. Complex? it doesnt have to be,, I vanilla trade 1 pair with a few mas, rsi and stochs and watch the price action for market sentiment, far from complex. It can be done.

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#5 Oct. 1, 2009 08:12:00

fgrego
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institutional versus retail trading

In the forex market there are two types of players:
1) profit-seeking investors (risk-takers)
2) central banks and corporations (normally risk hedgers)
The former only make up 25% of the overall daily volume. For the other 75%, making a profit in FX is not their main reason for transacting. Banks and retail investors are both in category 1 and can both make money at the expense of category 2. In other words, there is no zero-sum game between banks and retail investors.
This is a peculiarity of FX not always present in other capital markets.

[ October 01, 2009, 08:14 AM: Message edited by: Federico ]


MatadorFX LLC / CTA
www.matadorforex.com

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#6 Oct. 1, 2009 09:34:00

emmison
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institutional versus retail trading

quote:
Originally posted by Federico:
In the forex market there are two types of players:
1) profit-seeking investors (risk-takers)
2) central banks and corporations (normally risk hedgers)
The former only make up 25% of the overall daily volume. For the other 75%, making a profit in FX is not their main reason for transacting. Banks and retail investors are both in category 1 and can both make money at the expense of category 2. In other words, there is no zero-sum game between banks and retail investors.
This is a peculiarity of FX not always present in other capital markets.

quote:
Originally posted by Richard Olsen:
Exchange rates are hard to predict. The research departments of financial institutions predict currencies on a regular basis, but their track record is not impressive. There is an abundance of research studies that have attempted to prove the success of economic theories in explaining exchange rate movements. The evidence has not been conclusive - overall they have failed to
prove the effectiveness of the theories.

Based on my own research, the reality is more complex than assumed by the economic models. The most important factor determining exchange rates are market dynamics and not underlying fundamentals. Around 95 percent of the transaction volume is speculative, which has a significant impact on price evolution of exchange rates. Every speculative positions that gets opened has eventually to be closed again. The symmetry of opening and closing of positions has an important market impact that
current models do not account for.

We have been studying the dynamics of foreign exchange markets for many years and have published a number of scientfic articles, including a recent book at Academic Press, called Introduction to High Frequency Finance. Based on our research, foreign exchange markets are predictive, but current technology is in its infancy and a lot can be done to improve the quality of the forecasts.



It's just a ride...

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#7 Oct. 1, 2009 09:39:00

fgrego
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institutional versus retail trading

The "95% of transaction volume is speculative" referred in the Olsen quote seems wrong or perhaps just out of context. One quick reference I could find in this respect is attached (Deutsche bank).

http://www.dbfx.com/forex-resources/asset-diversification


MatadorFX LLC / CTA
www.matadorforex.com

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#8 Oct. 1, 2009 10:06:00

weejock2
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institutional versus retail trading

All i conclude from any estimate is we just don't know!

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#9 Oct. 1, 2009 16:38:00

Sequitor
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institutional versus retail trading

Federico, thanks for posting the Deutsche bank link. Regardless of the percentage, given a sizable number of Category 2 participants acting irrationally (from the perspective of Category 1 participants) it may be time to take another look at where the assumption of rational behavior is being used and the consequences if that assumption is wrong.


Be careful of something that's just what you want it to be. Waylon Jennings
The more we want it to be true, the more careful we have to be. Carl Sagan

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#10 Oct. 1, 2009 16:54:00

weejock2
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institutional versus retail trading

quote:
Originally posted by Sequitor:
it may be time to take another look at where the assumption of rational behavior is being used and the consequences if that assumption is wrong.

Taking into account leverage!!

Magnifying rational and irrational behaviours!!!

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