Do trading systems affect market movement?

I’ve seen some popular trading systems on various forums for free and it looks like a lot of people use them. If this is the case and a system is being used by a lot of people, can it affect the market movement? For example if the system gives a buy signal and 10,000 traders are using that same signal, will it drive the price up?

Not necessarily. The FX market is HUGE so even with 10,000 people using the same system, it still wouldn’t be enough to really cause the make a huge move.

techincal tools are important but what really drives the market are the 90% of traders that trade based on greed and hysteria. thats who you are trading a against every time you look at a chart. that will never change unless someone comes up with an indicator that is 100% correct. but once that happens and everyone has this indicator things will shift but everything will play out the same on a different plat form. the same 90% of traders that fale will drive the market based on greed and hysteria. and even if you have a 100% indicator you still have to interprete it. all technical tools still require interpretation and not everyone will interpret these tools the same way. even if people are taught the same techniques the same way people will allow their personalities to drive their trading decisions eventually and that will come up with different results with the same indicators. what drives the market are the fools and what follow the makret are the 10% that are successful traders.

People will not all trade the system correctly. You could give them the exact rules with step by step instructions and I guarantee you that they would trade the system different from one another. Traders are not robots so it’s impossible to get exact trades by a big group.

The thing is, even with a mechanical system, traders still face their emotions. Everyone controls their emotions differently so they will all trade differently.:wink:

Even if 10,000 traders (let’s say they were trading 100K unit lots) were following a system and pushed the buy button at the same exact time, that would mean 100M units of currency would be traded at that moment. In a US$2 trillion daily market, that’s about .005% of daily volume (depending on what you’re trading) …chump change!

The conclusion is that they don’t affect the market,the volume is too big :smiley: !!

Yes, the market is VERY big but bear in mind that the professional traders know roughly where the amateurs are going to enter/exit and place stops. From this they can trade AGAINST the crowd and make profits.

For example if price is rising towards a support level, pivot point or round-figure take-profit target, the pro’s will know that at that point, a lot positions will sell out to take their profits and bring the price slightly down, so they will have already entered a short order to profit from this downward move or they know that the downward move is only temporary.

There are stories circulating about stop hunters, big institutional dealers who can move the market momentarily to take out stop losses but imagine the amount of money needed to move the market?

Anyone got any views on this?

The focus of this thread has been about how the forex market is too massive to be moved in any meaningful fashion by a collection of traders all using the same system. Everyone seems to be in agreement there.

How would a bunch of small traders having their stops at the same level be any different? Doesn’t seem to me that it would, especially since a great many of those orders will be handled directly by market making firms and never actually flow through in to the broader market.

Let’s be real about this. The big institutional traders are trading mostly against each other. That’s the inter-bank market where all the real volume is. Us little pluggers are insignificant.

I’ve been having a similar discussion with a colleague of mine. The US$2 trillion daily market is indeed that - a daily market. If you split that over all the “moments” in the day, and then split it again over all the pairs being traded, and lastly consider a more minor pair, is it not possible that US$100 million being bought/sold in one moment could move the market?

This was just a discussion we had, and I’m not convinced myself … suppose I should look at the math a bit closer.

If everyone was trading the same “minor” pair in the same narrow timeframe during an off-peak part of the trading day, maybe you do get a move. Heck, even with a major pair you might see something, depending on the time of day. But that assumes the trading is passed through from the retail brokers (market makers) in to the general market (read inter-bank) by those brokers and not just offset by some exposure they have elsewhere in their customer position set.

Let’s say we’re talking about a $100m buying in AUD/NZD. In order for the overall market rate on that cross to move, all the brokers (or at least a good chunk of the transaction volume, anyway) would have to go in to the inter-bank market at the same time and buy AUD/NZD. Then the market would move - at least temporarily (if there were no follow-up buying it could very well settle back to where it started). If the inter-bank market doesn’t see the order flow, though, it’s not going to be impacted.

Think of it this way. If I were to sell you 1m shares of Google stock right now in a direct transaction that didn’t go through the exchange, do you think it would move the market? Nope, because the market wouldn’t know about it. It’s the same with the retail forex traders in terms of the inter-bank market.

Now if a buy order of $100m USD/JPY came in to Citibank from GE, the market would probably feel it, at least a little, depending on the time of day and overall volume. That’s because GE is playing directly in the inter-bank market through Citi’s dealing desk.