Hi there,
I am wondering to know how the big fishes trade, governments, big banks,actually the big money…
Do they wait for market opening hours, or place trades in pending orders throughout the day?
Lets say the UK government will buy the GBP only, or can buy other countries currency? I assume it wants to strengthen its own currency, but might be wrong…
Thanks in advance for information.
Bambura
This may be one scenario, Australia Airlines may decide to buy $500bn worth of aeroplanes from Boeing in which case we’d be looking at dollar strength against the AUD, so that’s a ‘real’ big transaction as opposed to a speculative transaction, so when processing the transaction they will obviously want to get the best price which means trading on AUD strength so it benefits both parties, and therefore processing that transaction at a peak during the timeframe for the transaction.
It probably doesn’t quite answer your question, but it’s an interesting footnote, and I’m pretty sure I’ve got my facts right. Maybe rhodytrader will put you right, if I’m off the mark.
I’ve read a bit of material about accumulation and distribution which is fairly evident in the charts. The smart money will accumulate long positions or distribute short positions so they don’t end up influencing price by their trading. I don’t know if this is entirely correct, but its what I’ve learned from reading up on VSA.
For example: smart money will buy long positions slowly at the bottom of the market. This can be seen as a consolidation or ranging band. After their positions have been filled, demand for lower prices dry up (since the smart money aren’t actively participating anymore). They can do several things at this point, they can markdown price by selling a bit. This may catch stops below the market and drive prices even lower where smart money can cash in on even better positions (the consequence of this is that smart money can sometimes induce a selling climax). Their goal, however, is for price to rise to hit paydirt. You’ll usually see this as a markup. What happens is price rapidly rises above resistance and begins consolidating there because smart money is silently selling back their long positions. This will continue until the top of the market, where smart money restarts the cycle in reverse.
It varies. As others have said, some will work big orders throughout the day. Some will do them at regular times, such as the fixings.
Lets say the UK government will buy the GBP only, or can buy other countries currency? I assume it wants to strengthen its own currency, but might be wrong…
Governments and central banks can buy or sell their own currencies. Some of it will be acquiring or adjusting reserves. Some of it will be trying to control their currency - such as Brazil selling BRL for USD in the market just about every day.
The way that some of the big players and government trade, I do agree with the gentleman above. But I think the question here is what is going on with the Forex retail trading. As most of you already know, each individual Forex dealer is like an exchange for itself (Forex retail currency trading does not have a central exchange). So, each Forex dealer has the right to take the other side of the trade or forward that trade to another institution, like a bank. It used to be a very good profitable business and I think it still is, but now there is more competition and their money requirements in the last 4-5 years has increased from $500,000 to $20 Million.
So the way the big guys in retail Forex trade is by taking the other side of the trade, plus they earn the spread (or portion of the spread) and since 90% plus of the retail traders lose money, they have created a riskless arbitrage where it is almost impossible to lose money. Of course they are not in the business of losing money, although they do have expenses just like any other business, they might lose money but not on the trading side.