I’ve been interested in Forex for some time now and recently started reading some articles on Babypips in my free time. However, I also started doubting if it is actually realistic to make money in forex.
I understand that the fundamental forex market is inefficient. Big corporations and banks need to buy and sell currencies for their operations, and don’t really care at what price. However, what surprised me is this only takes up 10% of the traded amounts every day, and 90% is speculative. If I then consider that I compete with all of the big banks and funds, which have tighter spreads, more money, faster access to news and information and super advanced algorithms. Can someone explain to me, how you as a small independent retail trader, without access to all those things, can still expect to make a profit?
Hi Blacer, welcome.
Why would anyone want to compete with banks?, what news?, yes 2 mins on EU, but really?
No-one needs to beat the banks, the only algo needed is the smartest known computer known to man.
Forex is one big market right? You are trading on it, and so are the big banks. So how can you not be competing with the banks?
News: they have access to news feeds and analysis of news events, so they can have big positions in the markets, even before I’m aware that some event will move the market.
And those big positions move the market.
Moral of the story: Don’t compete. Learn to ride their current.
Exactly! You don’t have to compete with the banks. For those, who say you cant survive in Forex are basing their assumptions on inconclusive proof and myths. Just three or four decades earlier, theories such as EMH suggested that you cant beat the stock market. Now look at popular hedge funds and the evidence suggest otherwise, i.e. you can definitely do so. Same with Spot Fx and futures, people have done it and they are doing it. I am a full-time trader myself. There are also others here. For me, portfolio diversification has worked. For others, something else is working.
Don’t compete with them join them and it will be an amazing ride 
Retail traders have some advantages over big money. Off the top of my head:
- our positions are so small that they almost always get filled immediately. The big money are more susceptible to slippage and front-running, and move the market against themselves if their orders are too big.
- because we trade relatively small position sizes, we can exploit certain market inefficiencies that the big money can’t (or don’t find worthwhile).
- we can sit out of the market whenever we like. The big money have benchmarks or targets to meet and MUST trade, even in adverse conditions.
- we don’t answer to any bosses, investors or customers. The big money do.
- we are free to trade any strategy or system we wish. The big money are bound by their own doctrines.
Hope some other people can expand here…
Yes Kevin, you have summed it up, last Jan 10th is hard evidence of the advantage that a retail trader, using his own brain, has over a Bank Trader.
The USD dropped on NFP -bank trader (algo) selling, many retails were aware of the pending miss and it’s likely consequence, they were able to use common sense to front run the banks.
A copy of my note previous day:
NFP - MISS EXPECTED DUE TO WEATHER - BEARISH FOR USD - ONLY TRADE IN THAT DIR ON VALID SIGNAL
(sorry about the caps, I just copy and pasted, the valid ‘signal’ btw was the Asian Session)
The point I’m making is not that I’m some sort of super wise guy, it’s just that we can be flexible in our approach, most bank traders who would have gone short USD pre nfp would have been laughed out of the office.
Why do u want or need to beat the big players? Just trade and use common sense and you will be profitable, just do not aim for unrealistic expectations.
Having a mindset of beating the banks will lead to nothing.
Cheers,
FxTurtle
Why should we beat them ? 
We need to follow them.
I agree. Just have to estimate where the money is going and go with the trend. There is no David vs Goliath here.
You do not need to beat anyone as a trader other than yourself. You trade your account for your own benefit and do not compete for profits with anyone.
This.
To elaborate: If the big banks and funds are winners, who’s losing?
Other big banks and players. It’s not that just because they’re bigger, they’re automatically better. Being bigger just means they’re the ones who affect price.
Which means, for you, you’ll have to watch what they’re doing and thinking and see which side is the strong hand and which is the weak hand. Ride the current of the strong hand (as said by Master Tang here) while benefiting from the weak hand getting forced out.
Yes, I understand what you’re saying. And I’m not disagreeing.
I just have a hard time understanding where the money is coming from. I guess using the terms beating or competing was not the best. What I meant is that the money you earn as a trader has to come from someone.
I read in another thread, that retail accounts are just 10% of the total forex market. If 90% of the volume is speculative, that would mean that banks and other big financial instutions comprise 80% of the total market (or am I missing something here). With all the resources they have (and the fact that they are still doing it), I can’t believe they are not making big amounts of money.
If the banks are 80% of the market and are making money from the other 20%, how can there still be enough money for me to make a profit? And how realistic is it then, to assume I won’t be a part of that 20%?
Everyday, all across the world, countries are printing money, yeh? Answer your question 
lol
One other thing I forgot to mention is that the big players have overheads, such as rent, salaried employees, bonuses etc. Retail traders don’t have these overheads, which puts us at an advantage.
The banks and huge corporations ARE what moves the currencies full stop. If they stopped doing anything at all for a whole day then the charts wouldn’t even move. Therefore if you aren’t following what they do then you WILL be wrong. Its physically impossible to beat them because figuring out which direction they’re all gonna go is the objective of mastering forex.
Maybe. But it is much better to steal a little of their gains and get out without being detected.
What makes you think you’d be stealing ‘their’ gains? Much more likely you’re stealing the gains off of someone else like yourself.
I was being sort of sarcastic.