Where can I find a diagram of the structure of the forex market? There are various players and each one has a different motive for his involvement in the market. The FRB is da big boss and I think it’s motive is to ensure a stable currency for the US. But what about the second tier players? Who are they and what are their motives? Where do the brokers that we work with slot into the big picture?
It seems like the mafia is out there and it is easy to dodge them on a demo account, but with live trading one needs to identify them and adjust your strategy accordingly.
Hate to say this, but the Fed is hardly the “big boss” as you put it. You could say that as a collective the central banks and treasuries can be the big movers, but one working by itself really can’t have much lasting effect when intervening in the market. They just don’t have the reserves.
If the broker that I deal with, takes the opposite position that I take, they have a vested interest in my losing a trade, because forex is a zero sum game. I lose, they win. If I consistently win, what then?
The US dollar makes up the bulk of the currency trades in the forex market. The Fed does not leave the value thereof to be determined by the market alone. They have a “target value” for the dollar for lack of a better word and they intervene. It is part of monetary policy.
If one knows who the participants in the market are, and know what they are trying to achieve, it should be possible to develop a strategy where you have some sort of edge. If you don’t know this, it can be compared to driving blind.
I am actually quite intrested in this data as well, however I think it would be of more use with the following:
Who is motivated by what?
What is their maximum impact?
What is their usual impact?
Its only help would be knowing who might throw their weight when and where, but it wont really change much. Most of this isnt likley to be found for the major players, who arnt really a person, but groups of people who all collectivly impact the market. Some people refer to them by what their doing (bull vs bear).
They also have a vested interest in keeping their customers’s trust in them. There are some pretty smart people out there, and if they tried to pull some kind of a scam, I guarantee many people would notice immediately. People start complaining in forums, other members of that broker look into it, bad reviews pop up all over the internet. Soon they are out of business.
The brokers take the opposite position mostly to hedge your trade, so they can get as close to breaking even on the actual trade as possible, and collect their pip spread as profit.
Do you know how it works? This is interesting, because forex is a zero sum game as I mentioned earlier. Is this not a partial explanation of why so many traders lose money on forex? I mean the brokers stay in business, so someone has to hand them their money.
Do they hedge all the deals individually or do they look at their position collectively, say every 5 minutes and then hedge their position? It does not seem practical to hedge themselves against every trade, because someone else will invariably go short on the GBPUSD while I go long, for example. These 2 trades should then be netted off and the resulting position hedged. In practice a few thousand trades will be netted off against each other. Am I right?
Lagger,
This question has already been answered for you in great detail in another thread that you started in the brokers section. Not only did I answer it but rhodytrader did to. My opinion you can toss out the window if you want, but rhodytrader is a professional that has been in this business for years. Take it or leave it, but your answer has been given.
Forex is not for everybody. After reading countless “fear and conspiracy” posts you have made, maybe you should consider that trading will not be your calling. There are many other talents that you may have that you can do well with. Maybe try giving one of them a shot.
I spoke to a broker who works on a dealing desk (so not the ECNs), and yes, they collectively add the positions together and if they are over-exposed on an instrument, they’ll hedge it.
The broker is allowed a certain amount of leeway though, so they’re not perfectly hedged all the time… they can choose to allow a small amount of exposure in one side of the market if they think it’s a good idea.
Alas, you’ve got it wrong. In terms of the value of the USD the Fed definitely doesn’t have a target level. In fact, the Fed isn’t in charge of the USD policy. That’s the Treasury. When the Treasury wants intervention in the USD it has the Fed take care of business, but unlike in the interest rate market, the Fed doesn’t not act in forex of its on volition.
Thanks for your concern. The reason for all these questions is that I think that I have found a way to beat the market, but a prerequisite is a broker that treats traders fairly. 98.75% hit rate is not to shabby I think, particularly if the causes of the losses were due to learning how the software works.
The way forward is to trade through an ECN as they have no vested interest in whether you win or lose as they get the commission anyway. They obviously prefer winners as you keep giving them commission! Try MB Trading / EFX and see how you get on, they do mini accounts so no need to risk a lot to start with. If you really have the holy grail then you’ll make your original stake back in no time and you’re then playing with free money, nothing to lose! Good luck
The reason for all these questions is that I think that I have found a way to beat the market,