28 July 2018
Forex Bank Trading Strategy Revealed
by Sterling Suhr
Anyone successful in the forex market will hands down agree there is no greater career one could have. The ability to work your own schedule, the freedom, and income potential is hard to match with any other career. Having said that, what does it take to become successful in the forex market? Plain and simple we need the proper forex education to achieve success.
In a market with a success rate of 5% it is important that we search out and receive forex training that will allow us to be in that very small successful group of traders. How does one go about doing so? To put it simply if the forex trading strategy that is being used is one used by the masses, then how can one expect different results than the masses? 5% of retail traders succeed, which tells us that 95% fail and thus we have no other choice than to break free from the failing forex education system!
ENTER YOU ENEMIES HEAD AND THINK LIKE A BANK
Before we begin I would like to give a preface to the forex bank trading strategy. First, it is common knowledge that the banks drive the forex market. It is not a hidden fact that they drive the most amount of volume on a daily basis and as a result they drive short term moves. If we understand that the banks drive, manipulate, and push this market then wouldn’t it be hugely beneficial to track when they are entering and what position they are taking? This is the very foundation of the bank day trading strategy we employ. If we can decipher when they are entering, and what position they are taking then we do not need any further information to make a profitable forex trading decision.
We must remember that this is the banks market, and not ours! Retail traders are simply figurative flies on the wall. Keeping that in mind, why then do most retail forex traders out there attempt to invent or learn forex trading strategies that have been created to try and fit a market we do not control? It is our strong conviction at Day Trading Forex Live that success in the forex market is only possible when we stop trying to fit forex strategies to a market we don’t control, but rather learn the trading strategy of the banks! This is their business, and they have a business model (aka forex trading strategy) that we must learn to follow to achieve consistent results! Every day the banks repeat the same 3 step process. If we learn to trade forex by following their model we will have a much greater chance of success…after all the banks are the ones moving the market.
3 STEPS TO SUCCESS
As we just mentioned the banks use a 3 step process day after day to profit from the forex market. We can think of this process as their forex trading strategy. It has rules that they follow, it is repeatable, and it consistently results in profit. In any market there must be a counter party to every transaction. If you are looking to buy the market someone must be willing to sell to you, and conversely if you are looking to sell the market then someone needs to be willing to buy it from you. This is the basis for how the market at its foundation works and therefore this is how we track how the banks trade.
Accumulation: As discussed above there is a counter party to every transaction in any market including the forex market. Therefore when a bank or group of banks desires to enter the forex market they must do so by accumulating a position over time. Unlike you and I, because of the sheer volume banks push they must enter positions during times most people would term as consolidation or range bound markets.
These periods of consolidation are what we call accumulation as they are areas where smart money (banks, hedge funds, ect) enters or accumulates their desired position over the course of time. By doing this through tight range bound periods banks are able to not only keep what they are accumulating secret to the rest of the market, but they are also able to get a much better overall entry price. This is the foundation to any trade made by the banks. Money is made by accumulating a long position they will later sell off at a higher price, or accumulating a short position they will later cover at a lower price.
This is one of the most essential keys to trading forex successfully, and yet it is always over looked or worse yet called consolidation which is viewed as useless times in the market that mean nothing. Our single goal should be to track when the banks are entering the market and what position they are entering and thus these areas of accumulation are critical to our trading decisions. As discussed above banks are the ones moving this market, and therefore if you can identify the position they are accumulating you can identify which direction the market will move next with a high degree of accuracy. What then comes after this period of accumulation?
Spotting Forex Market Manipulation
Manipulation: Over and over through my years of educating forex traders I’ve heard many forex traders say that it feels as if they are entering the market at exactly the wrong time. Many retail forex traders feel as if the market is just waiting for them to enter before it instantly turns the opposite direction. I’m here to tell you that it’s true! This is a critical idea that all must understand and come to accept. We all know the failure rate among traders, but what does this information tell us?
Remember above when we discussed that there must be a counter party to every trade? This is a well-known fact and it is indisputable. Because the mega banks position is so large they must essentially create their own market. For example lets say Bank X was looking to sell the EUR/USD. In order to sell the position size they desire there would have to be someone willing to buy an equal amount of the EUR/USD. This is where the retail forex trader comes in.
Forex traders are predictable. As a general rule of thumb all traders go through the same education, use the same trading strategies, and use the same software and indicators. While each strategy has its own small differences, the majority generate the same losing results and this is undeniable. If this weren’t true wouldn’t we see a success rate higher than 5%? Therefore while the strategies differ, the outcome and thus trades tend to be in large part the same which explains why the outcome of retail traders tends to be the same. Because of this the banks are well aware of how to get retail traders to enter the market.
Going back to our illustration if Bank X was looking to sell the EUR/USD then they would push the price up, which it turn would begin to trigger buying pressure from retail traders. At this same point they would begin to sell into all that buying pressure, and then the market instantly turns to the downside. This is the central reason many retail forex traders consistently enter the market at exactly the wrong time. The unfortunate part about this is the fact that this information is actually the most powerful thing the banks give us, but only if we open our eyes to it. The manipulation of price tells us what position they have been accumulating and thus tells us the direction they intend to drive the price. I urge you to look back at all large market moves. Before most every move in the forex market you will see a tight range bound period that is accumulation followed by a false push in the opposite direction of the trend.
Learn To Day Trade Stop Run Reversals
Distribution/Market Trend: After they have accumulated a position through the standard tight ranging market, banks will often create a false push that we just discussed which is manipulation. This false push is an extension of the accumulation period as it allows them to finish entering the rest of the position they had been accumulating. This as we just discussed is the reason so many forex traders enter the market at exactly the wrong time. If however we know the tricks they use we can avoid being a pawn of the banks manipulation, and instead profit from it as they do!
If we have correctly identified which direction they have manipulated the market we can then understand which direction they intend to push the price. This is called the distribution phase of the market, and is seen visually as a market trend. Again this market trend comes only after the banks have finished accumulating their position through tight range bound price action as well as manipulation. Hands down this is the easiest area for us to profit from but only if we can properly identify the first 2 steps in the process. Through this article I have marked out this 3 step process on a series of charts. New concepts can be hard to understand with only words and therefore I believe the charts should serve you well in the learning process. As you examine these charts you should be identifying the 3 stages of the bank day trading strategy.
PUTTING FOREX IN PERSPECTIVE
Bottom line is this forex trading strategy is no doubt very different than what you have heard before. Realizing the chart is a false manipulation of prices and learning to read the intention behind the moves will take practice. Anything in life that is new takes time to learn and this will be no exception. However, the potential reward of being a profitable forex trader is massive and in our opinion unmatched! Having the freedom to do as you like, and the money to support that freedom is something forex trading offers to all of us, but only if we are willing to work for it. Everyone reading this knows most traders fail. Everyone reading this knows the general ways most trade. Therefore if you are using a forex trading strategy used by the masses I strongly urge you to give some serious thought as to why you feel the outcome will be different for you? At some point we all need to realize that maybe it’s not the tens of thousands of retail forex traders that are failing, but rather maybe it’s the strategies that are flawed to begin with. Therefore I again urge you to take in this free information, give it some thought, and apply it in your trading! I say this not to offend anyone but rather in a sincere effort to get everyone reading this thinking about the facts. Either way I sincerely wish you all the best and I truly hope I can serve you in your progression as a forex trader.
Forex Charts Patterns – Do They Increase Your Edge?
October 21
06:08
2011
by Sterling Suhr
3 Comments
Forex chart patterns (increase your edge) Every one trading forex chart patterns knows that they have the potential to increase your edge. Every different chart pattern including triangles, bull and bear flags, Gartley patterns or any other common pattern, all have a certain percentage of successful trade setups. Depending on your money management even a pattern that has a mere 50-50 outcome (most have better ratios) can still keep you in consistent profits, and I’m not going to argue that fact.
My argument
Just the other day I got into an argument with a good friend of mine when I told him that chart patterns are fake. I probably used the wrong words in our discussion because he got pretty angry. He took it as though I was telling him that the method he uses to trade is wrong and that wasn’t my intention. I was merely pointing out that the chart patterns we see on the charts are not true patterns. Even though they repeat and have a certain percentage of likely outcome over time, the percentage of successful setups changes over time.
Consider this, in order for any pattern on a chart to be true you would need the same traders, thinking the same thing, taking the same trades, with the same fundamental outlook, that created the first pattern, and all this would need to happen at the same time with the same amount of money used on each trade. This is literally impossible. So he tells me “well the charts are dynamic” and I said “exactly”! What I can tell you with certainty is that those chart patterns follow thru in the direction that Smart Money wants them to, and not because there is any consistency to any certain outcome of the pattern. Now that begs the question of what has happened when the pattern does not do what it should do?
The short answer is you have been manipulated by the smart money to believe that the pattern will have a certain outcome when the whole time they have been accumulating a position against the most likely outcome of that particular pattern. Remember for every buyer there is a seller and for every seller there is a buyer. Therefore Smart Money knows that if for example they create what visually looks like an upward triangle on the chart, retail forex traders will begin to buy. As retail traders begin to buy smart money is the one selling it to them. Those traders are trapped in a long position and served the purpose of buying smart money’s desired short position.
The deception
We all know that trading is essentially gambling. We are taking a bet that price will move our direction, and it’s as simple as that. What separates the trading environment from the casino environment is our edge as traders. When we use our edge we are actually placing our self in the casinos position rather than the gambler that pulls the slot handle. The slot machine is designed to suck you in to believing you can win even though the odds are extremely against you. This is exactly what Smart Money does with these so called predictable patterns. Giving you small wins over time creates the thought process that you are using a winning strategy, and the next big hit is only one trade away!
They also use the moving averages and any other standard indicator commonly used by retail traders. The fact is they know how traders use them and can move price enough to make the pattern break or MAs cross just to suck us into the market. It is absolutely essential that Smart Money does this as they literally have to create buyers if they would like to sell the market, and they must create sellers if they are looking to buy the market. The shorter the time frame the easier it is for them to trap traders. This is our personal belief and we ask you to do some serious thinking on this matter, as it could mean your ultimate success or failure in the forex market.
The Smart Money
When referring to the Smart Money we are essentially talking about the worlds ten largest banks. They are (in order) BNB Parabas, Royal bank of Scotland, Barclays, Deutsche Bank, HSBC Bank, Credit Agricole, Bank of America, Mitsubishi UFJ, JP Morgan Chase, and UBS AG. They also include Investment banks such as Goldman Sachs and the like. Even your typical large bucket shop broker that is not a registered ECN such as FXCM fits the bill. The reason we call these guys the Smart Money is the fact that they have access to information we as retail traders will never have.
I have recently read many articles detailing how these guys get insider information from sources within our own governments. To think that they wouldn’t manipulate the intraday market is naive at best. Here is a great video where well known trader Jim Cramer blew the whistle when he admitted to manipulating stock prices during his days as a hedge fund manager, and went on to say not only how easy it was, but also that everyone is doing it. Again it would be naive to think that it is different for the currency market. Why would it be? If you had access to order flow and inside information from government sources to trade from would you? Of course you would! I know I would!
The points and facts in this article are just some of the ways they manipulate free markets. It would take a book to describe them all. Below however is a nice example. This is a chart of Non-Farm Payroll from December 2nd, 2011. First notice the ascending that at first
broke thru the pattern as expected before the release. It then tests the breakout level and rises during London session not only taking out stops but sucking in new buyers as the pattern has worked and traders buy. This was a manipulation by the London market as they accumulated sell orders. A couple hours later the NFP numbers came out and was lower than expected, but the unemployment rate was much better than expected as you can see on the chart. It doesn’t take much for math skills to figure that a fall in the unemployment rate couldn’t be caused by a lower number of jobs added in a month. Even I knew that the drop in unemployment was due to people either running to the end of their unemployment benefits or giving up on looking for work entirely (the Smart Money knows this better than I do) yet you can see how price spiked up to take out stops above the highs before the drop. Who do you think did that?
These are 2 classic examples of how the Smart money uses patterns and news to manipulate traders into bad positions in order them to be able to enter their desired position. Again, and at the risk of sounding like a broken record there has to be someone willing to buy if you are looking to sell, and someone looking to sell if you are looking to buy. This is a problem for Smart Money given the size of the positions they enter, and it is ABSOLUTELY necessary for them to manipulate the market into the opposite of their intended direction. We must use this information if we are to avoid being part of the losing heard of retail traders.
Increase your edge
Now I am sure you are wondering how then do you increase your edge? The short answer is instead of trading a manipulated pattern trade with the Smart Money. There are certain things the Smart money does to “show their hand” so to speak. For Example:
Market intent – A substantial increase in volume, with the bar opening on its high and closing on its low, or opening on its low and closing on its high.
Faded moves – A lower volume move often against the trend showing little or no interest in the direction of the reversal. This can also be a series of lower volume bars that slowly move against the trend.
Sudden shifts A shift in direction opposite the short term direction of the last several bars. This often comes after a faded move. Example: Assume the trend is down and you then have 3 low volume candles up followed by the next candle aggressively jumping down. This is a sudden shift from a market moving slowly up to aggressively down.
Stop runs – A pop above or below a short term high or low that gets rejected usually forming a large wick on the bar. This is usually the clearest way to identify what Smart Money is doing, and the position they are accumulating. Those new to tracking Smart Money should at first stick with stop runs as they are the easiest to identify. What we are determining using these is how they are manipulating the market. Eventually the Smart Money has to create the move in the direction they will profit from and these are the ways they show it to us before the trend actually begins.
Before you conclude that I am speaking about another pattern let me tell you that there is no consistent pattern to follow here and that is NOT what we are looking for. We only need to see a few of these tell tale signs of what they are doing. Smart Money is very secretive in what position they are accumulating but they can’t hide it forever. Imagine if Smart Money was like a terrible poker player that had a sure “tell” that gave away what they were accumulating every time. If this was the case we would all begin to pile on before they finished accumulating their desired position! This would essentially ruin the way they trade, and therefore this is why they do everything they can to disguise what position they are entering.
What I do is look for the tell tale signs and only trade when I’m certain of the direction the Smart Money has been accumulating. Are we right 100% of the time? No, but when I see the chart patterns I can use the Forex Bank Trading Strategy and increase my edge once the manipulation becomes clear.
Anyone successful in the forex market will hands down agree there is no greater career one could have. The ability to work your own schedule, the freedom, and income potential is hard to match with any other career. Having said that, what does it take to become successful in the forex market? Plain and simple we need the proper forex education to achieve success.
In a market with a success rate of 5% it is important that we search out and receive forex training that will allow us to be in that very small successful group of traders. How does one go about doing so? To put it simply if the forex trading strategy that is being used is one used by the masses, then how can one expect different results than the masses? 5% of retail traders succeed, which tells us that 95% fail and thus we have no other choice than to break free from the failing forex education system!
ENTER YOU ENEMIES HEAD AND THINK LIKE A BANK
Before we begin I would like to give a preface to the forex bank trading strategy. First, it is common knowledge that the banks drive the forex market. It is not a hidden fact that they drive the most amount of volume on a daily basis and as a result they drive short term moves. If we understand that the banks drive, manipulate, and push this market then wouldn’t it be hugely beneficial to track when they are entering and what position they are taking? This is the very foundation of the bank day trading strategy we employ. If we can decipher when they are entering, and what position they are taking then we do not need any further information to make a profitable forex trading decision.
We must remember that this is the banks market, and not ours! Retail traders are simply figurative flies on the wall. Keeping that in mind, why then do most retail forex traders out there attempt to invent or learn forex trading strategies that have been created to try and fit a market we do not control? It is our strong conviction at Day Trading Forex Live that success in the forex market is only possible when we stop trying to fit forex strategies to a market we don’t control, but rather learn the trading strategy of the banks! This is their business, and they have a business model (aka forex trading strategy) that we must learn to follow to achieve consistent results! Every day the banks repeat the same 3 step process. If we learn to trade forex by following their model we will have a much greater chance of success…after all the banks are the ones moving the market.
3 STEPS TO SUCCESS
As we just mentioned the banks use a 3 step process day after day to profit from the forex market. We can think of this process as their forex trading strategy. It has rules that they follow, it is repeatable, and it consistently results in profit. In any market there must be a counter party to every transaction. If you are looking to buy the market someone must be willing to sell to you, and conversely if you are looking to sell the market then someone needs to be willing to buy it from you. This is the basis for how the market at its foundation works and therefore this is how we track how the banks trade.
Accumulation: As discussed above there is a counter party to every transaction in any market including the forex market. Therefore when a bank or group of banks desires to enter the forex market they must do so by accumulating a position over time. Unlike you and I, because of the sheer volume banks push they must enter positions during times most people would term as consolidation or range bound markets.
These periods of consolidation are what we call accumulation as they are areas where smart money (banks, hedge funds, ect) enters or accumulates their desired position over the course of time. By doing this through tight range bound periods banks are able to not only keep what they are accumulating secret to the rest of the market, but they are also able to get a much better overall entry price. This is the foundation to any trade made by the banks. Money is made by accumulating a long position they will later sell off at a higher price, or accumulating a short position they will later cover at a lower price.
This is one of the most essential keys to trading forex successfully, and yet it is always over looked or worse yet called consolidation which is viewed as useless times in the market that mean nothing. Our single goal should be to track when the banks are entering the market and what position they are entering and thus these areas of accumulation are critical to our trading decisions. As discussed above banks are the ones moving this market, and therefore if you can identify the position they are accumulating you can identify which direction the market will move next with a high degree of accuracy. What then comes after this period of accumulation?
Spotting Forex Market Manipulation
Manipulation: Over and over through my years of educating forex traders I’ve heard many forex traders say that it feels as if they are entering the market at exactly the wrong time. Many retail forex traders feel as if the market is just waiting for them to enter before it instantly turns the opposite direction. I’m here to tell you that it’s true! This is a critical idea that all must understand and come to accept. We all know the failure rate among traders, but what does this information tell us?
Remember above when we discussed that there must be a counter party to every trade? This is a well-known fact and it is indisputable. Because the mega banks position is so large they must essentially create their own market. For example lets say Bank X was looking to sell the EUR/USD. In order to sell the position size they desire there would have to be someone willing to buy an equal amount of the EUR/USD. This is where the retail forex trader comes in.
Forex traders are predictable. As a general rule of thumb all traders go through the same education, use the same trading strategies, and use the same software and indicators. While each strategy has its own small differences, the majority generate the same losing results and this is undeniable. If this weren’t true wouldn’t we see a success rate higher than 5%? Therefore while the strategies differ, the outcome and thus trades tend to be in large part the same which explains why the outcome of retail traders tends to be the same. Because of this the banks are well aware of how to get retail traders to enter the market.
Going back to our illustration if Bank X was looking to sell the EUR/USD then they would push the price up, which it turn would begin to trigger buying pressure from retail traders. At this same point they would begin to sell into all that buying pressure, and then the market instantly turns to the downside. This is the central reason many retail forex traders consistently enter the market at exactly the wrong time. The unfortunate part about this is the fact that this information is actually the most powerful thing the banks give us, but only if we open our eyes to it. The manipulation of price tells us what position they have been accumulating and thus tells us the direction they intend to drive the price. I urge you to look back at all large market moves. Before most every move in the forex market you will see a tight range bound period that is accumulation followed by a false push in the opposite direction of the trend.
Learn To Day Trade Stop Run Reversals
Distribution/Market Trend: After they have accumulated a position through the standard tight ranging market, banks will often create a false push that we just discussed which is manipulation. This false push is an extension of the accumulation period as it allows them to finish entering the rest of the position they had been accumulating. This as we just discussed is the reason so many forex traders enter the market at exactly the wrong time. If however we know the tricks they use we can avoid being a pawn of the banks manipulation, and instead profit from it as they do!
If we have correctly identified which direction they have manipulated the market we can then understand which direction they intend to push the price. This is called the distribution phase of the market, and is seen visually as a market trend. Again this market trend comes only after the banks have finished accumulating their position through tight range bound price action as well as manipulation. Hands down this is the easiest area for us to profit from but only if we can properly identify the first 2 steps in the process. Through this article I have marked out this 3 step process on a series of charts. New concepts can be hard to understand with only words and therefore I believe the charts should serve you well in the learning process. As you examine these charts you should be identifying the 3 stages of the bank day trading strategy.
PUTTING FOREX IN PERSPECTIVE
Bottom line is this forex trading strategy is no doubt very different than what you have heard before. Realizing the chart is a false manipulation of prices and learning to read the intention behind the moves will take practice. Anything in life that is new takes time to learn and this will be no exception. However, the potential reward of being a profitable forex trader is massive and in our opinion unmatched! Having the freedom to do as you like, and the money to support that freedom is something forex trading offers to all of us, but only if we are willing to work for it. Everyone reading this knows most traders fail. Everyone reading this knows the general ways most trade. Therefore if you are using a forex trading strategy used by the masses I strongly urge you to give some serious thought as to why you feel the outcome will be different for you? At some point we all need to realize that maybe it’s not the tens of thousands of retail forex traders that are failing, but rather maybe it’s the strategies that are flawed to begin with. Therefore I again urge you to take in this free information, give it some thought, and apply it in your trading! I say this not to offend anyone but rather in a sincere effort to get everyone reading this thinking about the facts. Either way I sincerely wish you all the best and I truly hope I can serve you in your progression as a forex trader.
Forex Charts Patterns – Do They Increase Your Edge?
October 21
06:08
2011
by Sterling Suhr
3 Comments
Forex chart patterns (increase your edge) Every one trading forex chart patterns knows that they have the potential to increase your edge. Every different chart pattern including triangles, bull and bear flags, Gartley patterns or any other common pattern, all have a certain percentage of successful trade setups. Depending on your money management even a pattern that has a mere 50-50 outcome (most have better ratios) can still keep you in consistent profits, and I’m not going to argue that fact.
My argument
Just the other day I got into an argument with a good friend of mine when I told him that chart patterns are fake. I probably used the wrong words in our discussion because he got pretty angry. He took it as though I was telling him that the method he uses to trade is wrong and that wasn’t my intention. I was merely pointing out that the chart patterns we see on the charts are not true patterns. Even though they repeat and have a certain percentage of likely outcome over time, the percentage of successful setups changes over time.
Consider this, in order for any pattern on a chart to be true you would need the same traders, thinking the same thing, taking the same trades, with the same fundamental outlook, that created the first pattern, and all this would need to happen at the same time with the same amount of money used on each trade. This is literally impossible. So he tells me “well the charts are dynamic” and I said “exactly”! What I can tell you with certainty is that those chart patterns follow thru in the direction that Smart Money wants them to, and not because there is any consistency to any certain outcome of the pattern. Now that begs the question of what has happened when the pattern does not do what it should do?
The short answer is you have been manipulated by the smart money to believe that the pattern will have a certain outcome when the whole time they have been accumulating a position against the most likely outcome of that particular pattern. Remember for every buyer there is a seller and for every seller there is a buyer. Therefore Smart Money knows that if for example they create what visually looks like an upward triangle on the chart, retail forex traders will begin to buy. As retail traders begin to buy smart money is the one selling it to them. Those traders are trapped in a long position and served the purpose of buying smart money’s desired short position.
The deception
We all know that trading is essentially gambling. We are taking a bet that price will move our direction, and it’s as simple as that. What separates the trading environment from the casino environment is our edge as traders. When we use our edge we are actually placing our self in the casinos position rather than the gambler that pulls the slot handle. The slot machine is designed to suck you in to believing you can win even though the odds are extremely against you. This is exactly what Smart Money does with these so called predictable patterns. Giving you small wins over time creates the thought process that you are using a winning strategy, and the next big hit is only one trade away!
They also use the moving averages and any other standard indicator commonly used by retail traders. The fact is they know how traders use them and can move price enough to make the pattern break or MAs cross just to suck us into the market. It is absolutely essential that Smart Money does this as they literally have to create buyers if they would like to sell the market, and they must create sellers if they are looking to buy the market. The shorter the time frame the easier it is for them to trap traders. This is our personal belief and we ask you to do some serious thinking on this matter, as it could mean your ultimate success or failure in the forex market.
The Smart Money
When referring to the Smart Money we are essentially talking about the worlds ten largest banks. They are (in order) BNB Parabas, Royal bank of Scotland, Barclays, Deutsche Bank, HSBC Bank, Credit Agricole, Bank of America, Mitsubishi UFJ, JP Morgan Chase, and UBS AG. They also include Investment banks such as Goldman Sachs and the like. Even your typical large bucket shop broker that is not a registered ECN such as FXCM fits the bill. The reason we call these guys the Smart Money is the fact that they have access to information we as retail traders will never have.
I have recently read many articles detailing how these guys get insider information from sources within our own governments. To think that they wouldn’t manipulate the intraday market is naive at best. Here is a great video where well known trader Jim Cramer blew the whistle when he admitted to manipulating stock prices during his days as a hedge fund manager, and went on to say not only how easy it was, but also that everyone is doing it. Again it would be naive to think that it is different for the currency market. Why would it be? If you had access to order flow and inside information from government sources to trade from would you? Of course you would! I know I would!
The points and facts in this article are just some of the ways they manipulate free markets. It would take a book to describe them all. Below however is a nice example. This is a chart of Non-Farm Payroll from December 2nd, 2011. First notice the ascending that at first
broke thru the pattern as expected before the release. It then tests the breakout level and rises during London session not only taking out stops but sucking in new buyers as the pattern has worked and traders buy. This was a manipulation by the London market as they accumulated sell orders. A couple hours later the NFP numbers came out and was lower than expected, but the unemployment rate was much better than expected as you can see on the chart. It doesn’t take much for math skills to figure that a fall in the unemployment rate couldn’t be caused by a lower number of jobs added in a month. Even I knew that the drop in unemployment was due to people either running to the end of their unemployment benefits or giving up on looking for work entirely (the Smart Money knows this better than I do) yet you can see how price spiked up to take out stops above the highs before the drop. Who do you think did that?
These are 2 classic examples of how the Smart money uses patterns and news to manipulate traders into bad positions in order them to be able to enter their desired position. Again, and at the risk of sounding like a broken record there has to be someone willing to buy if you are looking to sell, and someone looking to sell if you are looking to buy. This is a problem for Smart Money given the size of the positions they enter, and it is ABSOLUTELY necessary for them to manipulate the market into the opposite of their intended direction. We must use this information if we are to avoid being part of the losing heard of retail traders.
Increase your edge
Now I am sure you are wondering how then do you increase your edge? The short answer is instead of trading a manipulated pattern trade with the Smart Money. There are certain things the Smart money does to “show their hand” so to speak. For Example:
Market intent – A substantial increase in volume, with the bar opening on its high and closing on its low, or opening on its low and closing on its high.
Faded moves – A lower volume move often against the trend showing little or no interest in the direction of the reversal. This can also be a series of lower volume bars that slowly move against the trend.
Sudden shifts A shift in direction opposite the short term direction of the last several bars. This often comes after a faded move. Example: Assume the trend is down and you then have 3 low volume candles up followed by the next candle aggressively jumping down. This is a sudden shift from a market moving slowly up to aggressively down.
Stop runs – A pop above or below a short term high or low that gets rejected usually forming a large wick on the bar. This is usually the clearest way to identify what Smart Money is doing, and the position they are accumulating. Those new to tracking Smart Money should at first stick with stop runs as they are the easiest to identify. What we are determining using these is how they are manipulating the market. Eventually the Smart Money has to create the move in the direction they will profit from and these are the ways they show it to us before the trend actually begins.
Before you conclude that I am speaking about another pattern let me tell you that there is no consistent pattern to follow here and that is NOT what we are looking for. We only need to see a few of these tell tale signs of what they are doing. Smart Money is very secretive in what position they are accumulating but they can’t hide it forever. Imagine if Smart Money was like a terrible poker player that had a sure “tell” that gave away what they were accumulating every time. If this was the case we would all begin to pile on before they finished accumulating their desired position! This would essentially ruin the way they trade, and therefore this is why they do everything they can to disguise what position they are entering.
What I do is look for the tell tale signs and only trade when I’m certain of the direction the Smart Money has been accumulating. Are we right 100% of the time? No, but when I see the chart patterns I can use the Forex Bank Trading Strategy and increase my edge once the manipulation becomes clear.
Labels: Forex
24 July 2018
Fool's Rules for Investing Success
Find Strong Management Teams -- Know well the managers of the companies in which you invest. The most effective way to find multi-bagger stocks is to look for a leadership group that looks committed to long-term operational success and creating superior returns for shareholders. Beware of management teams that give out too many stock options, or appear to be having more fun on the golf course than in the office.
Look for Great Business Models -- Superior stocks often have natural moats built around them to protect them from competition. David Gardner looks for companies that set their own rules—often by creating or revolutionizing an industry. Tom chooses more established but little-known companies that have found unique ways to dominate their industries.
Show Us the Cash -- There's no better indicator of business health than cash flow. Many companies now make an art form of disguising their true cash flow. So review the cash flow statement carefully. Look out for companies with overloaded finished-goods inventories or declining profit margins.
Stay focused on the long term -- Stock investors need a time horizon of at least three to five years. Ups and downs in stock prices can be unrelated to the true strength of the business. Every great stock has suffered short-term misery. Even Warren Buffett's Berkshire Hathaway lost almost 50% of its value from March 1999 to March 2000. Staying invested for the long term greatly reduces the risk of selling at the bottom and allows your wealth to compound over time.
Generate future fair valuation ranges before buying -- There are lots of great companies run by great management teams, but their stocks are overpriced. Great returns come from buying great companies at good prices.
Look for Growth Opportunities -- Target companies whose stocks you think could grow 20% or more annually for five years. One or two fast-growing companies can substantially lift your entire portfolio.
Diversify -- Make sure that no single failure will keep you up at night. Balance your portfolio into a range of stocks. Vary your investments by industries, location, and size of company. Use an index fund to achieve more diversification.
Labels: Investment Quote
