A Confusion Being Perpetrated about Institutional Players

I really think there is a confusion here about institutional traders trying to 'trick' the retail traders into doing things and making certain trades.

The institutional market isn't spending their 100s of millions of $'s trying to trick what is at best 10% of the market combined across 20+ pairs, or your $500 mini account stops.

Even if all the retailers were in on EU at the same time (unlikely), since EU is about 50% of all retail orders, we are talking now 5% of the market.

We are too small and they do not care about us little geckos, meercats or small ardvarks when there are other Lions & Tigers on the savannah hunting them all the time.

They are not trying to take your money - they are trying to take the money of the larger players because that is who is attacking them, that is who is hunting them, that is who they have to worry about because they can move things against them - not us.

We barely show up on the radar, and our stops being tripped are not large enough collectively for them to cause a market reaction.

Why expose yourself to attack very small prey when the big prey is hunting your stash equally?

This is a confusion that keeps getting perpetrated and is really a misunderstanding of how institutional players work.

Don't believe me?

These same patterns were showing up prior to the mid/late 90's, before retail fx was available. The same moves you see in the market today are the same ones that happened before we were even in the game.

How could the same patterns be happening and playing out almost exactly the same if all of a sudden, the new 'retail prey' is out there and they are now targeting us?

The market would most certainly change patterns, and would most certainly look different.

But its not!

It doesn't make any sense when you really think about it.

Again, they are trying to take the money of other large players who are likely on the other side of the transaction and represent the greatest threat to them on a daily basis.

It is silly to think they are coming after you when you almost don't even register on the radar.

Just learn to place orders where they do, at locations they have demonstrated they have and likely will.

Then you eliminate any issues about being on the wrong side or being 'tricked' by some phantom collusion across a decentralized market that doesn't exist.

The only person that allows you to be tricked by anything is you.

Food for thought.

Kind Regards,
Chris Capre
2ndSkiesForex.com

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Comment by 2ndSkiesForex on September 12, 2012 at 5:17pm: I forgot to mention one other key point around this discussion. Which is;

It's more convenient to think of the 'institutions' manipulating and taking out the little guy, as it gives us two things;

a) someone to blame when things go wrong

b) someone to be fighting against

Mostly, you're fighting against yourself and psychology, not the market which doesn't know who you are or care about you.

Just something else I wanted to share.

Kind Regards,
Chris

Comment by Peter jcp on September 12, 2012 at 6:50pm: Hi Chris - you might guess I would comment ;-). Firstly I totally agree the large institutional players of the session, day or week are not really bothered about us small "retailers" - as you say they have bigger "fish to fry".

Lets look at the figures the EU is approx between 40-50% of the main spot forex market and if we retailers are approx 10% of the total market then as you say then we are about 5% of the spot EU - which is real figures is maybe what - 2 - 5 or 10 billion yes billion dollars ??

This is the part I cannot really follow about all the figures on this unregulated market - because if there are between 2 and 5 million maximum retail traders - how can we add up that amount?

Something does not stack up even allowing for leverage etc etc.

However going back to the whether we are 2 or 10 billion or more on the EU - its not to be "sneezed" at - and if a player via "manipulation" get obtain say 65-75% of that money from the "retailers" by blatant stop hunting - its well worth doing ;-)

I look upon it does not not matter whether you are a small retailer with 1 lot on - or a small hedge fund with 10,000 lots on - if a large players sees he can "out trump" the move and make money from it - he will do it. After all its not illegal - is it ?

I have followed the EU for over 8 years and I can definitely tell you the patterns and the play since HFT came in is different. New tricks have evolved - they have had to because there is more money at stake nowadays - and with the internet and robots - traders are more sophisticated.

The fact that I am a "winner" in this market means I have no "axe to grind" - But I just feel sorry for newer traders trading with methods designed for different market places.

I have got to the point I can tell when the market makers are ready to play one of their "stunts".

Its actually very clever - and a perfect example happened today in the market - on many pairs but mainly on the EU today at 9.05am UK time and 4.05am NY time,

You can say what you like - the truth was the market dropped approx 60 pips in less than 2 minutes to simply stop hunt and then to rebuy.

The reason given by the brokers etc was a simple "bog standard" notice - sudden volatility due to a news item ( Germany) and algos would have tripped off.

Its a great excuse - it covers a multitude of sins and can even keep the regulators happy.

It achieved a "double whammy" - first it helped clear existing intra day bulls and then it helped them ( market makers) to buy at a lower price. Brilliant achievement by the players who did it.

I fully understand- because i can remember it myself thinking some one knows when i enter and they trade against me - mentality - simply because its basically true.

We all know many brokers and market makers work together on advising all of positions and stops. Its no secret it's just a shame the FSA and other regulators are not aware of it.

We also all know the latest tricks of false pending orders and the excuse HFT was suppose to bring more liquidity to the market - when really its designed to take more out without having to really effect the larger moves.

Chris - I love this market - Its great - Its where I have to make my money.

But please don't try and make its sound fair and above board - that's just nonsense.

Yes we can have thousands or millions of bears fighting it out with similar bulls on a key price.

While this is going on - the market player (s) of the session - works out which way to "sting".

They will tilt the board in favour of the way - they don't want to go - so to get more traders that direction and then at the right time - whether its after 15 minutes - 1 hr or when ever - stop hunt.

One of my favourite motto's which is so true in Forex - every move is a stop hunt because more than likely every move over say 10 / 20 pips will take a trader out - whether it's just Will or Dick - the small retail trader - or a multi million dollar hedge fund. The players don't really mind - they just want money - who's ever it is.

Finally - I do think many traders who have been told about "noise" in the market - except all this what goes on . After all if they believe they need larger stops ie - 70 -100+ pips - the market makers do not mind at all - more to take off the "table"

For me though and many other very experience scalpers ( there can only be a few - less than 5% of retailers) we live and depend on manipulation. My best trades today are on the back of the players "tricking" and personally if the non retail get caught - it just shows they are not really experienced enough - and should stick with "insider trading" on stocks and shares.

Sorry I am so "blatant" about it - but there is enough evidence to support everything I am saying.

I am sure with you being involved with the commercial element - you cannot support my views - and that's fine and I understand . For everybody else - please just make you own mind up- just don't let the market psychologists grind you down - and get to understand their "games"

Regards

Peter

Comment by 2ndSkiesForex on September 12, 2012 at 7:20pm: @ Peter

Of course I knew you would respond, just was hoping you wouldn't need 10 pages to do it.

Sure, HFT's have changed intraday patterns a bit, but they are not trying to take out any retailers because their targets are way too small to do this (if you really understand HFTs).

Also, there are 'news' algos now that just respond to news events and execute a pre-scribed action. That has nothing to do with you and your stops.

Currently, HFTs are only 25% of the fx market, and are mostly concentrated in EU, UJ and GU (pairs with tightest spreads). So their activity is limited.

But I'm not saying its fair or unfair. Notice I never use those terms. I never use terms like 'tricks' or 'stunts' or anything, because that implies they are directed at us.

They are not. They are playing against the other big players, not us. When you are being hunted by large prey all the time, everyday, day in-day out, your focus is on those that can kill you, not the small animal that offers no threat.

Again, you wouldn't try to move the market to get at best 5% of the pie, and that is high balling it. Not all the retailers are in EU at the same time (3 sessions - remember) so it fluctuates throughout the day.

Your orders are also anonymous (most brokers have this now) so they have no idea who you are.

Again, who are the HFT's trying to take out? The 5%, or the 60+%? Which offers more money?

In fact, if you really understand the 2011 rise in silver to $50, that was big players going after who???
Big players (JP Morgue in this case).

The motto 'every move is a stop hunt' is by the natural design of so many players participating in the market. And for the most part, if you've actually seen an order book for a day, stops are not placed at every pip along the way in a days range, especially a trending day. So not every move is a stop hunt.

For a real stop hunt to be effective, there has to be a large collusion of players there. Otherwise, taking out a low amount of stops has a lesser effect.

But algo's don't try and take out people like you. Most of the moves they make nowadays are based on large equations that have nothing to do with you, but more momentum flows, physics, etc.

Even most of the pricing models by brokers are all done by algos now. If the market was all algos, and the same moves were happening, then what? Would you still make the same argument?

I'd be willing to bet if you removed all ideas around the 'stunts/tricks/etc' and just called them patterns, you would still be able to trade the same. But there is a difference in the thinking of a) the market is about you and institutions trying to take out the retailers, or b) the market is creating patterns that I can trade and profit from.

There is a huge psychological difference in the two, and the latter tends to lead to a better psychological edge. When you address something as an element of information, instead of making it a personal or psychologically charging thing, it tends to be seen more clearly.

Food for thought.

Kind Regards,
Chris

Comment by 2ndSkiesForex on September 12, 2012 at 7:28pm: Another great example of large players going after other large players was the London Whale - why was it such a disastrous trade for JP Morgue? Because they were exposed by a former JP Morgan employee working for Saba (ironic). Which then proceeded to put pressure on them in the IG9 index via the opposite position.

The result was massive unwinding of positions across fx, equities and precious metals that lasted for days, if not weeks (late april - breakout of major daily ranges).

Again, a large player going after a large player causing movement in the market. Almost all the movement for those days/weeks had nothing to do with retail players - it had to do with the unwinding of very large positions across several markets.

And FYI - my 'commercial' element has nothing to do with my views. They come from my experience of working for the broker, talking with dealers regularly, and understanding how market makers work.

But I see no 'evidence' in what you are saying - only an 'interpretation' of how the market functions imo

Kind Regards
Chris

Comment by Peter jcp on September 12, 2012 at 7:48pm: Yes - I suppose you are correct - If I looked upon these moves as being "new patterns" rather than the emotive words such as stunt/ trick / false etc it would sit more comfortable in my "mindset".

That's a great idea Chris - from now on I will drop the emotive language and try and relate it to purely technical terms - such as -one I like -

" Change of Noise" - ie a different pattern happening in the market "noise" which is normally under 50 or 100 pips and is more notable in intra- day trading.

Yes - I will now try and use that terminology - "Change of "Noise"

But I will have to shorten it - yes "CON"

That will do me - lol

Can you see that one appearing in Forex beginners guides?

Regards

Peter

Comment by cristotrading on September 12, 2012 at 7:51pm: stay put, peter will answer soon :)

Comment by Peter jcp on September 12, 2012 at 8:07pm: I just beat you to it Cristo ;-) lol - you have reminded me - must get back to debating the advantages and disadvantages of larger time frames with Lisa - and the next week - back on the Politricks - always a great subject and one Lisa loves ;-))

PS - Chris love the Nigel Farage video - he certainly tells it as it is ;-)

Comment by cristotrading on September 12, 2012 at 8:11pm: yes my comment needed to be approved so that took some thinking :)

Comment by 2ndSkiesForex on September 12, 2012 at 8:13pm: @cristo - all comments need to be approved. Was eating when your's came in and approved them in order fyi

Comment by 2ndSkiesForex on September 12, 2012 at 8:14pm: @ Peter,

Although I don't agree with everything Farage says, I agree with most of it, but more importantly, I appreciate him standing out in a crowd and doing things differently - that is a rare thing in these days and climate

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