Big Players vs. Us

[Zack Zarr 5]

Institutional vs. Retail Traders

 

This is a topic which has been the main focus of my forex trading career and I always wanted to know the difference between the two categories. In particular, the difference between the mindsets. And I believe it is this single difference that makes us, the retail traders, fall into the game of the institutional traders. I believe the way to trade forex is to think as an institutional trader, see the charts from their perspective and react to the market action in the way they do. My last statement might not be even possible because they create the market action, not us.

 

Over past years, I have tried to put myself in their shoe and learn where and when they have caused a big market reaction. A BIG MARKET REACTION. That is all you can see from your side of the table. We could never see the actual traders behind the scene who create tops and bottoms, patterns, trendlines, etc. to move around the immense amount of money they possess. All we see is the RESULTS of their big moves AFTER the move has happened. That is the only thing they cannot hide. And how did they get around this big problem? They introduced technical analysis, trendlines, indicators, … to distract retail traders.

 

You might ask, why would they even need retail traders? If you have looked at the structure of forex market section, you would find the answer. The answer is they need the liquidity. And the structure of forex market provides that. The way the forex market is structured today has come a long way. It is not something that can be created in a year or 10 years. It has been a long and time-consuming journey. But, the internet helped this growth process A LOT! The fact that you and I, as retail traders, can sit behind our computers or cell phones and imagine ourselves trading with a gigantic pool of traders across the world is insane.

 

With an “unlimited” access to money and a pre-determined agenda, the job of an institutional trader is to create ups and downs in the market in a way that they could force their agenda and fill their massive orders. So, as you can imagine, institutional traders must know everything retail traders know in terms of technical trading and then some more. If you want to trap millions of traders into buying what you want to sell, you must have control over their minds and their decision-making process. You give them indicators. And if you think an institutional trader sits behind a desk and hits buy and sell buttons every minute or hour, think again. It is funny picturing an institutional trader trying to catch a move in the market. If that is not funny to you, this picture should do it.

 

 

I am trying to keep my posts short. My key point is that if you want to survive in the forex market, you must change your mindset. See the charts from a different perspective. And you could still benefit from the noise of the market, captured by all indicators and technical analysis because they do work to some extent. I use technical analysis in my short term trading but barely rely on them for long term trades. And the long term trading is what you want to be doing 10, 20 years from now or perhaps for the rest of your life.

 

Zack