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Chapter 24, Part I. Market Sentiment and COT report Page 8

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 24, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    I think you’ve got an idea of hedging. Now I want you to imagine possible values of such transactions, since the major participants here are large banks, some transnational companies, solid producers, retailers etc. This is just huge amount of money.

    But rule to understand their positions is simple:

    Commercials are usually extremely short at market tops and extremely long at market bottoms



    Speculatest speculators

    In fact they could be the same large banks, just another branch of them, since you know that transnational banks, such as JP Morgan, Deutsche Bank, Goldman Sachs and others have a lot of different branches – classical services, assets management, private banking, brokerage etc. So they can act on Forex as hedgers as speculators – just remember the table in earlier chapter who are most active on Forex…

    Since they can trade will really huge volumes their positions couldn’t be just stopped and reversed suddenly. They need some time to not shake the market, they gradually adding to position more and more until the trend holds and gradually exit or reverse it when it changes. It means that their trading is medium-term or even long-term, mostly based on following the trend strategy. Simple example of “following the trend” strategy is trading based on some medium-term or long-term MA.

    Retailers or feeders

    They are me and you – those who risk to be crushed in churning almost every minute. If you will take a look at profit of huge speculators from currency operations, you can imagine how many feeders we need to feed just one big bank. That’s the reason, why 90% of retailers lose money on Forex. Their money is necessary to feed the big speculators. Since many of them trade reversals and retracements – i.e. trade against big whales, they mostly lose instead of win. Still, if retailers join big banks and understand what they are doing currently, they have chances to succeed.


    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.



    Note: FPA ranks are earned in the battles against scam, not in the classroom.
     
    #1 Sive Morten, Dec 24, 2013
    Lasted edited by : Oct 1, 2016
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