Bringing Down the Forex House in Asia
They're young, they're 18 -21 years old, they sit in their bedrooms, they chew noodles and
The Asian gamer trader is rising fast and with 5G around the corner and with China and India rising the forex trading distribution will soon be shared by Asia and Europe together. Certainly in the retail forex markets the Asian trader will become more predominant in the next 2-3 years and the age is getting younger and younger as a new generation of traders rise with a brutal efficiency to take on the forex world.
In truth 90% of the retails traders out there today have no real idea how the
structure of the retail forex market works and that is why they consistently
lose. So now I am going to break it down for you and hopefully you will take
this understanding and become a better day trader for it.
Firstly, although hugely unregulated and non-descript, the forex
spot market consists of about 80% bank commercial users, 15% large fund speculators
and 5% non banking small retail forex customers . The commercial banks which dominate the forex
landscape are merely buying and selling under instruction for importers and
institutional investors and therefore in an interbank market a bank is always
making a bid-offer spread and booking profits countless times per day as
customer orders come in. They do no use technical data as the mainstay of their
transactional business. Herein lies the significant contrast where small retail
forex traders cannot even make a move without reference to a smattering of
elect technical indicators to justify their trade. Hence there is a failure to
understand how the market works by the small retail trader.
Secondly, The FX platform provider is your house very much
like a casino. The platform company has a line of credit with one or two major
international commercial banks. A platform provider with 20,000 customers is
likely to have an open line of credit of 20 million Dollars. Now, for
illustration purposes lets imagine that the line of credit comes from Barclays
Bank to the Platform Company. This line
of credit is paired with a quotation service which Barclays will provide to all
it’s commercial customers which again is based upon it’s institutional price
quote in the dealer market as quoted on Reuters and Bloomberg. That quote
service to corporate customers is the basis upon which the Platform company
will but and sell currencies to take the opposite side of their own customer
orders through their own quotation service which is usually time lagged. So, essentially
the Platform price a retail customer is using is time lagged behind the main
price action of the bank dealer market. Here the small trader is really at the mercy
of the Platform provider to enter the trade at a time and price dictated by the
Platform provider and failure to recognize this can become detrimental to the
small trader’s longevity
Thirdly, Bank dealers in the interbank market are very much
like the gamer traders that are emerging with the young people in that they are
only concerned with what happens here and now as against any consideration of
the past and the future. Bank dealers have no time to overload themselves with
technical data and the new gamer traders who grew up on Naruto and other such
online games are not going to waste a split second in determining where the action
lies. Years of gaming have improved eye skills in understanding game play.
Looking at the 5 or 15 minute forex charts without consideration of massive amounts of technical data and the very first thing you notice is how the market moves in waves in rhythm as buyers gain strength and fade before the sellers. The only reference gamer traders keep in mind is the day chart because although trends can show up on day charts, within every 5 and 15 minutes you cannot expect prices to move up or down in a straight line, hence your window an ‘Mado’ to trade without emotion whenever pressure builds and eases off.
We are human after all and the trader that can know the wave
of human emotions is able to bring the house down. Since 9 out of every 10
traders lose in the long run then the house doesn’t really care if it yields a
dollar to a smart gamer trader waiting to pick that 1 Dollar up every single time. The new 21 something Asian trader has a staggering level of confidence to trade as i have never witnessed before an if they do not spend hours pouring over technical charts they're certainly staring at the movement of candles for any possible reversal as moods change and then they will pounce on the trade with ruthless efficiency and book a profit.
Then they go blow their money on their drinks, girlfriends, clothes watches and cars but they will return again because they know that the FX market is about reading human emotions. They get mad at night, they scream at police officers, they are petulant; but they know how to make money. They do not depend on anyone else to make a trading judgement. They can take a decision win or lose and move on to the next trade. Understanding how emotions work in a market is the key to a successful career in day trading forex. They don't need to work for banks and hedge funds. They're already stars in their own right and don't need to be bossed about and shown how to trade. They have transferred their eagle-eye gaming skills to the real money making arena and for every one gamer trader they're beating the hell out of the other 9 traders on the retail platform because they can ruthlessly switch from buy to sell as they move with the rhythm of the 5 and 15 minute candles.
