Many traders make the mistake of adopting trading tools and indicators blindly without observing their benefits and negative aspects. They follow the plans of other traders and banks also. Yes, banks also trade in the forex market. No doubt their main function is to set transactions of other traders.
You must be curious to know about how banks trade forex?
Let me tell you precisely!
Usually, banks follow some simple trading strategies that will help them to trade in the forex market like market drivers. The three main trading plans are build-up, corruption, and organization. Banks’ trading strategy is also based on economical observation. They try to trade for a long time and aren’t fed up with it.
Mostly, banks try to set three main positions and manage them for a week. The main feature of a bank’s trading plan is that they don’t use indicators or technical tools too much. Only 20% of indicators are used by them. The remaining 80 % depends on primitive analysis.
Let’s know more about it!
3 Main Trading Strategies Of Banks
Forex lovers are always in search of new things related to forex trading. They make trading decisions wisely and carefully. The main quality of banks as forex traders is that they trade by adopting perfect trading plans.
Normally, banks trade on three trading strategies or phases that are listed below:
1. Build Up
Build up or accumulation phase is the first and most famous strategy adopted by banks. Such banks are also known as smart and expert traders. They try to buy and sell currencies in small amounts. So, they can set their trading positions in their way. All this is done during this period of a trading plan.
They are so wise that they don’t put their all money into trading. Instead of it, they go towards their target very slowly and carefully. Banks are buyers and make a way for retail traders to get entry into forex trading.
Why are banks considered smart traders? It is because of their quality of market corruption. They can easily manipulate market situations and turn them in their favor. They will be able to do this only when the market is in the phase of consolidation.
The position of some traders mostly goes above or below this stage. If they follow the market trend, they can trade successfully just like big banks.
Banks are successful in the forex trading market because of their organized planning. They work in an organization to become trending traders. Forex trading is not a mystery for them. As soon as traders get a signal from market trends, they start buying currencies.
It is the bank’s strategy that when other traders are willing to buy currencies, they began to sell. On the contrary, banks are buying when retail traders are selling. So, it’s important to observe the market’s future trends.
When Do Banks Trade Forex
Do you think banks can trade any time of the day? You are wrong. For successful entry into the trading world, big banks manage the time for trading and follow it later with the best planning. So, do you want to know when do banks trade forex?
Usually, the best time of trading for banks is right after the selection of the opening market. The gap may be around half an hour and the liquidity of currency pairs must be high during trading sessions.
For example, with the opening of the forex market in the US, the currency pair of EUR/USD trades more than others. The reason is that the trading time of US banks intersects with the trading time of EU banks.
Mostly, it is seen that banks like to trade widely and for a long period. They set their trades for weeks and months. That’s why daily trading hours do not matter much for their trades. They can set trading time according to their schedule and manage it perfectly.
Characteristics Of Banks While Trading Forex
Banks are market drivers and manipulators in the forex market. All the transactions of a client are managed by banks. Despite this, banks are also good traders. They trade themselves from their trading platform.
Banks are also known as Smart money traders or Institutional Traders. Two main characteristics of banks are mentioned below:
- Banks can manage hundreds of millions of trades which makes them market operators.
- They try big trials for trades. They like to trade at large scales such as trades that are done in weeks and months.
An average trader can’t invest such a large amount as banks for trades. These traders can’t place trading orders for long periods of weeks and months. So, they follow the moves of banks and other expert traders to get success.
Do banks trade forex?
The main function of banks in forex is to maintain clients’ transactions. On the other hand, they also trade forex by using their platform, economical observation, trading plans, and positions.
What is the trading strategy of a forex bank?
The most famous trading strategy of a bank is that they manipulate points and price levels of supply and demand locations. Banks start trading on connection time because they need liquidity to get positions in the market.
Do banks lose money in forex?
Yes, they can, but particularly, it doesn’t affect them too much. The reason is that banks get a commission from both sides to sell and buy. It will cover their loss and they can manage their account in their previous position easily.
Now, it is clear from the above post that forex is the biggest trading market because it gives opportunity to everyone for trading freely. Both banks or institutions and retail traders can also trade here.
Usually, banks follow three phases for successful trading. These phases are also known as trading plans and strategies. Remember, forex trading has no shortcut or formula for becoming rich overnight.
So, you can follow the trading plans of big banks and get a perfect entry into this amazing world of trading.