Some people make articles about ‘how the bankers trade forex’ and it is hard to believe when it’s written by someone who has never worked on the frontline forex desks for any banks.
Now before we start and start running you through a few things, ‘Trader’ mean ‘Price maker’. Not a salesman, not a front desk clerk, not a bank teller. I mean the guy that sits on the frontline and wears all the hits, executes all the trades and who has the final say whether the bank buys or sells a particular currency pair. It’s a lot of responsibility and there’s not many people around that can say they’ve been there.
The forex traders at the banks, the Price Makers, they have a huge amount of flexibility with what they do. Sure they have limits, but for the big guys they are BIG. Their whole job is not about making friends, it’s about making as much cash as you can in the shortest amount of time. I can tell you I was never there to weaste my time. It was all or nothing and it was all about the bonuses at the end of the year.
In order to get the big cash payouts you had to make a cart load and then some. Now this is the point of the article. How do they actually do it? There is no simple explanation so I’m going to have to run you through a bunch of things they do to give you the general idea.
First of all since they are on the frontline it’s absolutely imperative they know everything about everything, that could possibly impact the currencies. So they have key tools – like Bloomberg or Reuters to make sure they have real time accurate financial markets news. After all there’s no point getting the CPI release 30 seconds after the original release time as the currency will be 100 points eithger side of the market by then.
They study the charts in minute detail. Sure they trade off the hourly charts but they also monitor the markets on the Daily and Weekly time frames as well. This ensures they have an accurate asessment of the overall trend as well as current momentum. The charts will give them specific entry levels.
Now the central banks. If you ask any senior trader any qustion about current central bank policy they’ll be able to tell you everything. They ensure they are abreast of all central banks releases, speeches and announcements. Why? Because this is where the trends come from.
So far they have entry levels and they have identified the trends. All they need now is the fundamental drivers, the economic data to fit into place with the overall trend. That’s why the economic data is such a massive focus for the bankers.