Very Important Questions
Forex trading is probably the most ambiguous industry I've ever met in the Internet. There is no "Good" or "Bad", no "Right", or "Not right" ... There is only a subjective opinion! The trader's opinion about the market and what is happening on it. Not surprisingly, there are many questions that can not be answered unambiguously, for example:
• Why did the deal close with a profit? Because the analysis worked, or just lucky, because the price could go in the right direction for some reason.
• The published news provoked the growth of quotations because the published data was good, or was it beneficial to a large player?
• Is the trading strategy working, or is there a profitable series for the testing period, which will soon be replaced by a loss-making one?
• The price faded from resistance, or simply ended the impulse?
The list of such questions can be continued forever ... Obviously, all these questions do not have a single, truly true answer. But all these are trivialities in comparison with 5-th questions, having sounded which it is possible to provoke a stormy discussion, rigid disputes, or even frank abuse ...
1. Does someone earn money on Forex?
To meet a profitable trader is how to find a needle in a haystack. At the same time, there are no guarantees that yesterday's profitable trader will not become unprofitable. Precisely because "profit in the past does not guarantee profit in the future", it is very difficult to single out the earning trader. In this case, often under the earnings is temporary luck. A well-known phrase, which is considered for the right to be mentioned everywhere, says that 95% of traders lose money. However, we will never know what this figure really is: 95%, 99%, or even 99.9%. Personally, I like the latter, because one profitable trader for a thousand sounds plausible, which can not be said of five profitable traders per hundred.
Plausible answer. In most cases, only temporary earnings are possible on Forex. For example, if we look at the profitability statistics for brokers, we see that within a quarter of a large number of traders (~ 33%) can earn. However, if we increased this period to one year, this figure would be closer to 5%, and then to 1%, etc. You can catch a wave, earn a certain amount on it, but if you continue, you will lose everything that has earned. Therefore, if you broke the jackpot, for example, by opening a PAMM-account and earning a decent amount, it's best to stop and not continue. If we talk about regular earnings on Forex, then it is possible only if you understand the nature of the market and at the same time have information that others do not have or that most people do not know about. A simple example. Imagine that there is an organization that wants to sell a very large amount of euro. Of course, she has an interest to do this at the best price, saving a couple hundred thousand. To do this, she plays such a scenario (price movement), so that with the help of available liquidity on the market, incl. and our transactions, to achieve its goal, while not crushing the market itself. Now ask yourself which indicator, or what strategy will be able to predict what the company is thinking of, and at what point does it plan to implement it? Of course, here it would be appropriate to mention that the strategy "against the crowd" is one of the few that takes into account similar scenarios, but I hope you already know about it.
Conspiracy answer. The probability of earning on Forex from a single person is approximately equal to zero, and those isolated cases when supposedly earned exist to ensure that "belief in earnings" does not fade. The very sphere of Forex is an improved version of the pyramid, when you do not need to pay interest, and there is no need to return deposits. The impossibility of earning is achieved due to the fact that the nature of the movement of quotations is close to chaotic, which has no regularities. And if there are no laws, then there is no earnings either ...
2.Who is the Market Maker?
For a long time traders do not give rest to the idea that apart from themselves in the market there is someone who is much larger, more influential and knows what they do not. How can you calmly trade, understanding this? Probably only if you learn to look at the market as a market maker. But is it possible to specifically answer the question, who is a market maker, and what is he like? Is he alone, or are there many? Unfortunately, ordinary traders, incl. and we will never be able to answer these questions. simply are out of reach of organizations that can hypothetically be market makers. It is like humanity, which presupposes the existence of other civilizations, but it is specifically to say how many of them, and what they can not, and not the fact that it will someday.
In the category of "market makers" are all market participants who have sufficient capital to somehow affect the price movement in their favor. It can be various corporations, funds, banks, or even individual individuals, for example, from the forbes rating. Marketmaker can also act on behalf of the government of the country on behalf of the central bank. Together, all the above-mentioned participants create the image of a so-called "market maker", but their actions in the market are not coordinated, that is, each pursues its own interests, and only occasionally they cooperate in agreement, or simply by chance. The only thing they have in common is the need to take advantage of the market in financial or political terms.
There is also a version of the existence of a single market maker, or an organization that has such a strong influence that even central banks are small fish for it. Often talk about a secret society, which includes the most influential people, and also there are references to the Masons. And the role of such a market maker does not always consist only in weaning money from citizens, but, often, in something much higher that we can not understand.
3.What does the price control?
In the trading circles are constantly disputes about what is the source of quotations ... Futures on the euro, interbank, forex, or the cash market? Which of the presented tools is the lead, and which follow it? Particularly, these disputes are taking place when the question of the source is raised: the data of which one can be believed from, and which one should be ignored. A simple example: these are trading volumes. Is it possible to specifically answer, which volumes are more informative: futures, or forex, from Exchange No. 1, or from Exchange No. 2? Given the ambiguous definition of "correctness" in forex, there is no answer to this question either.
Each separate source of quotations has its own price for the asset, which is determined by the results of trades within this source. In this case, the synchronism of prices on all sources is achieved through transactions, called arbitration. Imagine that you are walking down the street and see two exchangers, and the purchase rate of one exceeds the selling rate of the other. You, without thinking twice, start to transfer money from one exchanger to another, while earning the difference. This will continue until the price in both exchangers is equalized due to the sharply increased demand in the second exchanger and the excess supply in the first. This is how the connection between the sources of Forex quotes is made, only in a slightly more technological form. Although it is possible and the scenario, when it was in the cash market, there was a large demand among the population, which triggered the growth / fall of quotations.
The price of an asset is formed in one market (exchange), the rest simply follow it. Interestingly, forex marketers often believe that Forex is the market leader, not the leading one.Perhaps that's how they try to justify their inability to earn on Forex, but if they traded on the CME, then everything would be different ... Most often, centralized exchange markets are considered the leading ones, but not forex, in view of its decentralization.
4.Are your transactions listed on the interbank market?
How much blood was shed in battles on this subject, and all in vain ... After all, there is no answer to this question either. Why is this issue so worried about traders, because in practice it actually does not affect anything? The thing is that by its nature a person does not like very much when someone earns money on it, especially when someone is cooperating with him directly. If the broker openly stated that he was earning your losses, you would never have opened an account with such a company. Another thing brokers who claim to take only their modest commission, and if you received a loss, then this money will work the same as you, only on the other end of the wire. Therefore, in spite of the fact that the trader has not yet learned how to earn money, it is very important for him that transactions, even the smallest ones, be deduced to the interbank market. But is there any way to confirm the conclusion of the transaction on the interbank market? Even if we acquired connections at the brokerage level and found out whether a particular broker issues a deal on the interbank market, or rather, whether it transfers all the transactions to its liquidity provider, then it is not a fact that the liquidity provider itself passes them on. The latter also often uses "kitchen" methods, just on a much larger scale.
Plausible answer. Today, access to the interbank market is not unique, and many brokers do provide such a service. In such conditions, it's nice when the broker himself indicates which of his accounts have access to the interbank bank, and which ones do not. For example, in the specification of accounts in the company Amarkets, we can see that two of the five accounts have access to the interbank market, which looks quite plausible, especially given the minimum requirements for these accounts.
Thus, brokers may well send transactions to the interbank, but not the fact that absolutely all transactions. It is much more reasonable, from the point of view of business, to make a number of filters so that potentially unprofitable customers are spinning within the company, and those that can make a profit - send to the interbank. This model is called a hybrid model, you can read about it and other models in this article. At the same time, there are restrictions on the order's longevity, for example, it is naive to believe that an order of 0.01 lot will be sent to the interbank market, it is cheaper to pay from your own pocket. Proceeding from the foregoing, the dilemma of choosing a broker, which issues transactions on interbank, is absolutely incomprehensible. Much more sensible, as for me, when choosing it would be to pay attention to the reputation, duration of life and feedback in general. For example, when choosing a company with 10 years of experience, you risk much less than opening an account with a young broker of the "withdrawing" transaction to the interbank market.
Conspiracy answer. Interbank for that and the interbank market, that only banks trade on it. Forex transactions reach, at most, a liquidity provider and there, most likely, find a counter order, or the supplier acts as a counterparty. The only thing that Forex connects with the interbank market is the fact that in order to hedge its risks, a liquidity provider can open an aggregate position for each instrument on the interbank market.
5. Does the market play against you?
When a trader overtakes a series of unsuccessful transactions, he involuntarily begins to suspect that it is for his transactions that the market hunts. Very often there are pictures proving that immediately after the activation of the stop order, the price returned to its original position. All this, of course, sounds ridiculous, until the moment the lot of the transaction exceeds, for example, 50 units. And then it's hard to say who actually "kicked" the price ... Therefore, like the previous ones, this question can not find a specific answer.
Plausible answer. In 99% of cases, the price does NOT hunt for your transactions. However, it's another matter if you set this transaction at the level where it was also installed by all other market participants. In this case, you get a whole cluster, for example, stop-loss, which the price is very likely to work. By the way, we have an indicator of such clusters. There are also cases when the individual broker in an absolutely calm market has volatility, and the price instantly activates your stop loss and immediately goes back. But this is rather a dishonest broker game against you, not the market ...
Conspiracy answer. Even if we assume that the market is managed by one instance, it is difficult to imagine that it plays against someone specifically. After all, when someone buys, someone simultaneously sells, therefore, the maximum that can be is that the market plays against the majority. In the last sentence there is logic, but there is no conspiracy. that is the nature of the market, that the majority lose, and the minority earns.
What to do?
For each trader, the questions raised above are very important, especially if he has chosen trading as a profession. But the fact that there is no answer to them can cause a feeling of incompleteness and psychological discomfort, which can negatively affect trading. Imagine that a trader who came to the market to earn money does not know for sure whether someone in this market has earned it before him, and is it possible to earn at all? At the same time he has been trading for some time and all to no avail. Where in this situation to find strength and motivation to continue? First of all, it is worth determining, than for you is trading: a profession, a game of chance, or a hobby?
• If a profession, are you ready to give it as much time as any other profession requires?
• If you are gambling, how much money can you lose so that the game does not turn into a headache?
• If a hobby, then do you enjoy trading, even in case of losses?
The last two options, of course, do not require such a deep immersion in the subject as the first, but I think the next recommendation will be fair for everyone. For each of the 5 questions it is worthwhile to find for yourself a comfortable answer, or at least the point of view that you are following. And, in the future, just do not pay attention to discussions about this. This will be enough to not be distracted from the main purpose of trading - earnings.
Despite the fact that I tried to answer the questions posed, they are also only my subjective opinion, which is not necessarily true.