A DIFFERENT POINT OF VIEW
Only 5% of retail traders succeed, while 95% of them fail. Having that said, what does it really take to become part of the 5%? Probably you have tried so many strategies that are out there with very small success. Have you ever asked yourself, if you follow a strategy that the masses are using, wouldn´t the chances be really high to be a part of the 95% that fail in the end? How can you join the group of the few successful traders out there? The answer is simple, you have no other choice than to break free from the failing forex education system.
What you are about to read is going to be different. A lot of your current beliefs about how markets work are going to be questioned. In the following pages I will not explain you some holy grail strategy. Neither am I going to say, that all that you know about trading is entirely wrong. No. I will show you something that will let you see the markets from a different point of view. It is nothing that I invented or some conspiracy theory. This is what is really happening behind the curtain of the markets day in day out. I will show you how the banks, the market makers or the smart money drive the markets in their favor.
NOT YOUR BUSINESS
It is a common knowledge that the big players (banks) drive the markets. It is also not a secret that these institutions have the most amount of capital or volume on a daily basis and as a result they have the power to have a huge impact on short term moves. If you accept the fact that the banks push and manipulate the market in their favor, would not it be really valuable to know when they are entering and what position they are in? This is the base of all the strategies I teach on this website. If you know which position the banks are taking from an early stage on, you would not need anything else to finally become a profitable trader.
One should always remember that this is the banks market. Not yours. It is like their business and we are just regular customers. When you hold that thought and ask yourself why does the majority of retail traders comes up with strategies that fit into a market they do not control at all, but rather learn the strategy of the banks and how they handle their business. If you learn to trade by following the banks business you will have a great edge over the market and transform from a mediocre to a professional profitable trader.
THE 3 STAGES
The banks business is like their own trading strategy and they use 3 stages to profit from the market day in day out. This strategy has rules, it is consistently profitable, repeatable and most important not depending on any economics. As you know the foundation of every market is supply and demand. If there is somebody who wants to buy the market there must be someone who is willing to sell the market. Vice versa if there is somebody who wants to sell the market there must be someone who is willing to buy at the same time.
As mentioned earlier banks have a huge amount of volume compared to us the regular retail traders. So for every transaction in any market there has to be a counter party. Therefore when the market makers or banks want to enter the forex market they can not just enter with huge volume at one point, because probably there will not be enough participants who are willing to take the counter position when the market moves heavily in one direction. The solution for the smart money is to accumulate their position over a longer period of time.
STAGE 01 (ACCUMULATION)
The period of accumulation where the banks enter their position over a course of time is often called consolidation or that the market is ranging. It is a common rule that this ranging markets should be avoided and are not of any interest for traders. It is true that these periods of consolidation should not be traded, because there is not much movement or the movement is unpredictable. You will often hear that people get whipsawed in these ranging markets. But what is actually not true is, that these kind of ranging areas are not interesting. It is the complete opposite. A ranging market always is a great indication that the market makers accumulating their position. This is something most people, books, websites and market gurus totally get wrong in my opinion.
The stage of accumulation is the foundation to any trade made by the banks. Money is made by accumulating a long position they will later sell off at a higher price, or accumulating a short position they will later cover at a lower price. Our goal should be to know when the banks are entering the market and that is why these ranging areas of accumulation are critical to our trading decisions. But the question remains, if the market does not go in any particular direction during this period accumulation, how can we identify which position is accumulated by the banks? Because if we could identify the position they took during that time, we would be on the right side of the market before all the other retail traders. This brings us to Stage 2. The picture below shows two accumulation stages marked with the orange rectangles.
STAGE 2 (MANIPULATION)
To a lot of traders often it seems like the market could read their minds. They enter a position with full confidence just to watch the market turn against them a few moments later as if the market is just waiting for them to enter to eat up their position. The actual fact is that this is totally true. As mentioned earlier the banks have a huge amount of volume inside their positions and there must always be a market participant that takes the counter part to that position. At this point the regular retail trader comes into play. The reason why this is easy to achieve for the smart money is simple: Traders are way to predictable. They go through the same common forex education, use the same strategies with slight differences and same indicators. Because of this the banks are aware of how to get retail traders to enter the market. In our example the smart money was looking to sell the market during the accumulation. After they accumulated enough for selling the market, they push the price significantly higher in order to trigger the buying pressure from the retail traders, just to sell into the market at the same point.
This is the main reason most traders usually have the feeling they enter the market at the wrong time. This manipulation can tell you which position the market makers accumulated. If you take a look at your charts on any timeframe and any pair or commodity, you will find the same act of accumulation and manipulation before every large move that the markets make. But you can not enter the market during the accumulation. Because you do not know which position the banks are taking. And you should not enter into the stage of manipulation either. But when to enter the market? This brings us to stage 3. In the picture below you see how fast the price falls down and lures a lot of retail traders into a short position.
STAGE 3 (PROFIT RELEASE)
After the accumulation during the tight range bound market, the smart money often creates a false breakout, the manipulation. This false breakout usually goes in the direction of the trend before the accumulation took place. This false push is just a smart move to finish entering the rest of the smart moneys position. If we identify the first two stages correctly, we have the ability to understand in what direction they smart accumulated. They release their profits for a better price. This makes the market move very fast into one direction. This point is often referred to as the market is trending. Again this trending market only happens when the banks have finished accumulating their position through a tight range followed by manipulation. The profit release phase is the area where we are going to make money.
You should be aware of that this profit release phase is also built of smaller phases. For example the market starts trending down after the manipulation happened, this is phase one. Then a pullback happens. The pullback in a trending market is nothing else than another small accumulation stage within a smaller timeframe. They accumulate more to their position to manipulate and drive the market further into their desired direction and into phase two of the profit release phase. Keep in mind and this is really important, there will always be a phase one within the profit release phase and usually also a phase two. We do not know the exact volume behind their position. So it can happen that there will also be a phase three, four, five and so on. But we want to trade consistently profitable and so the only logical conclusion is just to enter into phase one and two of the profit release phase. All other smaller phases that follow should be avoided. The following pictures show you profit release and its phases.
After the manipulation the price is driven in the opposite direction very quick. Taken out the stops by all traders who went short due to the manipulation stage. This stop hunting and forcing short positioned traders out of their position gives the release phase even more momentum to the upside.
3 Phases within the profit release phase. In between the “pullbacks” are just another accumulation stages of the smart money.
You can see this process repeating over and over again across different timeframes and different assets.
THE BOTTOM LINE
All that you read above about manipulation and how the markets are driven in reality will hopefully make you look at the charts in front of you in a different way with a better understanding of what is really going on. Of course this is just the theory. It takes a lot of time to practice and execute it correctly. The examples above are textbook examples. The stages are not often so easily to identify.
Anything in life that is new takes time to learn. However, the potential reward of being a profitable trader is great. All methods that I have been trading over the last decade are based on the business of the banks and how they drive the markets. In my opinion it is the only way of being profitable in the long run. Thanks for reading this article. All the methods that I teach on my site always will refer to this article. Hope you enjoy what you read and hopefully will come back here to read it again and again. See you on the other side of the 5% until then happy trading and happy learning.
