Forex is the largest financial market. This precedes the stock market by some orders. Banks play a huge role in the world of Forex. Sometimes, they have the power to directly affect the value of coins. Banks make up a large number of trades in the currency market – but how do banks trade Forex?

Of course, banks are not going to be on the side of such a large amount. In fact, forex is often run by banks, especially central banks!

There is a lot more to foreign exchange than currency exchange for speculative purposes. Understanding this will help you to become a more profitable FX trader. And knowing how to trade Forex like banks can increase the chances of making a profit in Forex.

But first, who exactly are the smart monies?

Smart Money traders

• Central banks.
• Hedge funds.
• Large institutions like major insurance companies and global companies.

Now that you know who the smart money traders are, you want to know how they are different from you.

Firstly, smart monies have much more money to trade than you. Smart monies have tens and hundreds of millions to trade. And the sheer volume of their trades gives them the power to drive the market.

Secondly, they don’t trade on small timeframes. Smart monies trade daily, weekly, or even monthly timeframes. Traders that trade on small timeframes are usually looking to get in and out of the market in a short time. But the smart money is usually in the market for a long time

Trading Strategies of Bank’s

1. Accumulation Phase

Smart money traders set their positions by selling and buying in small amounts during the accumulation phase. They don’t trade all their money at once because that can drastically shift the market towards the direction they’re targeting. They do it slowly, giving as few hints as possible.

This phase usually happens towards the end of a downtrend. The outlook is pessimistic, price moves are slow, and many retail traders are selling. Banks, however, are buying. This briefly causes a downtrend in prices, which makes the accumulation phase a good time for retail forex traders to enter the market as well.

2. Manipulation Phase

Banks have the ability to handle the market and can do that when it comes to market consolidation stage. Many retailers keep their positions above or below the consolidation zone to ride it out no matter what new trend happens. If they move ahead and bite the bait of a false break, they can go directly opposite of the market trend and wipe out their stop losses.

3. Distribution Phase

The motives of the institutions at this time are not a mystery. The market is rising, and retailers are taking the currecies as a signal to buy. One word of warning though: banks often sell when others buy, while others buy when they sell. The distribution phase is another positioning period, so retail traders should watch out for the next trend.

How to trade Forex like the banks

It is usually a vain and unprofitable effort to trade against the banks in the long run. So, it only makes sense to learn to trade with them and not against them. Here are tips on how to trade like a market maker.

• The first thing is to learn to trade on larger timeframes. Banks don’t trade on minute charts.
• Using tools that can help you predict the bias of the banks helps too. Of course, the banks wouldn’t show you their entries for you to copy. But these tools can help you predict when the smart money is entering their trades so you can plan your own entries.

Conclusion

It is important to know that learning to trade with the bank takes time and practice. It is not a get-rich-quick strategy. Since banks won’t show you their trades for you to copy, it won’t be so easy. That is why you have to practice and test strategies and try out indicators until you have something that works. But this knowledge of how to trade Forex like the banks and institutions would set you in the right direction. Indicators that show market sentiments can be of immense help to you in learning how to trade like the banks. Because you now know that banks buy when the crowd sells and sells when the crowd buys.

Learning about forex bank trading strategies is just the first of many steps if you wish to master forex trading and do well enough to make it your main source of income. To learn more about forex trading and be part of a dynamic forex trading community, join Winstone Prime today.