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Brokers and Banks as an Institutional Trader 4 replies

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Is anyone here an institutional trader?

Quoting skenobi
{quote} Snowflake, perhaps? Oh well... Note to the rest: Feel free to set me on your Ignore list. Of course, y'all don't need anybody's permission for that.
Hi Skenobi and other experienced traders,

I can see opportunities in USDJPY and EURUSD of 7 pips sometimes. However my cost of execution for round trip is around 1pip. This makes me reluctant to trade these opportunities as the risk reward isn't that favorable after costs. How can I lower my cost of execution to less than 1 pip if that is possible at all? I do not have direct access to interbank quotes or EBS or Reuters. Are their costs lower than 1 pip for round trip?

On ECN network, the spread for EURUSD is typically .2 pips and USDJPY .3 pips. When I use limit orders I find that I experience more adverse selection since my broker only crosses it internally. Does it make sense to just use market orders all the time?
Quoting foobar
{quote} Hi Skenobi and other experienced traders, I can see opportunities in USDJPY and EURUSD of 7 pips sometimes. However my cost of execution for round trip is around 1pip. This makes me reluctant to trade these opportunities as the risk reward isn't that favorable after costs. How can I lower my cost of execution to less than 1 pip if that is possible at all?
Wow... you can make 7 but you won't give up a lousy 1? Or am I understanding you wrong?

Quoting foobar
I do not have direct access to interbank quotes or EBS or Reuters. Are their costs lower than 1 pip for round trip?
For USD crosses, half the time, sure, why not? For non-USD crosses like EURGBP not always but still more reliable than retail.

Quoting foobar
On ECN network, the spread for EURUSD is typically .2 pips and USDJPY .3 pips.
If you say so.

Quoting foobar
When I use limit orders I find that I experience more adverse selection since my broker only crosses it internally.
I can't speak for other former institutionals now trading retail, but I always start my day having a low opinion of my broker's execution (ECN or no ECN).

By the way, my methods don't depend on pin-point execution. I just need to be on the right side of the S/R zones I'm looking at. Perhaps your system/methodology is a little rigid?

Quoting foobar
Does it make sense to just use market orders all the time?
The execution only has to make sense to you and your edge.
I'm not trying to convince anyone. I'm not in the "convincing" business.
Another lazy rookie added to my Ignore list.

Attached Image
I'm not trying to convince anyone. I'm not in the "convincing" business.
Quoting skenobi
Another lazy rookie added to my Ignore list. {image}
Sounds like he's still in the dark about the pools. Hint hint.
"The fun is in the hunt. Not the kill."
Quoting skenobi
{quote} Wow... you can make 7 but you won't give up a lousy 1? Or am I understanding you wrong? {quote} For USD crosses, half the time, sure, why not? For non-USD crosses like EURGBP not always but still more reliable than retail. {quote} If you say so. {quote} I can't speak for other former institutionals now trading retail, but I always start my day having a low opinion of my broker's execution (ECN or no ECN). By the way, my methods don't depend on pin-point execution. I just need to be on the right side of the S/R zones I'm looking at. Perhaps...
Sorry I wasn't clear. When I see opportunities of 7 pips it isn't with 100% probability but say a lot more likely to make 7 pips than lose 7 pips. However with transactions costs (spread + execution) of 1 pip, what is profitable for me might become loss making. I'm trying to find out how to lower my costs so that I can generate more trades so as to smoothen my equity curve more.

Do you think that it's worth the effort to trade for 7 to 10 pips or focus more on those 30 to 100 pips opportunities?
Quoting foobar
{quote} Sorry I wasn't clear. When I see opportunities of 7 pips it isn't with 100% probability but say a lot more likely to make 7 pips than lose 7 pips. However with transactions costs (spread + execution) of 1 pip, what is profitable for me might become loss making.
If the probability difference between making 7 and losing 7 is basically a crap shoot for you, it sounds to me like you need to find another edge. Tighter spreads (i.e. minutely-lower costs) will not save you there. Not sure how else anyone can give you a better observation. Maybe someone here can give you a second opinion?

Quoting foobar
Do you think that it's worth the effort to trade for 7 to 10 pips or focus more on those 30 to 100 pips opportunities?
It depends on the kind of trader you think you are or the kind of trader you want to be.

For instance, I don't have time to look at markets more than once in a day. So my focus is on making 100-200 pips.

I can scalp and still make money (and institutionals have to know this because their workstations at the Banks are expensive to justify).

Nowadays I just choose not to.
I'm not trying to convince anyone. I'm not in the "convincing" business.
Quoting Ponzi Jr
Is anyone on this forum an institutional trader?
I trade from an institution.

Does that count...?

Come with me if you want to live....
Quoting skenobi
{quote} I am, however, putting you on MY Ignore list, as I feel this is actually the wrong thread for you to address the EURCHF retail traders' cause you bring up.

Note however that I'm not banning you from this thread (it's not my thread anyway); I just won't see your posts anymore.

The best of luck to you in getting your issues resolved elsewhere!

Cheers! ..
lol. very classy reply. (Y) Reminds me of all the time FTI did it in his thread.

Rgds
Fall in love with the process, and the outcome takes care of itself.
Hi skenobi, I would like to hear your insights on a few questions

1)who make market during off exchange hours, for stock indices? If someone has vested interest in a particular asset, can he push the market during less liquid hours like gbp, eur pair on asian session? or S&P 500 after american session? If the answer is yes, this mean the move can be manipulated and have a chance to be corrected once the most active market for the particular asset open?

2)since most asset are interrelated, do you think our edge is the greatest when we jump into the trend that can be explained by fundamental flow? this means we avoid any trend that doesn't make sense just in case the trend is not backed by real flow and can be short life? ex: all stock market down, but JPY go down without any reason, we avoid the trend in jpy even though thrust is strong? (as jpy is major borrowing currency as should shoot up during risk aversion)

3)likewise, what do you think of ranging market， I find it really challenging as ranging market is very irregular and the central point keep shifting, even with dollar cost averaging it is diificult as our tp might not get hit when we need to stop attend our position, do you avoid ranging market? (movement that are out of sync with historical correlated asset class)

4)Does MM monitor cross chart also when market making in major, the reason being I often observe that when majors chart are zig zaging and historical positive/ negative correlated asset move in opposite direction, I suspect that this is because MM know many trader will monitor cross chart and they use cross chart to hunt stops? ex: MM know today non trending day in majors, they sell eur buy gbp (which are positvely correlated) to trip eur/gbp sell stops and then buy eur sell gbp to trip buy stops? likewise, by observing cross chart we can determine the likely price movement when majors are not trending, ex: EUR/GBP are trending up, and we determine today is non trending day on major, we can guesstimate that eur might go up and gbp will go down which are still contain in a range in majors, and EURGBP will trend up?

many thanks

regards
Quoting GoldenFinger
Hi skenobi, I would like to hear your insights on a few questions 1)who make market during off exchange hours, for stock indices?
Dunno. I don't touch exchange-traded stuff. Maybe someone else can answer?

Quoting GoldenFinger
If someone has vested interest in a particular asset, can he push the market during less liquid hours like gbp, eur pair on asian session? or S&P 500 after american session?
Sure.

Quoting GoldenFinger
If the answer is yes, this mean the move can be manipulated and have a chance to be corrected once the most active market for the particular asset open?
You're not going to get a different answer from the last time I answered you back in October. Manipulated or not, price will continue upwards until sellers (not MORE sellers) appear and buyers quit; price will continue lower until buyers (not MORE buyers) appear and sellers quit.

Size doesn't matter.

Whether the initial move appeared manipulated (or even whether it corrects) or not, doesn't matter. The same principle applies.

Let me put it in another way: If price moves as a result of only ONE player in low volume conditions in a no-capital-control currency pair, would you still consider it "manipulated"?

If the answer to the above matters to you (it doesn't bother me and many others at all), you're going to be disappointed many, many times in the markets, and just wasting time besides.

Quoting GoldenFinger
2)since most asset are interrelated, do you think our edge is the greatest when we jump into the trend that can be explained by fundamental flow?
If looking for "explanations" makes you money, then that "edge" works for you. And I'll be happy that it works for you because you'd have succeeded where a lot of price-action institutionals like me have "failed".

There is no "our edge". Just "my edge" or "your edge". It doesn't have to work for other people. You don't have to make people agree with you; you just continue making money.

For me? Looking for explanations is a waste of time.

Looking for flow information is a waste of time, because flow information is fluid and orderbooks can change on a dime. *snaps fingers*

Depending on inter-relations and then complaining when the inter-relationships don't "work" is a waste of time.

But that's just me. You don't have to agree.

Quoting GoldenFinger
this means we avoid any trend that doesn't make sense just in case the trend is not backed by real flow and can be short life?
If you want to avoid a trend, that's your choice. You shouldn't say "we". "Short life" is a matter of individual perspective/preference. A scalper, for instance, can still trade trends in low timeframes regardless of fickle flow information.

Quoting GoldenFinger
ex: all stock market down, but JPY go down without any reason, we avoid the trend in jpy even though thrust is strong? (as jpy is major borrowing currency as should shoot up during risk aversion)
That's your personal choice. Other people might see it differently. (I won't be drawn into your interpretation of text-book why's and what-fors. I stopped caring about "theory" back in November-December of 1995, one month after I entered financial markets for the first time.)

Quoting GoldenFinger
3)likewise, what do you think of ranging market，
*shrug* I don't think much.

If there's opportunity, I just trade it.

Quoting GoldenFinger
I find it really challenging as ranging market is very irregular and the central point keep shifting, even with dollar cost averaging it is diificult as our tp might not get hit when we need to stop attend our position,
Even when ranging, I always scalp in the direction of the longer term trend. But that's just me.

Maybe ranging conditions aren't your cup of tea?

Quoting GoldenFinger
do you avoid ranging market?
Nope.

Quoting GoldenFinger
(movement that are out of sync with historical correlated asset class)
That's your opinion. I personally don't have time to calculate correlations; For instance, I was trained to just look at the slope of a 60-bar MA on an intraday chart to get a feel. Good enough for me.

Quoting GoldenFinger
4)Does MM monitor cross chart also when market making in major
I can't speak for others, but speaking for myself and those I do know: no we don't as much.

Quoting GoldenFinger
, the reason being I often observe that when majors chart are zig zaging and historical positive/ negative correlated asset move in opposite direction,
Again, that's your observation. Some may agree with you, but others (like me) will not lose any sleep over it.

Why? If charts are zig-zagging as you say, I would just dial up or down the chart TF and find a usable trend and gauge from there. So for instance, if I can SEE with my eyeballs that EURUSD and GBPUSD is trending up, while EURGBP is trending lower, it just means that the USD is weaker in general and should be traded against stronger of the EURGBP cross i.e. I look for levels to buy cable.

That's enough "correlation" for me.

Quoting GoldenFinger
I suspect that this is because MM know many trader will monitor cross chart and they use cross chart to hunt stops?
I'm not sure about MMs using charts (cross or otherwise) to hunt stops.

Knowing what I know about how price behaves when we hunt stops, we already pretty much know where the weak order clusters are. Weak or not, these clusters USUALLY gather around historical S/R lines.

Quoting GoldenFinger
ex: MM know today non trending day in majors, they sell eur buy gbp (which are positvely correlated) to trip eur/gbp sell stops and then buy eur sell gbp to trip buy stops?
You're making the same mistake as before in assuming MMs make decisions looking at isolated factors. Their decision-making matrix is 3-dimensional; there are MANY considerations.

Refer back to my answer here for a flavor of what I meant.

https://www.forexfactory.com/showthr...0#post10411010

Quoting GoldenFinger
likewise, by observing cross chart we can determine the likely price movement when majors are not trending, ex: EUR/GBP are trending up, and we determine today is non trending day on major,
My opinion: majors are always trending (even in those ranges you talk about). Just not always in the TF you're interested in.

If you decide today is a non-trending day and if you don't trade trends, then feel free to stay out of markets. The rest of us are just fine. There is no "we".

Quoting GoldenFinger
we can guesstimate that eur might go up and gbp will go down which are still contain in a range in majors, and EURGBP will trend up?
I can guesstimate that there will be at least a few more people unsubscribing from me after this.
I'm not trying to convince anyone. I'm not in the "convincing" business.
Quoting GoldenFinger
Hi skenobi, I would like to hear your insights on a few questions 1)who make market during off exchange hours, for stock indices? If someone has vested interest in a particular asset, can he push the market during less liquid hours like gbp, eur pair on asian session? or S&P 500 after american session? If the answer is yes, this mean the move can be manipulated and have a chance to be corrected once the most active market for the particular asset open?
Here is the answer to first part of your question - https://www.investopedia.com/ask/answers/04/061004.asp

With regards to the rest it is typical of the institutions to manipulate price in the low vol Asian sessions because its cheaper to do it then. They will pass on instructions to their Asian desk to achieve a certain price which will then be reversed in the European session.

For the S&P its a bit different. Institutions will typically use the volumes at the close to accumulate a position and then the volumes at the opens to get off.
Boxing clever since 76.
Quoting copi88
{quote}With regards to the rest it is typical of the institutions to manipulate price in the low vol Asian sessions because its cheaper to do it then. They will pass on instructions to their Asian desk to achieve a certain price which will then be reversed in the European session.
But what happens if institution A wants to 'manipulate' prices lower in the thinner Asian session yet institution B wants their Asian desk to 'manipulate' prices higher? Someone is going to lose via their manipulations so manipulation only means profits if it works, and many times it doesn't.

Overall everyone should forget about institutional traders, 90% are not that good and if you look at the average P&L statement for their own punting (house money) it's not pretty. Yes, of course they tend to make money but that's what the bid-offer spread, fees, commissions, fees on fees, commissions on fees and outright cheating/fraud/theft are for.
Road To Wisdom? To err and err and err again, but less and less and less...
Quoting Calculus
{quote} But what happens if institution A wants to 'manipulate' prices lower in the thinner Asian session yet institution B wants their Asian desk to 'manipulate' prices higher? Someone is going to lose via their manipulations so manipulation only means profits if it works, and many times it doesn't. Overall everyone should forget about institutional traders, 90% are not that good and if you look at the average P&L statement for their own punting (house money) it's not pretty. Yes, of course they tend to make money but that's what the bid-offer...
Sure maybe 5 want to take it up and 2 want to take it down, there will be winners and loosers. Doesnt mean that is doesnt happen.
The institutions are all running similar models though, built using the same maths, using the same correlations and inputs, so most of the time they are going to be going in the same direction.

Here is 30m EUR chart. See how they take it the wrong way in the low volume Asian session and then reverse it at Frankie/LDN opens when the volume kicks in.

Attached Image (click to enlarge)
Click to Enlarge Name: p5jMDTr.png Size: 133 KB
Boxing clever since 76.
Quoting skenobi
{quote} I'm an old school price action trader. "Futures" and "volume" data are some things you'd never find in my arsenal. (I have it... I just never use it.) In fact, I'm violently allergic to so-called traders who think volume data will make them money, and to those with their never-ending quest of finding institutional volume data like it's some kind of holy grail.
Its refreshing reading this since I think the same about volume.
" In fact, I'm violently allergic"
In trading, you have to be defensive and aggressive at the same time
Quoting copi88
{quote} Doesnt mean that is doesnt happen. {image}
I agree, of course they push the prices around some of the time in their favour, but it's a competitive market so there are many failures as well.

And for everyone who complains about the institutions why not try to use them instead of them using you (perceived or not). A simple strategy would be to observe when they're going for the stops, one of their standard plays, and then concentrate on the recovery if there is one. That would align your interests with theirs.
Road To Wisdom? To err and err and err again, but less and less and less...
Sometimes, manipulation can also turn into real move as market is irrational. Besides who really know whether it is manipulation or not, sometimes it could be real move originated from unknown causes, as shown in some days where market move in one direction from asian to ny session.

the best we could do is to expect volatility/ change of direction when such times are approaching.

All in all, I think having a good grasp of immediate fundamental development, some technical chart reading skill (confluence in TA) and a prudent money management will help us to tame the market.

Personally, I find day trading hard enough, not to mention scalping (taking into account the cost and no real edge for small movement). It is also unjustified for me to trade long term with small capital (too little setup), currently day trading trend move is the best option.

All isolated scenario from my above questions are only meant for ease of discussion, in real trading, all elements should be combined to form an overall view of the market.
Quoting GoldenFinger
Sometimes, manipulation can also turn into real move as market is irrational. Besides who really know whether it is manipulation or not, sometimes it could be real move originated from unknown causes, as shown in some days where market move in one direction from asian to ny session.
All moves are real, by the way, whether they are rational or otherwise.

Traders with a reasonable edge should just get it out of their heads that they "failed" to somehow read the markets "correctly" occasionally. Unexplainable anomalies are simply out of anyone's hands, and should just be hedged against as best as you can in all your trade plans.

Quoting GoldenFinger
the best we could do is to expect volatility/ change of direction when such times are approaching.
Correct.

Quoting GoldenFinger
All in all, I think having a good grasp of immediate fundamental development, some technical chart reading skill (confluence in TA) and a prudent money management
I don't put too much stock on that fundamental bit, so we'll just have to agree to disagree.

Quoting GoldenFinger
will help us to tame the market.
Markets can't be tamed. It's like riding a bronco. You just do it and hang on.

Quoting GoldenFinger
Personally, I find day trading hard enough, not to mention scalping (taking into account the cost and no real edge for small movement). It is also unjustified for me to trade long term with small capital (too little setup), currently day trading trend move is the best option.
I feel your pain.

Quoting GoldenFinger
All isolated scenario from my above questions are only meant for ease of discussion, in real trading, all elements should be combined to form an overall view of the market.
Do also account for elements that you don't expect or have never considered in your wildest nightmares.
I'm not trying to convince anyone. I'm not in the "convincing" business.
I have question about Arbitrage trading. Is this type of trading applied between brokers which quote differently or it can done by trading different currency pairs?
Hi there,

First of all, I wanted to thank all the Institutional guys involved in this thread. Just finished reading all the 63 pages and it was very interesting.

I just hope im not too late for my questions #2yearslater lol

It's maybe a bit more for Skenobi, but any of you can feel free to answer.

I understand that sometimes, too much knowledge can be detrimental and no need to look further if simple does the trick. I also understand simple doesnt equate easy. I'm currently successful in my field (fitness) because I kept asking myself questions and seek the answer myself. I've kept trying to understand why the human body reacts to this, or that, and how to achieve this, etc. I feel like this would be the way to go about forex also? Trying to deepen my understanding of the market before jumping in, trying to educate myself before risking money, but from your point of view, it seems pretty pointless (I dont want to put words in your mouth) as long as I have identified an edge, no need to ask questions.

I've noticed you are not a big fan of "labeling" things as to why it has happened in the market. So my first question is this:

1. Don't you think it can help us (retail traders) to "try" to understand why those move happened in the market? Why it reacted at that level? Basically, trying to figure out what are the big players doing/thinking?

How do you make money in the market if you don't try to understand it? Its move and why it happened?

If you can, please try to elaborate further than: "If that works for you keep doing it" I would appreciate.

2. How did you learn trading if you didnt try to understand market movements as it doesnt make you money? How did you become successful on a consistent basis?

3. What do you think you have that the average retail trader dosesnt beside 20 years of experience lol From my understanding, you were pretty consistent right from the start otherwise you would have been fired.

4. You said as an answer somewhere in this thread:"It's the battle between ever-changing collective wills of the buyers and the sellers that move price". I understand that if the price goes up, its because more people believes it should go up and therefore are longs and maybe "bullish bias". How we do explain a pair that keeps breaking resistance to make news highs? Like GJ for example? I understand some trade the lower time frames such as m5 and m15, but at some point, those traders have to check out the Daily or Weekly chart to see where the next resistance is (because they cant see it in M5/M15) and they dont want to Long in front of a major weekly resistance. So Im assuming pretty much everyone (long-term traders using the Weekly/Daily charts) and short-term traders (using the H1, M15, M5 charts) know where the next major resistance is to the left of the chart to AVOID going long right in front of it. Why GJ didnt reverse sooner after breaking so many highs and resistance? If everyone sees them and dont want to buy in front of them, why did it keep going up?

5. I understand banks look for the path of "least resistance" to "ride the wave" like everyone else. You seem to dismiss the "theory of conspiration" that the banks are going short when everyone else go long. Therefore, should we assume the banks DONT try to "manipulate" the price/retail to long when they sell into their buys? They are just after other banks order? For me, it still makes sense that they will take the opposite side of the retail markets, but from your point of view, it seems like they are doing that just because it suits their agenda and not to get us retail. They just see the price going down (for example) when us, retail, sees it going up and therefore, we assume banks are against us. Does that make sense?

Since this is a 0 sum game, when you are a bank selling 500 lots, there have to be a LOT of losers to absorb and buy these 500 lots or ONE big loser (another bank). Therefore, it makes sense for a bank to try to manipulate the price to make people collectively believe its going up, while they are shorting it).

6. You said you were using the line chart on the H1 or daily If I remember well to draw your S&R (among other things of course*) Is support and resistance for you a straight line, like a fixed price or more a zone?

We are very lucky to have guys like you answer our questions and sorry for the very few assholes that you've encountered here. 99% of us are very thankful to you and the other guys. Thank you for your time
Also, If I may add this question,

I've read somewhere in this thread that some institutional guys use moving averages.

Are EMA more used than MA and could you elaborate on what is the most used periods (I've heard about the 50-100-200)
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