DislikedLets assume there's no retail forex market, how does the interbank forex market work?
Does the retail market dictate the activity on the interbank forex market?
Who is the "center of the universe" in this forex market?
How much of the presumption of the retail trading world relevant to the actual interbank forex market?Ignored
I often talk about how central banks and the top tier banks are in control of the forex. They are the "big boys" in the market. Collectively, they establish structure and set the narrative. But they are not at the center of the forex universe. The banks are tasked with processing transactions for their clients, and it's that work that forms candles, trends, etc. We (retail traders) speculate on their work when we make a trade, but have nearly zero impact on candle formation, let alone, trends.
The banks' clients are corporations and governments that have international business exposures or need to move money across their borders, for one reason or another. There are tens of thousands of businesses and government organizations all over the world moving money every day. If you are the CFO of a business, you work with your treasury staff to conduct forex operations for your business. They are responsible for having working relations with banks, dealer and brokers that are part of their forex execution strategy. That relationship can include cash management (e.g., sweeping unneeded cash out of foreign banks into corporate banks accounts); moving money among countries to pay bills, invest in opportunities, pay taxes, etc: set up risk mitigation strategies for overseas investments, exposures, etc; use of forwards and swaps to more effectively take advantage of interest rate differentials between countries; and more. Corporations use the forex to move money, manage risk, take advantage of opportunities, and reverse risky investments, to name just a few things. It is an ongoing challenge for corporations, given the changing nature of macroeconomics, politics, technology, etc around the world. The banks (where corporations keep their money) supervise the transaction-level implementation of the corporation's forex strategy. For those who like to think in terms of supply and demand, corporations and governments are the suppliers and demanders.
Structure takes time to develop because investment portfolios take time to adjust to changing economic developments. Remember, central banks hate upheaval when it comes to policy implementation. But the day to day chart work that we trade is unfolding as money moves around the world, within the business policies, processes and procedures that are commonly used by banks (bank traders work under strict rules and must adhere to the banks approved processes, so that those trader activities can be tracked, and reported on). Charts unfold each day according to regulations within the banks that traders are required to follow, unless and until something in the FA world (or political) changes, which can make or ruin plans. If you think through this a bit, then the notion of common levels or targets begins to make sense.
This is, of course, a very simplified edition of a very complex environment. But perhaps it's a place to start when you realize that nearly everything that retail forex traders think they know is largely wrong or essentially irrelevant.
5
) those who were trading In the Pits had NO charts
, and suggest, that somewhere in the hearts & minds of traders, there DOES exist intuition.