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Brokers and Banks as an Institutional Trader 4 replies

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Is anyone here an institutional trader?

Skenobi San: my previous thinking with stop hunting was that it was a move to generate liquidity for a move in the opposite direction e.g. Institutions are short, there is a clump of stops above the market, you run it up there and sell to their buy orders (short covers), thus generating more open short positions for the down move.

Reading through your talk of running stops though. I'm wondering; did you view them more as profit targets than as a means of generating liquidity for a move. e.g. Run price up, then close out your positions by selling to their short cover orders and then exiting the market and bagging 15 pips profit?
"Never Take a Trade You Don't Understand!" - Pres78
There are bank order information available such as "Credit Suisse entered EUR/USD Short via filling a limit order at 1.117". Is this really a serious big money involved transaction? Just curious....
Simplicity is the ultimate sophistication - Leonardo da Vinci
Quoting heispark
There are bank order information available such as "Credit Suisse entered EUR/USD Short via filling a limit order at 1.117". Is this really a serious big money involved transaction? Just curious....
When they say that, in 90% of the cases it's just their research person / strategist sending out recommendation to clients to do that trade. Don't know many risk takers on the buy side / sell side who would listen much to their strategist / economist, so more likely than not there is no big money flow behind it. If it is a "star" strategist having that kind of call, it might cause some flow as clients might take the trade - there is not many star strategists / economists though, so in general as a rule I would say there is no real flow associated with that kind of statements.

Sometimes sales person from a bank tells you that "our traders are entering this and that trade @ some level", but in that case those traders are already positioned before the sales sends out the message to his clients. So there is also no immediate flow impact.
Quoting katrooo
{quote} When they say that, in 90% of the cases it's just their research person / strategist sending out recommendation to clients to do that trade. Don't know many risk takers on the buy side / sell side who would listen much to their strategist / economist, so more likely than not there is no big money flow behind it. If it is a "star" strategist having that kind of call, it might cause some flow as clients might take the trade - there is not many star strategists / economists though, so in general as a rule I would say there is no real flow associated...
Thank you for the information. Indeed, their historical performance looks just so-so......
Simplicity is the ultimate sophistication - Leonardo da Vinci
Quoting katrooo
{quote} When they say that, in 90% of the cases it's just their research person / strategist sending out recommendation to clients to do that trade...
So they lie. "Credit Suisse entered EUR/USD Short via filling a limit order at 1.117" is not a recommandation, it's a fact they entered short.

Quoting katrooo
{quote} ...Sometimes sales person from a bank tells you that "our traders are entering this and that trade @ some level", but in that case those traders are already positioned before the sales sends out the message to his clients. So there is also no immediate flow impact.
You say 90% of the case its just their strategist and now you say sometimes could be true... Means 10%? of the time it's true?
In that case, what is their interest to communicatetheir trades ? What is their interest to tell the world they enter that trade???
Bottomless wonders spring from simple rules, which are repeated without end
Quoting skenobi
{quote} As institutionals, we don't trade spot FX in lots. We deal in actual amounts of any size large or small but frequently in deal sizes in excess of USD 1 million. We trade WITH other banks either directly or THRU interdealer brokers, unlike retail traders who can trade only WITH (not THRU) retail brokers (even if you call them ECN). If you're asking me how I trade as a retail trader, that's personal to me, I'm afraid. I don't have a reason for this; that's just how I choose to operate. {quote} I can't help with you with that. But if you have...
Thanks for your input brother, I really appreciate it.

Not that I shouldn't be trading, just not committed to execute on such a large amount. Yet.

Wish you nothing but the best.
Quoting katrooo
{quote} hi skenobi, mostly agree but not with everything. Of course prop shops or retail (if you consider them a buy-side) do a lot of short-term intraday trading. But I am quite confident you wouldn't find a guy doing day trading in one of the big real money companies. You would definitely find these guys doing it in macro hedge funds, but just statistically counting the ones I personally know the ratio is more like 7:3 (out of 10 PMs) in favour of PMs who are more macro oriented, i.e. trading with few days / weeks horizon. Don't have a statistically...
How does that work? Quantity over quality......with a good base of probability methodology and MM?
The road to pipland is arduous and fraught with challenge.
Was just wondering what your take on the majors is. Are they related? Are they linked somehow? Are they unique in their own right?
Quoting Atomic_Sheep
Was just wondering what your take on the majors is. Are they related? Are they linked somehow? Are they unique in their own right?
This is interesting. They are linked by triangular arbitrage. I'd like to hear Skenobi's views on whether minor pairs are worth trading though.

If the price of Euros goes up then you can buy less NZD for your Euros, but you could use your Euros to buy Yen and use that Yen to buy NZD and then sell that NZD back to buy Euros at the new increased rate, thus having made a profit. So people are doing this all the time, or more specifically, computer programs are doing this all the time. So direct buying of Euros with Dollars will put the price of the Euro up against other currencies too as people use their dollars to buy minor currencies to buy Euros.

This in my mind means that the movement of minor pairs is mostly due to trading in their major counterparts where big buy and sell orders are placed/waiting at S/R levels. So imho, the minor pairs will respect S/R levels less than majors... ??!!??
"Never Take a Trade You Don't Understand!" - Pres78
Quoting ZeeDeveel
Reading through your talk of running stops though. I'm wondering; did you view them more as profit targets than as a means of generating liquidity for a move.
For my part, sure. Why not? (I don't speak for other institutionals)

Opinion: I don't think liquidity can ever be manually generated (except in the conceited mind of the stop runner). The market is either liquid or it isn't.

Quoting heispark
There are bank order information available such as "Credit Suisse entered EUR/USD Short via filling a limit order at 1.117". Is this really a serious big money involved transaction? Just curious....
It's just information.

Quoting limprobable
In that case, what is their interest to communicatetheir trades ? What is their interest to tell the world they enter that trade???
To declare their bias.

Quoting ZeeDeveel
{quote} This is interesting. They are linked by triangular arbitrage. I'd like to hear Skenobi's views on whether minor pairs are worth trading though.
I'm sure "triangular arbitrage" is making money for somebody somewhere. As for myself, I trade minor pairs on their own individual merits i.e. I just eyeball the trend and I trade it.

Quoting ZeeDeveel
If the price of Euros goes up then you can buy less NZD for your Euros, but you could use your Euros to buy Yen and use that Yen to buy NZD and then sell that NZD back to buy Euros at the new increased rate, thus having made a profit.
I don't understand the above paragraph at all.

For instance, if EUR goes up, it went up against what? Against USD? Against NZD? If against NZD, don't you mean you can buy MORE NZD for your EUR (because you said "buy less")? I stopped reading when you didn't make any sense.

Quoting ZeeDeveel
So imho, the minor pairs will respect S/R levels less than majors... ??!!??
If that's your humble opinion, you should test it.

Good luck!
I'm not trying to convince anyone. I'm not in the "convincing" business.
Hello,

Does most of institutionals use Order book- Level II Order flow to make money and dont use charts ?

Thanks for all your answers.

Green pips.
Bottomless wonders spring from simple rules, which are repeated without end
Quoting limprobable
Hello, Does most of institutionals use Order book- Level II Order flow to make money
In forex, no.

Quoting limprobable
Hello, Does most of institutionals .... dont use charts ?
A lot of institutionals use charts.
I'm not trying to convince anyone. I'm not in the "convincing" business.
Quoting skenobi
{quote} For my part, sure. Why not? (I don't speak for other institutionals) Opinion: I don't think liquidity can ever be manually generated (except in the conceited mind of the stop runner). The market is either liquid or it isn't. {quote} It's just information. {quote} To declare their bias. {quote} I'm sure "triangular arbitrage" is making money for somebody somewhere. As for myself, I trade minor pairs on their own individual merits i.e. I just eyeball the trend and I trade it. {quote} I don't understand the above paragraph at all. For instance,...
You are awesome Skenobi!
First, thanks for this awesome thread, very informative. I was following it already, but I registered for this question.

As you guys said, the job of an institutional trader requires, that he is always following the markets, so he can make the required amount of money for the bank, and after that he works for his big bonus at the end of the year, and when he sees, that he is going to overachieve that well and going to get a nice bonus, he has finally a little time to be more relaxed.

My question is, then why is there so little activity during July and August? I know it is because of their holidays, but wouldn't it be more profitable, if they would push it during those months too? Or is it only some of them taking holidays, and a few of them still working?

Thanks for the answer
Price and volume reveals everything. The market moves on supply and demand.
Quoting Darastonius
First, thanks for this awesome thread, very informative. I was following it already, but I registered for this question. As you guys said, the job of an institutional trader requires, that he is always following the markets, so he can make the required amount of money for the bank, and after that he works for his big bonus at the end of the year, and when he sees, that he is going to overachieve that well and going to get a nice bonus, he has finally a little time to be more relaxed. My question is, then why is there so little activity during July...
The forex market is never inactive. Global capitalism and exchange proceeds, day in, day out. The nodes that facilitate global business are however London and NY, London of course being the home of these global social relations as capital of these Anglo Saxon rooted relations. NY additionally being the home of a historically large, vibrant and robust twin. Of course, the trick is in determining when a tradable move is unfolding.

But have no doubts, the forex market is the biggest, most constant and most lucrative business on this globe.
The road to pipland is arduous and fraught with challenge.
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  • Edited at 6:30pm Oct 1, 2015 6:05pm | Edited at 6:30pm
Quoting skenobi
I stopped reading when you didn't make any sense.
You're quite right, that didn't make sense, but the overall logic was ok I think, anyway... !

Previously you talked about "trading the range". I wonder if you'd be so kind as to give a few insights into a chart for us? I've annotated some major tops and bottoms of this current converging wedge type pattern that UJ is in. It would be interesting to hear your take on the reasons why we see certain moves taking place.

For example at "I" there was a strong reversal, yet despite my expectations it only made it to the half way point of the range and making a kind of camel hump formation. Would you regard this as a sign that demand is drying up? Or that lower prices might be preferable for large interests to accumulate positions at a lower price? Are there any obvious "stop hunts" that you'd recognise from your days, perhaps? Or any moves which you could chalk up to some obvious money making maneuver due to seizing a low liquidity opportunity - outside of London/NY hours maybe?

Basically why doesn't a range simply move from top, to bottom, top to bottom; why does it get stuck in the middle sometimes, or double top, or triple bottom? Is this just supply and demand playing out, or are big players directing this play?

Big thanks for your time.
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"Never Take a Trade You Don't Understand!" - Pres78
Quoting ZeeDeveel
{quote} You're quite right, that didn't make sense, but the overall logic was ok I think, anyway... ! Previously you talked about "trading the range". I wonder if you'd be so kind as to give a few insights into a chart for us? I've annotated some major tops and bottoms of this current converging wedge type pattern that UJ is in. It would be interesting to hear your take on the reasons why we see certain moves taking place.
If you had read my posts extensively (and you're excused if you haven't, because really, who do I think I am anyway LOL), you would've surmised that I don't really like to find "explanations" as to "why" stuff happens.


Quoting ZeeDeveel
For example at "I" there was a strong reversal, yet despite my expectations it only made it to the half way point of the range and making a kind of camel hump formation.
Some people can make money from "expecting" stuff. Personally, I can't.

Quoting ZeeDeveel
Would you regard this as a sign that demand is drying up?
I don't know. You could be right.

Let's put it this way: Just because a snapshot led you to believe that demand is drying up at THAT point in time, does it mean the situation WILLl remain the same when the next bar/candle forms? If your answer is yes, then all I can say is, "Good luck, buddy!".

If your answer is No, then why does it even matter that there's a need to classify this or that snapshot as "demand is drying up"? I mean, sure it's nice to know, but really: So what?


Quoting ZeeDeveel
Or that lower prices might be preferable for large interests to accumulate positions at a lower price?
Who really knows if anyone is accumulating anything? I don't really go out of my way trying to find out. Correction: the ONLY time I try to find out such things is when I'm trading illiquid EM pairs like USDMYR or USDIDR (as an institutional trader). For G7 pairs, I don't bother.

Quoting ZeeDeveel
Are there any obvious "stop hunts" that you'd recognise from your days, perhaps?
Most spikes have elements of stops being run. Whether the stops were actively run for its own sake (in a "hunt) as opposed to being a reaction to external events, God knows. And classifying this or that stop run as "hunts" is not something I find useful to do.

Quoting ZeeDeveel
Or any moves which you could chalk up to some obvious money making maneuver due to seizing a low liquidity opportunity
All moves are either money making maneuvers or loss-reducing maneuvers.

Quoting ZeeDeveel
- outside of London/NY hours maybe?
Speaking only for myself, I don't make that distinction.

Quoting ZeeDeveel
Basically why doesn't a range simply move from top, to bottom, top to bottom; why does it get stuck in the middle sometimes, or double top, or triple bottom?
Even after 20 years, I don't know.

Quoting ZeeDeveel
Is this just supply and demand playing out, or are big players directing this play? Big thanks for your time. {image}
Everything is supply/demand, or in the case of forex, demand/lack thereof.
I'm not trying to convince anyone. I'm not in the "convincing" business.
Quoting heispark
{quote} Thank you for the information. Indeed, their historical performance looks just so-so......
Aftermath of NFP. Wonder how they still can keep their job...
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Their historic performance is also pathetic...
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Source: efxnews.com
Simplicity is the ultimate sophistication - Leonardo da Vinci
Quoting heispark
{quote} Aftermath of NFP. Wonder how they still can keep their job... {image} Their historic performance is also pathetic... Source: efxnews.com
I suspect this is just a small portion of their trading activities. They must have profitable traders in their organisations.
"Never Take a Trade You Don't Understand!" - Pres78
Quoting heispark
{quote} Aftermath of NFP. Wonder how they still can keep their job... {image} Their historic performance is also pathetic... {image} {image} {image} {image} Source: efxnews.com
Where on the efx site did you get that trading graph? I cannot seem to find it. Very interesting stuff!
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