Every traders ask this question when they trade. Should I get in now? Is this proper time? Anyone who has traded a demo investing account or a live account knows that this is the most important concern. What should I trade now? How much should I put in ? Is this the proper time to trade 10k to 1mm?
It is not easy to answer such queries as they come with experience and awareness.
Many Forex traders are not aware of the large number of traders in the Forex market and the influence or non-influence that investors have on supply and demand. All traders must follow what the market is doing. If it desires to go up, then up shall be our trade. If it goes down, then we will follow it down. So how do we define the trend and when do we exactly follow the development.
First, the biggest group of traders belong to the banks and governments. The results of their oracle trader positions can be seen each week at the CFTC site under the Commitment of Traders Report. Commercial traders DO NOT try to make money from their currency transactions. They are not interested in Volatility but Stability.
They are like a big ship going one route that takes time and effort to turn. Even more than that, they resist turning. And often you will find these group of pro. traders belonging to big banks, investment funds and even countries.
Now come to the next group of traders below them. They are the individual speculative traders. Their main aim is to make money thru’ commisson for their clients. While their funds are much smaller, a combined group can still cause a small ripple in the forex market.
On the other hand, sometimes when the news are favourable or very bad. These group of 2nd tier traders can also move together at the same time. When their entire resources move at the same time, you can be sure that the currency 10k to 1mm markets will experience a short term earthquake. Does this help us answer the question of when to enter the market?
Let make up an example. Say we have a large company about to invest in something that demands U.S. Dollars. The Retail traders, you and I, don’t know about this obviously. However the banks who handle their funds would know about this and they might share it with other banks and fund supervisors.
More Non-commercial traders jump on board and demand for the Dollar increases even more.
Retail investors see a solid move on the trading charts. The movement continue to happen , funds continue to pour in. By the end of the US market trading, you would have see a 200 pips again of USD dollar on GBP. Sharp retail traders would have been looking for this kind of trade every day. Depending on the type of trading program they would have seen more than just the bars or candles moving on their charts, they would also see momentum changes.