HOW THE BANKS TRADE THE FOREX MARKET
What is the forex bank trading strategy?
The Forex Bank Trading Strategy is designed to identify price levels (manipulation points) based on supply and demand areas. Banks usually enter trades during consolidation times, and they need liquidity in the market to enter into positions.
The standard bank forex trading strategy is based on fundamental analysis, price accumulation, manipulation, and distribution. Most bank traders try to enter the trade after the false breakout and manipulation stage. Usually, bank traders make less than three positions per week and don’t have sophisticated trading systems.
How do big banks manipulate the forex market?
Big banks manipulate the forex market because they have massive positions, create liquidity, and have almost 80% of their volume. Banks trade for clients and for themselves too. Banks drive the markets in 3 phases: Accumulation, Distribution, and Manipulation. By Dow’s theory, the accumulation phase starts when the big investors (institutions) usually enter their positions. The manipulation phase is a false breakout phase. Finally, in the distribution phase, markets follow a big trend. Of course, these phases are theoretical.
What is the forex smart money concept?
Forex smart money concept represents a bank trading strategy based on determining accumulation, manipulation, and distribution trading phases. Usually, a smart money bank trading strategy’s main characteristics are medium and long-term positions after the manipulation phase.
Step 1: Accumulation Bank Trading Strategy Phase
In the forex bank trading strategy, accumulation plays a vital role. The exciting part is that it’s even considered one of the essential factors for successful trading. Unfortunately, most people/traders consider this strategy vague and meaningless, and they never focus enough on it. However, you must understand this strategy accurately to be a successful trader.
Your goal should be to track and find out the areas where, when, and how the smart money, i.e., banks, are planning to enter. To be more precise, you need to find their accumulating secret cautiously. You know when smart money will most likely enter the market, and their respective positions will be your key to success. Suppose you can identify and find out the areas/positions that smart money is accumulating. In that case, you can also specify the directions where the market will probably move. When you have an accurate idea of where the market will be moving next, it will benefit a profitable trading strategy.
Step 2: Manipulation Bank Trading Strategy Phase
This is the second step that comes after a successful accumulation. Market manipulation is quite a complex concept. You will still be urged to understand this strategy to trade successfully despite the complexity. For example, when you wait to enter a respective market area, you will soon notice the market moves in the opposite direction. That’s known as market manipulation, which is a false push. After considerable accumulation periods, the wrong short-term push or market manipulation period must be present in every market.
As mentioned, when the “megabanks” are trying to enter or accumulate the market, they will also create selling pressure. More precisely, they will drive and manipulate the market to sell off their stuff after a considerable accumulation. This is a short-term manipulation period where the market trend may move differently. It may appear that the market is behaving against you during this time! But you will need to be smart and cautious at this point. This short-term manipulation gives you an extraordinary hint about a possible accumulation when the market trend increases.
If you recall any significant market move before, you will surely notice a tight range-bound period known as accumulation. After that phase, there will be a short period of false push in the opposite/different market trend direction, known as manipulation.
Step 3: Distribution Bank Trading Strategy Phase
After the megabanks have accumulated a position in the market, there will be a period of false push or market manipulation. Many forex traders may consider this market manipulation period at the wrong time. But, if you can carefully visualize and analyze the market, you can avoid being a pawn of market manipulation. You can instead make a profit out of it. After the phases of accumulation and manipulation, there is a distribution phase of the market. This is when the banks will attempt to push the price of the market area. Finding the market’s distribution phase is also tricky, and it closely depends on its previous two steps, i.e., accumulation and manipulation.