Banks in Forex currency market represent a special caste of participants. They have the financial capacity to move asset prices to the right directions at certain points without reference to other small traders. The specificity of large amounts of capital allows banking structures to act as market makers, ensuring liquidity of markets.
There is a dual role for banks. They make deals as ordinary private traders, but are obliged to ensure the execution of orders of small participants in parallel, maintaining the stable work of Forex. Understanding the principles of how banks operate in the currency market allows to form strategies of “strong players” oriented for high stable yields.
Banks Perform Orders Traders
Individual banking entities are licensed to maintain liquidity in the respective currencies. Central banks of countries are actually defaulted are the relevant market makers, regulating, maintaining at the proper level of the trading state of their own currencies. When waiting for sharp volatility on Forex, appropriate meetings are held, where they discuss what participants, when they enter the market, executing bid, what volumes. In anticipation of a referendum in Britain, a clear sequence was agreed to increase the market share of the right institutional structures. The outcome of Brexit was announced during a low-volatility not-so-liquid Asian session. The task of the sector is to periodically submit bid for market transactions, execution of orders entering the market at current prices.
Market Makers Earn
Banks do not operate on the foreign exchange market free of charge. Readiness to execute applications in the absence of counter-offers finds material stimulation. Trading bids for currency purchases, for example, must be executed. For banks it is necessary to open the reverse transaction – on sale for execution. The picture is formed when small players have formed positions in one direction, large at their expense – in the other. Open interest is formed directly, in which it is financially beneficial for large institutional participants to direct the price against the majority by selecting their deposits.
The advantage for small participants is that such banks are forced to publish part of such transactions, and the relevant thematic resources disseminate information about bank warrants. Trade, together with such mentors, can bring high returns.
At certain points, institutional participants are sanctioned for market manipulation. For one crash (October 7, 2016) on the collapse of the British currency according to preliminary data was guilty trader CitiBank. He panicked, put up a significant number of bid in the thin market, which did not find execution by volume, which significantly collapsed the price. With a high probability, the institutional participant is waiting for fines.