Hi there, welcome to traders4traders.
Now I'm here to introduce the first of a five part series about How Do the BankersTrade Forex.
This is going to open your eyes to the small part of themarket that controls the majority of the volume in the market.
Now once youunderstand how the bankers do trade Forex, okay you're going to be a stepahead of the market and, this is the most important thing.
You'll be trading withthe market, not against it.
All right now what we're talking about with the bankersnow, I've got a whole range of things here that if I want to sort ofdiscuss and go through but let me just sort of a start back from the verybeginning.
Now I've read and become quite frustrated frankly with the number ofpeople out there who are speaking “I'll show you how the bankers trade Forex” nowat best its second or third or fourth hand information.
Now the bankingcommunity is very small and I've had a good look around the place and there'sso many people claiming “I'll show you how the bankers trade” and it isextremely frustrating to someone that has come through the banking industrywith 20 years of experience.
So let me just put my sort of touch on it and thisis first-hand knowledge, not sort of something that I read.
Not something thatI've heard from someone else tell me, or anything else for that matter.
Alright so the bankers, now what are they doing different to you as a retailtrader? Well there's probably a lot of things right, one thing overall, and this is what you'll get out of this five-part seriesis the simplicity of their trading systems, their methodology is extremelysimple.
Clear technicals, straight up fundamental drivers and really preciseexecution.
Now I'll go into detail as we go through this series but justfocusing on the mindset of the Banker Trader first and foremost.
Nowwhat they do that's different? Well let me just come back to where theyactually start, now I started as a graduate straight out of University withCitibank in Sydney and basically the structure of what you do the first yearor two, you are basically learning, you're learning about the markets, you'relearning about the currencies, the time zones, which currencies correlate and whythey correlate and then starting to build some structure around thefundamental drivers in the market but they spend a lot of time drillinginto the young guys, okay, all about the various aspects, the minute details ofthe currencies and this is one area first and foremost that most retailtraders overlook.
You know I've spoken to a lot of peopleand over the last eight years in training thousands of people, I knowfirsthand what they do.
They turn on their screens they look at the currencies and they start trading.
Now that is different to what the bankers would doin the first place, they will spend a lot of time makingsure that you know, what drives the Euro what the Euro crosses are connectedto, and which ones move on various announcements and those sorts of things.
So it's the minute detail that makes the difference, that's thefoundations for your whole knowledge so make sure when you are starting, that youdo spend a lot of time and I was going to say enough time, but a lot of time makingsure that you're having very thorough understanding of the currencies, themarkets, why the why the prices move and how to trade those price movements andthen you'll be prepared for the next step.
Now let's just go backagain once again to as you go through the banks you start as a graduate, you gointo a junior trader role and then if you're actually quite successful at thatstage, you go into a senior trader roll and then last but not least youprobably become the chief dealer, right so there's a bit of a steppingstone and there's certain levels of knowledge, experience and things you pick upalong the way.
Your risk profile of course increases through those stepping stones and that's the way you should to go aboutincreasing your risk, as you get more experience and more success, that's whenyou step things up.
All right now let's just come back to the bankers andwhat's different about the structure of what they do and their daily routine.
Notonly their mental preparation I'll come into that later on.
But the daily routine isvery systematic, right every time you come back to the screens you need to gothrough the same systematic process, now I know the bankers you know for the firstyear, you're getting used to that routine you're building the routine, the habitsof looking at the charts, looking at the fundamental drivers, just checking whatthe central banks are up to, making sure that the sentiment, direction, entrylevels are all lined up, and then your trading.
But one thing thatyou'll find is okay, the guys are going into work each day butgenerally getting in, when I was in London and probably less so in NewYork but more London, getting into work around 6:00 a.
if anything you'releaving around 5:00 or 6:00 p.
it's a solid 12-hour trading day and it isextremely exhausting, and I was in London for four years, it was a massive learningcurve, I'd say I probably aged about fifteen years in those four years theamount of pressure and flow and volume it was non-stop, okay but one thing whatwe are actually doing, understand what the bankers do.
Now there's two thingsthey do, they actually transact all the corporates, all the investment banks theygo through the top tier banks and they do all the execution for them, right it'sa bit of a tedious role for the forex traders, okay this is where they losemost of their money, transacting for basically the bank's client base whichare the massive corporations and investment banks as I said.
So, the secondtier of what they do is basically what you're doing, strategic trading, okaythat means you're basically looking at the market and placing positions aroundopportunities where you see direction and entries and these sorts of things.
Okay nothing to do with bank flows and all these sorts of aspects which you cancome unstuck.
Now when you are looking at the strategic aspect of the bankers theway they trade, right they are looking very methodically and very patiently atthe market.
Now this is where a lot of the the Hollywood sort of dramas – youknow Wall Street not really the Wolf of Wall Street (that was more about partying)but the other aspects where the traders are in there they're shouting all sorts of things, now a lot of that is the futures market it's different than whatthe banks are doing, now that doesn't mean there's not a lot of shouting andscreaming in the bank's there is, but it's insular.
There's no one outsidethe bank to come in and watch the team trade so there's a lot of teamwork going on, but what they do is, they sit back, and when there's downtime and there'snothing going on, they sit back and they wait, and they wait, and they wait for theopportunities now let me just give you some structurearound how the bankers trade and where you need to get some some skills andknowledge first and foremost.
Now, a lot of theconfidence that comes that is sort of perceived by the forex traders, and theyare extremely confident, to the point of almost being arrogant.
Now I was alwayssticking up for my traders when I was the Chief Dealer probably, primarily becausea lot of people thought they were over arrogant, but if anything you know whatthey were confident and they had to be, this is a tough industry and especiallywhen you're, on a bit of a losing run you need to pick yourself up, dust yourselfoff ready for another day, and this is one of the first aspectstheir psychological components they are very hard-headed.
Now one of thefirst things, the secrets that I was taught and I taught many of my juniortraders along the way as well, every day is a new day, right, that means you reset atthe end of each day and at the start of the next day, it's a completely new day, regardless of whether you've made 200 grand 400 grand, whether you've lost a hundred or 200 grand as well.
You can't dwell on yesterday'sperformance and this is a very hard thing for a trader.
Sports people have a week in between you know games, for traders it's five dayson the trot, two days off and five days on the trot, it's very, it can wear youdown, the only way you can psychologically get over the emotionalroller coaster is to switch off, okay when there's nothing going on.
But most importantly reset each day, it's almost like you need to plug your selfinto the wall, wipe your memory and start again.
Overconfidence, right (and thisusually happens when you are making money) is probably the biggest cause oflosses generally when you're in draw down in or your in a losing sort of phase, andthis happens to all traders in banks, retail traders, everywhere, investmentbanks, fund managers they all go through this.
When you're in a losing phaseyou're generally really focused, okay you are looking probably closer with attention todetail than any other time, when you start making money that's when you startto think, well it doesn't really matter you've got more money in your account itwasn't there yesterday and then you start making stupid decisions and that'swhy you need to reset each day, recalibrate your brain, rightand how do the bankers do this? Hows the structure, let mejust explain the structure of the internal mechanics of the bank, so thenyou'll understand how they do and what tweaks them into action.
Right, so how dothe managers, trust the bankers, trust the forex traders to manage the riskadequately and professionally and disciplined at all times? Well first andforemost they're paid a large salary that gets you in the door, but it's allabout the bonuses, the traders depending on the level of performance, at the levelof seniority will have certain levels of budgets.
Now my general budget inLondon, New York, less so in Sydney was around five million bucks, I had to make fivemillion dollars each year, and that's a bit of a tough target, especially when some of the other guys who havebeen around as long as me, have got budgets of 1 million, just like it's alittle bit unfair because if you're successful they will just keep puttingup your budget regardless of how compared to the other team and that'show they sort of bring it together.
so what the traders do is okay they're givena budget, now let me just sort of take it back to a junior graduate level startmakes a bit more sense to you so say your budget is a hundred thousanddollars, now this is the way the traders prepare themselves mentally and it'squite systematic, they treat this as a business, as you should as well.
So ifyour budget, or your target (your goal) for the year – well let's make it actually 120grand, then I can break it down into easy components, so what they'll do is thetrader himself will go into each month 120 grand, he needs to make 10 grand amonth, and then he'd go into each week you can actually sort of see this is actually what these are the sort oftargets we would actually give graduates right, you know, we let themtrade, we let them sort of lose a hundred thousand, in the big scheme of things for the banks, it's not much money but it's a biglearning curve so, what you need to do is, you need to set some goals aroundwhat your specific targets are, and then break them down into weekly, monthly orsort of daily, weekly, monthly, yearly targets, and that way you can manage theopportunities in front of you make sure that you are ticking the account over.
Nowaround that budget, how does management control it? Well they getthe traders specific limits, okay position and size limitsthey'll have drawdown daily limits, drawdown weekly limits, drawdown monthly limits.
Now this is the same structure that we have for our Funded Trader Program andit's important you understand this, this is the the professional network inaction, and this is the way that the senior management controls the tradingteams to make sure they don't blow the place up, you know there's so many loosecharacters like Nick Leeson in the mid to late nineties when I was in Londonbrought down Barings Bank, you know it was the derivatives market but basicallythat changed the structure of a lot of back-end systems and going on forwardfrom that there's been a whole range of guys that have stepped over the mark andthe banking systems are very tight and you have to control the parameters around thetraders on the front end desk so the traders have limits, now one of thekey components which is completely different to what retail traders do tobankers is retail traders your trading your own money, well that'sactually quite tough you're putting your own cash up whether it's 10 grand 20 grand50 grand a 100 grand whatever it is, right you're risking that cash that isfundamentally different to what the bankers do they trade the bank's money, when theylose with the bank's money they don't really care too much.
So how do theybring some caring into the forex traders well it's a quite easy, quite simply done.
Now the bankers before they become sort of senior traders they'veprobably been trading for five plus years, if not 10 to get to the topof the tree.
Now, the fear of losing if they actually break limits, rightthey're sacked immediately, that's their whole career on the line.
They may havespent 10 years trying to get there, you push through limits, you're sacked straightaway.
All right, so how the bankers controlit is, they give them bonuses a that's the carrot to keepthem going then they sort of focus them with their limits, okay and then thewhole sort of you know where you have the fear oflosing your cash, they had the fear of losing their careers, their security andeverything else, so the fear factor is quite comparable between the retailtrader and the banker itself so there are some similar comparisons there.
Nowso coming back to the structure of what they're doing, the mental preparationeach day the routine the systematic analysis this is where it comes back toonce again as I started the beginning with understanding the level, the timeand effort they put in to learning the market.
Now you go back sort of 27 yearsago when I first started, there was no online systems, there was no online coursesyou had to sit next to a trader and they told you exactly was what's going on.
What we've done with our course is actually jammed that 20 plus yearsexperience into a hundred plus videos and now you can actually get a wholerange of that experience instead of taking a couple of years to get that inyou can get that done in a matter of a week, or two depending on how much timeyou've got to go through things, and that's where your confidence andunderstanding is going to come into play once you've got confidence aroundknowing what you're doing, right all of a sudden the fear evaporates, okay, you'vegot your cash ready to go onto the market, you've got your understanding of themarket, you're looking for precise low-risk, high probability entry levelswhen you put a trade on you are thinking this is going to make money, now that allcomes from understanding managing your cash, right and understanding the market.
Now how can you sort of get some of this control right? The main part of thecontrol comes back to as I said with the limits for the bankers, but for you itcomes back to Capital Management the Four Consecutive Loss Rule thatI have constructed some time ago and it's a major part of the Pro Tradercourse, if you get that right, you are set to trade and trade forever, right youwill you will have a long trading career if not successful especially whenyou start taking the key components of technical analysis and fundamentalanalysis that you'll learn through these webinars as well as through the ProTrader Course All right, so confidence, limits, capitalmanagement, right that builds the bankers structure when they get to theoffice.
Now one of the other key things that you need to do is, is actually startto sort of work out, what you should be looking at and what you don't look at, and this is a major part of the 247 Trade Zone that we have and it's tryingto sort of give you that experience, don't waste your time reading whatDonald Trump would call “fake news” and there's a whole heap fo that out there these daysif nothing's happening in the market you'll find Reuters and Bloomberg, thetwo prominent you know financial markets new services, will regurgitate the samenews to try and keep people interested don't forget they are sellingadvertising just like every other company.
So understand when the marketsare ON and understand when they're OFF as I said the major thing I want you totake you out of his first step is, not only the mental toughness that thetraders have each day the way they conduct their business the way theyexecute but it's also the level of relaxation they have, they have a hugeamount of downtime when nothing's happening don't go looking for trouble, they don'tsit in front of the screens and just bang away, bang away all day long.
You'd go crazy if you did that they wait for the big moves and they hit themhard so they are very patient, in fact what they do is most of the time, andyou know I was in the banks almost 20 years, you're out partyingalmost four days a week, that's all during the week the weekends you'reprobably sleeping in because you've worked so hard and you'vebeen out all night, every night and that's what they do, they actually takethe time, relax they go out have a good time they come when they get in front ofthe screens though they switch on, and they are extremely focused, right andthat's probably one thing that I see, and have heard from a lot of traders out there, what's difference between me and the other guys? Well I'll tell you number one, alot of people for instance, they're either working shift work or they've gota day off and they think you know it's Wednesday, you know I've got 6 hourshere, I'm just going to turn the screens on start trading.
That is so wrong, now sure, occasionally you might find a market moving at that time on the backof some economic data release or some news, but generally you trade when themarket is on right, now generally that's where it revolves around economic datareleases, now if you are pushing the market and trying to pull money out ofit, right that's when you're going to come unstuck, you can't force the market around, and the bankers even know this and they areturning over huge amount of volume so you wait for the market to deliver theopportunities for you, and this is why they focus very closely on thefundamental aspects of the market, that's where the cash really is, right if youcan work out where the direction is going, well then that's that's half thequestion, so the traders themselves focus a lot, and a lot of their trading isaround the fundamental aspects of the marketone other key component they do spend a lot of time on is understandingthe Central Bank's.
One of the key things (and this comes back to the daily routine)once they sort of get into the bank themselves right, they come in, they turn their screens on they check their P&L, as you should when youwhen you upload your mt4 or your trading platform, make sure your cash isthere, if you've made money acknowledge it, if you've lost money check it out, make sure you reset for your new balance now once you've done that the key partto sort of going on from here, is really focusing on the central bank's, the central bank's control the overall trend, the sentiment, right theeconomic data is short term momentum now if the central bank sentiment is up andthe economic data releases that are coming out of that specific currency areup as well, we've got a very good trade got the trend, we've got a short termmomentum going the same direction, what we need now is the technical aspects andthat's where the traders will spend a lot of time each morning going throughand making a note of those key levels.
Once you've got those key levels down pat, you've got the general sentiment, then we're just looking for that last piecethat fundamental aspect to fit in with the trade.
Now a lot of the time, saythe sentiment is up, we've got a good entry level on the topside, but thefundamental news comes out weak, ok well that's when you put your pens down, turnyour computer off and you think well where should we go for lunch?That's what the traders do, as I said they don't go looking for troubleif there's a trade on they trade, if there's not, they don't do anything.
That's what you've got to do first and foremost, don't waste any of yourhard-earned cash chasing the market.
If there's a trade on, put the order on, if there's no trade on, well don't put anything on, and don't wasteseveral hours sitting in front of the screens thinking maybe something willhappen, because it won't, and actually if it did happen it would be completelyrandom, right and you wouldn't know what to do anyway.
So the key aspect for themental managing, and mental preparation of the bankers is they aresort of pretty relaxed every day they go to work, they know what days they'regoing to be busy, and what time of those days is going to be particularly busyand they focus on those times.
Outside of that it's tools down, rest, relax, go outand party.
Well that's what you need to do with your trading plan, isget hard-headed with your methodology, your mental preparation, don't let winning trades dominate your psychological aspect because you will start to become a different person andyour close friends and partners will tell you you are being abit of a loser because all of a sudden, you think you're a bit of a 'rock star'now that's a sure way to start losing cash, I can tell you that, now it's about focus, confidence, understanding the market, limits, okay having some structuredaround your capital management which is extremely important, that is the mostimportant aspect outside of this one, which is the psychological sort ofpreparation that you need to have to get you in the groove straightaway, sothere's a lot of aspects people sort of come to the screens when they firststart trading they think about the technical aspects, “I need it look at the charts” they Google the crap out of thecharts and (I'll come into the technical analysis in the fourth of thisseries) but you know, it's overused, but people are using technical analysisand throwing indicators all over it for direction as well as entry levels andall these sorts of things, basically they are doing that because they don'tunderstand the market, if you don't understand the market you're going to havea huge amount of fear in the market you're going to be lacking a massive amount of confidence I should say, every time you go to tradeand, soon as you put a trade on you'll close it out, once you understandwhat you're doing and what the market is going to deliveryou've got your capital management that's when you're ready to really sortof start rocking and get things moving, all right, now this is a wholeseries as I said, will open your eyes to the way the bankers actually preparethemselves.
There's a number of tools they use, whether I mentioned itbefore Reuters or Bloomberg, now we use Reuters, this is your connection to themarket.
I'm going to go through this very thoroughly so you understand what tolook at and what not to look at, right but, understand first and foremost, nowI was going to do this webinar last in the five-part series but I think it's mostimportant that you understand the edge that you need to have, to be a successfultrader.
As I said, most of it comes from from confidence and that comes fromknowledge of understanding what you're actually doing, the markets, executionlooking for that direction and sentiment from the central bank's, and some ofthese aspects you can get through the course, other things you're going tolearn as you sort of trade and experience these the release of theseevents themselves, and in particular the central bank's, you know the release ofthe rate decision, the statement, the press conference, the minutes there's awhole range of structure here around various economic data releases and mostimportant the central banks that do control the overall direction of thecurrencies, if we get nice clean trends out of the central bank's, we make a lot ofmoney, right and that's so important to you to get this right from the verybeginning.
If there's not a trade on, do not feel pressured to trade, as I said thebankers relax, they wait they've got 12 months to make their budget rightand that's where their bonus comes in, so if they make a budget, so one day out ofsay 200 it's no big deal, 20 days is no big deal, you know, you need to have this same aspect and if you're sitting at home (and I get thisquite a lot) a lot of people stop work and they want to become full-time traders, they're looking for that lifestyle change, well I can tell you the lifestylechange, trading fits in with what you're doing.
You don't sit in front ofthe screens for the six, eight, ten hours a day, and I have met loads of people todo that it is extremely pointless at the end ofthe day you can't see the forest from the trees.
Being fresh being veryspecific but being mentally tough and prepared and disciplined to look at themarkets, identify an opportunity or not, if there's not, well have a look throughand analyze the market and see where the next potential event might be, when thecurrencies might move, if it's not for a day or so, well come back tomorrow, don't sitin front of the screens and just hope that something might happen and try andgenerate cash out of thin air because that is a sure way to start losing cash, and once you start on the slippery slope you'll start chasing the market andthat's one thing that the bankers don't do at all.
Okay so, one of the key things, I'm just looking across at the various aspects here, I've got some sort of keynotes here that I want to highlight for you, so I think one of the key thingsokay, is just first and foremost expand your knowledge right, as I said the mostimportant thing, and this is why they don't give junior traders or thegraduates you know (they're called graduates because they've just got intothe joint) but they don't know as much as they think they do.
As a seniortrader and I was a Chief Dealer for about ten years, you're looking at thegraduates, I would be thinking okay two years time they'll be ready to becomejunior traders, and the junior trader will be a junior trader for probably two orthree years okay if he's good enough, and actually blows the budget outof the water well then we'll set him up with morecash, and he becomes a senior trader so there's a stepping stone to your whole career, but you won't have a career unless two things, you get thepsychological edge and understand what you're doing, you get the capital management structure around your whole trading system andthis is going to control not only your cash, your trade plan, yourrisk reward ratios and your trade selection.
It all comes back to thismajor component you get those two components in place, and now you're readyto start trading, and you're ready to start learning.
Now the next video willbe on Capital Management, then as I said we're going to move into the Fundamentalanalysis you know the economic data the central bank's then the Technicalanalysis and then last of all in the five-part series I'll bebringing it all together, and show you how this system works and how the bankers really sort of focus, and this is where you are computing okay, when yousee an opportunity, right you see, say Euro data release, all of asudden you know the technical levels, you know the central bank sentiment, you hityou trade, the currencies on the way and your cash is making money.
If itturns around on you you're getting out the trade very quickly locking in someprofits or just taking a small loss, this is about being dynamic and understandthat you can learn more all the time, but having the foundations is the key tothis, right and this is why I want to present this this webinar first, is getyourself prepared, alright this isn't just about Googling “How does technicalanalysis work?” It's about structure, right, structure around your preparation, getting your systems up, your trading platform, if you're looking to becomeprofessional I'd get Reuters on as well connecting with networks whether it'straders4traders or someone else, right you need to be speaking to people thathave got experience about, and understand how the bankers do trade Forex and thisis one of the key things that we do in the 247 Trade Zone is, I'mgiving out sort of knowledge and experience firsthand to our clients, and that's the difference between you know, learning straight away or trying todecipher the market by yourself for six twelve months or even two years, okayprobably losing a lot of money during that whole process.
So that's pretty muchit I want these webinars to be short and sweet and precise, and getyou ready for the market and get you ready for your trading career.
As Imentioned the next in the series will be CapitalManagement – the most important aspect of your trading system.
If you have anyquestions on this webinar or any of the other parts of the coursejump online at info@traders4traders.
com or jump in to the 247 TradeZone if you're doing the trial, free trial that is, and you can ask us thesequestions directly, not only will I be providing answers, we've have got a hugeamount of professional traders as our sort of client base and these guys areextremely accurate with everything they do and if anything, they do trade themarket like the bankers and that's why they're more successful I hope you canjoin us for the journey I look forward to working with you and I'll see youfor the next webinar shortly Cheerio.