In the previous part of this topic, we highlighted some of the players in the Forex market. Moreover, we showed how they make a profit.
We brought arguments that some Forex brokers profit when take the other side of their clients’ trades. Statistically, they stand more chances making a profit like this.
And then, there’s the central banking. Special trading departments manage to make huge profits. However, not all relate to the Forex market. Nevertheless, central banks do profit from the way the currencies move.
But, the list is far from over. Here are few other entities that make it in the Forex world.
High-Frequency Trading Firms
Today, traders follow robots. You must have noticed the sudden spikes in price action when a news is released.
There is no human trading responsible for such a spike. I mean, that’s not possible in the Forex market. This market is so huge that no one entity can cause spikes like this.
Robots can. Robots, or trading algorithms, are, in fact, super-computers. They’re programmed to buy and sell thousands of positions per second. Thousands!
Maybe even more.
To put this into perspective, retail traders use a five-digit account these days. It effectively means that after the decimal, five numbers follow.
A pip represents the changing number on the fourth decimal. Well, trading algorithms go for the 9th one.
These trading algorithms are the pillar of the so-called high-frequency trading companies. HFT trading is also known as quant trading.
That is because the trading algorithms buy and sell based on complicated mathematical formulas. Or, quant math.
Math experts are paid big money by quant firms to join and develop powerful trading algorithms. As such, these firms stand better chances to profit from the market swings.
If anything, we know for sure they create those swings.
All in all, the HFT industry is a huge one, with billions of dollars turnover on a yearly basis. However, they’re not after big profits. But, after compounding ones. Their regular profit outcome is in the low single digit area.
Some Retail Traders
Some retail traders make it. There’s a saying in trading. There’s nothing wrong in losing your capital or meeting a margin call. If it happens when you’re young.
Because chances are you won’t have enough capital to lose by making stupid mistakes. All retail traders that eventually make it, lost money at first. All of them.
But, somehow, they found a way to solve the trading riddle. Money management and discipline, a good strategy. They learn Forex trading from more experienced traders.
They follow rules and strategies taught by others. And, most of all, they don’t treat trading as a hobby.
When this happens, chances to survive and to make it in this business increase.
Believe it or not, Forex brokers know in advance (or, at least, they have a pretty good idea), who’s going to make it or not. The preliminary questions asked prior to the opening of a trading account are designed in such a way to filter the traders that will be treated from a market making point of view, from the ones that will be treated from a true brokerage firm point of view.
To sum up, trading is not for everyone. Moreover, Forex trading is not for most of the retail traders. If you don’t have the time and dedication to it, not to mention patience and willingness to learn, you won’t make it.
Just look at the other traders you face in the Forex arena. What makes you think you can beat their odds to win?
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