When starting any business, you have to know everything about it; otherwise, you will never succeed in it.
The same thing applies to trading the financial markets: if you have no idea how the market works, you will never figure out a way to make a consistent profit.
The financial markets are composed of two players — the market makers and retail traders.
The market makers are banks and financial institutions, which account for most of the trading volume in the market.
These players trade millions of dollars every single day, so they control and manipulate the market since they can drive the price whenever and wherever they want.
They not only have the best technical analysts but also know how retail traders analyze and trade the markets: they know where your stop loss and your profit targets are.
Thus, they can manipulate the market and take your money whenever they want — this is the truth that nobody will tell you. Let me give an example to show you how market makers know how you trade the market and how they take money from you.
See the EUR USD 4H chart below:
You can see that the market got to a high-probability key resistance level. What happened next was the formation of the bearish pin bar with a false breakout at that level, which indicated a high-probability sell signal.
As a retail trader, you would want to sell the market after the close of the pin bar and place a stop loss a few pips above the resistance level or the upper shadow of the pin bar.
After placing such an order, you would feel excited in anticipation of a big win. But look at what happened next:
As you can see, the market would have taken out your stop loss twice before falling significantly to hit the support level where you would have used as the profit target.
If your stop loss gets hit this way, you’ll surely feel disappointed; you may start feeling that someone is watching what you are doing in the market.
This happens frequently in all financial markets, and if you are not aware of it, you will always be trapped by banks and financial institutions.
Look at another example in the chart below:
Notice that the market was trending down. Upon the breakout of the support level, breakout traders would automatically short the market to make profits from the downtrend.
If you trade breakouts, you would have taken this trade and felt very confident because the support level was strongly broken, so the market was expected to keep going down.
But look at what happened next:
As you can see, after the breakout of that support level, banks and financial institutions changed their tactics because they know that many retail traders entered the market to join the trend.
They trapped those traders by what we call: false breakout strategy.
If you know about this trap, you will buy the market after this trap and make money since you know what is going on.
Banks and financial institutions have certain zones where they buy and sell in the market.
If you can identify them, you will take the same trades they take and make money with them instead of trading against them.
Let me show you an example with the EUR USD 4H chart below:
You can see that the market dropped strongly — just look at the red candlesticks. This move was made by banks who think the price level was good for them to short the market.
If the market goes back to test this zone, the same bank will liquidate the rest of their position, while other banks will sell from the same price level.
So, we will see another strong move.
Look at what happened next:
As you can see, the market went down strongly when the price retested the zone.
This is one of the strategies that banks and financial institutions use to trade the market.
If you know about it, you will easily make money from this kind of trade. Interestingly, if you look at your charts, you will find that these zones form frequently in the market.
The examples I mentioned above are only some of the many strategies that the market makers use to manipulate the market and take retail traders’ money.
Do you now see why you have to study and learn how banks and financial institutions trade the market?
I want you to change the way you look at the market. Instead of looking at the market as a battle between sellers and buyers, you should look at it as a case of market makers versus retail traders — market makers know what you are doing; they are more powerful than you; and they are in the market to trap you and take money from you.
The strategies that I’m going to share with you work 97% of the time; they work in all financial markets because they are the strategies used by the major players.
If you can follow what I’m going to share with you , I promise you that your trading results will change dramatically.
Please, take your time to read everything; don’t skip any part, because everything I shared is very important if you want to join the 5% of successful traders.
This post has introduced you to the concept of supply and demand levels and how banks trap retail traders.
In the next lessons, I will show you how to use this knowledge to make money. In the meantime, join my free Telegram channel where we can interact and share more knowledge. I also give out 2 to 3 free live Forex signals per week.