Which group should I aim for?

Ontilt

Member
(Taken from “Strategy 10” by Rob Booker)

There are four groups in currency trading. There are the novice traders – the greenies, the ones who try to outrun the bear and lose every time. We all start here. We all lose money here. Some of us lose our entire first trading stake (I did).
In addition to the novice traders, there are three other levels of participation: the dealers, the institutional traders, and the advanced retail traders.
In all of your trading, the dealers are the most powerful and they make the market, setting prices and putting together deals. Although institutional traders move more money around than dealers, it is still the case that your dealer either accepts or rejects your orders every time you trade.
The institutional traders work in banks, wire firms, or government agencies. They trade huge amounts of money at a time, and the size of their trades gives them enormous power. Not super powers, but very close. Some of these traders are moving $1 billion in currency or more every hour. Some are trading billions of dollars every minute.
Next, there are the advanced retail traders. This group is comprised of people from all across the world, sitting in smaller investment firms, offices, or even their homes. Eventually, you want to be a part of this group. In some cases, the advanced traders are the smartest group – trade for trade – than any other group. Because they don’t move a lot of money on each trade, they don’t have as much power as the institutional players. Because their trades are brokered by the dealers, they’ll never have absolute price-setting power. But, because there are so many novice traders, the advanced traders have plenty of people that they can feed to the hungry bears. Your goal as a currency trader is to aggressively take money out of the pockets of the novice traders.
 

jack

Administrator
Staff member
Ontilt said:
(Taken from “Strategy 10” by Rob Booker)

But, because there are so many novice traders, the advanced traders have plenty of people that they can feed to the hungry bears. Your goal as a currency trader is to aggressively take money out of the pockets of the novice traders.
This part I'm not 100% with.

Profitable traders extract wins from market makers and liquidity providers in most situations. I mean, technically speaking, the counterparty is the one coughing up cash. Novice traders (or retail order flow in general) can also trade against the same counterparties... but when you take a trade with your broker, you're not directly taking out some novice on the other side of your trade.

(Yes, the broker can net out your position with other clients... yes, MM's and LP's are fed enough novice (retail) order flow to be happy even with a minority population of profitable traders slipping into their dealings... but I digress, my point is I think Rob might have oversimplified this quote and in the process made it miss the mark.)
 

rod178

Well-Known Member
Aim for the group that does not follow mediocre traders who have had to resort to selling mediocre trading education
 

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