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  • I don't envy the Fed officials today. These headline and core CPI figures are going to be distressing. Maintaining the 'inflation is transitory' view is the central bank equivalency of HODL or diamond hands https://t.co/jm99h6f89u
  • Commodities Update: As of 14:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 1.70% Gold: -0.39% Silver: -0.77% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/bkkaIuBhqz
  • Ten-Year US Treasury yields breaking out above 165-basis points following notably hotter-than-expected inflation data this morning. Headline and core CPI both topped market forecast with readings of 4.2% and 3.0%, respectively. I previewed this scenario yesterday on @tradingview. https://t.co/Fgc0RZe2nw https://t.co/VHmkcuJm9p
  • 🇧🇷 Business Confidence (MAY) Actual: 58.5 Previous: 53.7 https://www.dailyfx.com/economic-calendar#2021-05-12
  • Please join @PeterHanksFX at 11:00 EST/15:00 GMT for your weekly stock market outlook. Register here: https://t.co/nqJWK4f4sl https://t.co/dp4faqlMl7
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 89.86%, while traders in GBP/USD are at opposite extremes with 68.99%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/hu9IfBFkzq
  • Commodities Update: As of 13:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 1.48% Gold: -0.31% Silver: -0.52% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/WOwgbEuZec
  • Heads Up:🇧🇷 Business Confidence (MAY) due at 14:00 GMT (15min) Previous: 53.7 https://www.dailyfx.com/economic-calendar#2021-05-12
  • Mid-Week Strategy webinar begins right now and there's some vol to work with https://www.dailyfx.com/webinars/140187219 Topics: 1) Big inflation beat, USD gives back gains 2) EUR/USD jumping right back into resistance zone after CPI release 3) Gold - bull flag remains in-play Let's go
  • Indices Update: As of 13:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 0.76% Germany 30: 0.26% France 40: 0.18% Wall Street: -0.40% US 500: -0.75% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/RqkV6znl1S
Retail Traders, Banks and Hedge Funds Approach Markets Differently

Retail Traders, Banks and Hedge Funds Approach Markets Differently

John Kicklighter, Chief Strategist

Talking Points:

  • There are three general approaches to markets: equal access; information advantage and structural flaw exploitation
  • Finding structural opportunities requires unorthodox thinking while information advantage isn't prevalent in FX
  • Most traders are equal access looking to make strategy with universal data which presents fewer unique advantages

See how retail traders are positioning in the majors using the SSI readings on DailyFX's sentiment page. Harness the power of big data to evaluate millions of historical price points to calculate the probabilities of short-term market moves using the GSI Indicator.

Do top performing hedge funds trade technical patterns? Are the largest banks posting quarters without a single down day by trading around event risk? There are different approaches to the markets and they bring their own limitations, advantages and nuance. Most market participants fit into a category of equal access trader where they attempt to develop a strategy or edge around universally available information. That includes the average retail trader that focuses on technicals, fundamentals and even basic quantitative methods such as algorithms.

A second type of trading is one that relays on information advantage. Extensive knowledge of a particular area of the financial system or region along with unique access to data can provide opportunity that few can act on can prove lucrative. However, considerable work goes into this approach, signals are not frequent and there is a strong pull towards illegal means (such as insider trading) to supplement irregular performance. This is typically the area of the hedge funds and banks with large, specialized teams.

The third category can be the most intensive with the fewest trades. Exploiting flaws in systems or taking advantage of systemic changes requires exceptional knowledge of a market and radical ideas. Seeing situations like the liquidity collapse after the subprime US housing collapse, the value divergence in options before a standard model was available or the extreme rise in Chinese equities as the market opened to investors requires a uniquely tuned view of markets. Exploiting the situations can be even more difficult. We discuss these three general trading approaches in today's Strategy Video.

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