Is it an advantage to know Banks Forex orders?

Banks Forex orders

Would you like to know the orders of the banks that trade the Forex market?

There are a lot of people who think that it might be the key to start winning consistently in the Forex market, one of the most difficult in the World.

The logic behind this is quite simple: as the banks are the big names in this industry if we follow what they are doing we should be after the right track.

This, in theory, sounds very well. However, do we really think that the banks are some sort of good traders who beat the market constantly?

In my opinion the banks are great market makers, not traders, because they provide liquidity to the market to all the brokers and traders in the world. They are the Primary market makers.

Forex banks

Do not you think the banks are trading the Forex markets and having great profits the same way as normal traders like you and me. They are quite different to us.

They are market makers and we are traders, two different things.

When they take positions in the markets it is due to liquidity issues, not really because they are trading like you.

Do not forget the banks are the heart of the international monetary system and all commercial transactions are done through them.

They are doing commercial transactions all day every day, and those are not “trading” activities the same as the ones a retail trader do.

The competition last years is fierce with the banks having introduced more liquidity in the system and creating better conditions for the Forex traders.

At the same time, others markets like bonds have lost some liquidity, so related to the Forex ones.

To remain competitive the banks have had to reduce the spreads they are taking to the minor market makers.

Bank Forex trading

Well, I do not think that following this method we are going to find the Philosopher’s Stone, however, it is not bad knowing what positions in Forex have some banks for the next days.

Although, I repeat: the real good business in Forex is related to the market maker side, and things such as Expert Advisors or automated trading, signals, and Forex mentoring.

Service to know the banks in Forex, eFXplus

There is one service that came out in recent years and gained quite a lot of popularity: eFXplus, a company that started to study the positions of the different banks for the major Forex pairs and created a historical database.

Today eFXPlus study the open positions of the major 20 banks and publish a detailed study about it regularly in their web.

Hence, the traders can know where the banks like Credit Agricole, Goldman Sachs, Bank of America or BNP have their orders in the market.

In the eFXplus platform you can see the daily signals about the different positions taken by the banks, as well as the variations that occur during the day.

One of the best tools that this service has is the one about results and profit, where the profitability of the different banks is measured, showing how many pips have the different banks won or lost.

For instance, you can see the ranking of the last two years.

During this period some banks have had a profitable overall operation and others have had losses.

Do not forget that these “profits” and “losses” are only a very partial and small side of the gigantic business that the banks do in Forex.

The data at the time of this article was this:

  • Morgan Stanley: 8,554 pips after 272 trades
  • Credit Suisse: 6,904 pips after 457 trades
  • Societé Generale: 2,204 pips after 13 trades
  • CitiBank: 1,906 pips after 49 trades
  • BNP Paribas: 1,515 pips after 43 trades
  • Goldman: 850 pips after 1 trade
  • JP Morgan: – 281 pips after 47 trades
  • Barclays: – 568 pips after 16 trades
  • Danske: – 675 after 310 trades

This are some of the main results of the data published at that time.

There are more banks in the middle of the table but I included the best and the worst.

As you can see, the wins of Morgan Stanley and Credit Suisse are quite significant.

However, as we see, not everything are profits, but there are also banks that have losses, so we cannot conclude that banks trading is “perfect”.

One of the things that called my attention was the fact that Goldman Sachs, for instance, only had “1 trade”. Why?

Is it because Goldman does not publish the rest of its trading?

Is it because what we see here is not genuine trading?

Another interesting fact is that Credit Suisse and Morgan Stanley are the only two banks that suffered losses the day of the Swiss Franc debacle.

Curiously enough, both banks closed their positions by 15th of January with losses or 50 and 150 pips respectively, having been able to get out of the trade at 1.0056 and 0.9797, while the majority of retail traders suffered losses of 2,000 pips.

What happens?

They had liquidity to get out but there was not for retail traders?

It is obvious that we have two different markets here, and that what retail traders do is something different than the market the banks do.

The only bank that suffered a significant loss that day was Credit Agricole that lost 440 pips with a GBPCHF trade, although by my calculation with the data the loss should have been of more than 1,000 pips since the open and close prices were 1.514 and 1.349.

Something does not smell well there.

One of the characteristics of knowing the banks orders is that they can give us some idea of where the support and resistance levels could be in the short-term because banks usually place their limit orders around those prices.

Nonetheless, if this data repeat itself there should be some sort of advantage by following the banks orders, but I do not think it is actually that easy to win in the Forex market. There are thing that escape us, for sure.