Never trade before Dealer or simply understand that it is not always jumping into the market to trade. Large organizations know that about 80% of the market is sideways. So the sharp swings or sudden changes in price are likely to end quickly. This is a good opportunity to have a large organization making a profit.

Let's first explore for a bit why sharp, strong movements have a high chance of being reversed.

Note that Dealers often work for banks, so they have 2 advantages:
  • First, they can see positions that retail traders have been looking for or are looking to place.
  • Second, they have a large amount of capital to support them and promote the market.
Below is the M5 bracket EUR / USD chart. Here we see that Germany's ZEW economic sentiment index, a report with a strong impact on the euro is published:

Retail traders are going to see that EUR / USD is falling, so a lot of them will jump in to sell. This will likely cause EURUSD to continue falling and test the low of the day. These are the actions and thoughts that retail traders are likely to take. What about the Dealers, what do they focus on?

Dealers know that the release of news often causes large volatility in prices. They also know that most of the time, the first move after an event or news is published is usually fake and that the price is often reversed before any significant data is released.

And what happens is that these Dealers, with the financial support of their respective banks and hedge funds, will start to open the opposite position and cause these strong moves to weaken and come to an end. . Their position will be much larger than the retail traders, making the orders of the retail traders at a disadvantage.

In the chart above, we see that the downtrend is not sustained. The position of the Dealer is currently pushing prices up and causing prices to suddenly reverse. Chances are that most retail traders have placed their stops above 1.2900. And look at the picture below, a lot of traders have their stops.

To push prices up to those stops, dealers could have used a huge amount of money. Once retail traders find that the price is making new intraday highs, they will likely have the thought they need to buy.

But it is Dealers, bankers, and trading institutions that really make the market move. That is also why they are called market makers - market makers.

Once all those retail traders opened a long position and placed a stop loss below the 1.2900 resistance, Dealer once again made the move slowly. As shown below: