12 Jan Ponzi

At last, i have time to dedicate something on how the money market works. Essentially all markets are operated by the market makes, a dozen of banks and financial institutions. Their role is to ensure the market operates orderly,when there is a buyer and there is a seller.

Your broker takes your trade and then warehouse them, it adds up all trades, plus and minus, to arrive at a net position. Then they hedge that position with the bank. It is the banks that would trade with the market. Of course, the streaming data you see does come from the bank, if not filtered by the broker first.

The brokers and banks make their monies through the spread, e.g. the 1 pip for Euro and the bulk of the monies comes from the stops taken. As time goes on, your capital diminishes throug the stops.

Of course, there are time you make. But the odds is against you. It is like going to the casinos, where the casinos operator is given an advantage by virtue of the game setup.

How does the broker has an advantage over you ?

(a) collaborating among brokers, work over a 24x5 to setup the market for a false move, then to reverse and take the stops. They execute deceptive trades, e.g. knowing Euro would rise after Bernanke speech, they move the markets lower jointly. E.g Euro was forced down to 1.4660 before the spike to 1.4815 on Thursday. Making Euro looks "weak".

(b) prepare the masses for the wrong position. Giving seemingly correct commentaries by so called reputable analyst. E.g. making calls for Euro bearishness ahead of last Thursday Bernanke speech. So that those busy part-time traders read the commentary and short Euro accordingly, especially when the Euro "seems" to look weak. That analyst would disappear for a while and the next analyst come onboard. That is why they bankroll a team of "analysts". These analysts are no more experienced than you or me.

(c) Insider information, e.g. leaks of data known only to the banks, and not masses. Or deliberately giving a outlying forecast to sway the expected figure of some of the economic data.

(d) Construct certain indexes, e.g. Sucker Sentiment Index, or sponsor forums to move the masses one way or another through proxy posts.

(e) More blatant means, e.g. during newsbreak, e.g. Euro is surging, create a gap on the chart, to induce pple to short. And then mirically, the gap disappear after 5 mins when the price is way above the gap.

(f) Omit important news break from the events calender. E.g. a lot of the brokers calender omitted Bernanke speech last Thursday.

(g) Freeze the data, widen the bid-ask spreads, e.g 20-30 pips to grab whatever stops are out there.

and many more....

Now, you tell me. How can you win ?

If you go to a poker game, and you dun know who is the Ponzi, probably you are the one.

If you have questions or want to find out more, email me: dollarproaragon@hotmail.com