Who is ruling the market?

Who is ruling the market?

In order to understand yesterday’s topic, we need to look the people who move the market and practically call all the shots right in the eyes and ask them – who are you?

Well, I did that… one could say and now I can answer you. They are commercial traders, non-commercial traders and retail traders. These three basic groups are the ones which move the markets.

Commercial traders or hedgers.

Hedgers are the ones who speculate the market in order to shield themselves from the sudden changes in price. Any group who are trying to so their best to be safe from the losses can be named hedgers – from framers and other producers all the way up to bankers.

The most important thing you need to know about them is that they are the more bullish when the market is surging and the most bearish when the market is plunging. In other words, for banks and big corporations it is not common to buy currency futures in order to shield themselves from losses in the future. During big transactions there is a possibility that in the future the market is going to drop and buyers are going to end up paying more in foreign currency than they first intended to. And for that they might buy futures – to lift the chart.

Non-commercial traders or large speculators.

Unlike hedgers speculators are in it for the money and not for any protection. These traders usually go with the trend and pull out as soon as the trend reverses.
Keeping to their position as the trend is rising – that is their primary strategy. As soon as trend reverses they are gone. Almost instantly. And since their accounts are usually enormous in size, they can easily influence the performance of the futures market.

Due to the big accounts they can influence the movement of the market in a very dramatic way.

Retail traders or small speculators.

Small speculators are not the most influential movers of the markets. The have their own small retail accounts and they tend to be on the wrong side of the market, trading against the trend most of the time. and when they do follow the trend they are too focused on the highest and lowest point of the market.

And these are the groups which you are going to have to watch out for. After all – they are making the market move.