Brandon Wendell, CMT
Brandon Wendell
One of the core pieces of Online Trading Academy’s Core Strategy is to help traders succeed by trading in the same manner and direction as the large trading institutions. Many people have questioned the ability of being able to know where these buying or selling points lie; that is until they learn the strategy and see it working for themselves.
Many people even doubt that these large trading institutions exist. We commonly think that the large banks solely engage in businesses like managing client accounts and thrive on commissions. The truth is that trading activity constitutes either a large portion or even the majority of their profits. Need proof? Well, these large institutions are publicly traded companies so one only needs to view their annual reports to see where their profits really come from.
Bank of America, for instance, made 13 billion dollars from their investment and brokerage services but over six billion from their trading activities.
Morgan Stanley’s largest income producer was in fact their trading at over $9 billion. This easily dwarfed their moneys received from investment banking or commissions.
JP Morgan Chase is known as a banking center and a brokerage, but they also made over $284 million from their trading activities.
If you have ever been involved in trading the US equity markets, you should be aware of market making activity. If you do not know what this is, you definitely need to educate yourself before risking any more money in the markets themselves. Market makers create liquidity in the equity markets by buying and selling securities for themselves and their clients. But they are also able to manipulate prices in the markets. This leads to losses from the uneducated traders who still commit money to the markets.
One of these big market makers is Goldman Sachs. We know them as an investment banking company, but as you can see from their financial information, they made over $9.5 billion last year in market making activity. This is trading!
If you think that I am just trying to promulgate an “us against them argument”, let’s check out the facts. There are scores of data points that show that the big institutions are more interested in profits for themselves than helping you secure your financial future. In fact, trading activity for these institutions has become much more profitable.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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