66.30 % of retail investors lose their capital when trading CFDs with this provider.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66.30 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Why is it important to know how the big players trade?

Published: 30.08.2023

If you don't want to get dragged around in the markets and leave your every trade to chance, you should be familiar with the actions of the so-called big players. Once you understand who big players are, where they are going, and how to spot and take advantage of their footprints on the chart, you will look at trading in a completely different way. Today's article will help you do just that.

The market moves up, down, or sideways and we, as retail traders, have no way of influencing it. We simply have to accept that the market is driven by big players whose primary purpose is to make money and they have all sorts of opportunities to do so. In order to have any chance against these institutions, we must first get to know them. Let us therefore look at how these institutions influence price, what traces they leave behind, and how we can take advantage of this.

Who are the big players in the market and what is their role

The largest volume of money is in the interbank market, which is made up of big players such as large banks, financial institutions, and hedge funds. These players trade huge volumes, influence market trends, and have a significant impact on exchange rates. They conduct their transactions for the following main reasons:

  • Hedging against adverse currency movements (for example, if a bank grants a loan in a foreign currency, it will not want to lose money on that loan due to adverse exchange rate movements). Financial institutions such as pension funds will hedge against exchange rate movements if they invest in foreign currency bonds, etc.
  • Carrying out speculation to make a profit. Banks and hedge funds have special departments, called trading desks in banking jargon, that are set aside for this task.
  • Currency buying and selling also occurs when trading securities such as stocks or bonds that are quoted in foreign currencies.

Some of the biggest players include several global banks such as Goldman Sachs, JP Morgan, Deutsche Bank, and others. These have considerable resources and access to information. Their trading can have a significant impact on the movement of currency pairs.

The big players include central banks


Central banks play a vital role in the market as they ensure the stability of the currency of their respective countries through monetary policy. Interest rates are the main instrument for this. Raising rates puts pressure on the currency to appreciate, while lowering rates often leads to a weakening of the currency.

Another tool is intervention, where the central bank keeps the exchange rate of the domestic currency within a certain price band by either selling it in large quantities if it is overvalued or buying it from its foreign exchange reserves if it is undervalued.

Large international companies can also be described as big players

Large international firms that engage in foreign trade, import or export goods, inventory, etc. in foreign currency and therefore need to hedge against currency risk. They do not want to profit from favorable exchange rates and speculation; their aim is to make sales from their main product, which may be, for example, cars, food products, pharmaceuticals, or commodities such as oil, wheat, etc. Hedging against currency risk eliminates any losses from exchange rate movements on the company's profits.

5 ways the big players influence the market

With the vast financial resources available to the big players, it is clear that they will have a major impact on the markets. Firstly, they place large orders in the market, which the market tends to fill. The price will therefore move in the direction of where these orders are placed.
In addition, the big players have opportunities to gain an advantage in the market through various manipulations. Some are legal and others tend to be illegal. Let's take a look at some of them.

  1. Picking pending orders - typically stop loss

    This happens very often in the markets and cannot be described as illegal manipulation. The point is that the big player sees in the interbank liquidity where other traders' orders are placed. These are often below clear support levels or above clear resistance. The big player has the ability to move the price to these levels and once these orders are picked, the market turns.
    A common misconception of retail traders is that these stop losses are always picked by the broker. This is theoretically possible with brokers who use the Market Maker model, i.e. they make the market and are the counterparty to their clients. Purple Trading, however, is a pure STP broker that does not trade against its clients because it sends orders directly to its liquidity providers.
  2. Fake news

    Big players will release a report that may not be based on the truth. For example, they may spread false news about a company or even the entire market in order to move the market in their favor.
    Fake news can include a situation when a bank issues an announcement that it expects a currency pair to fall or rise. What if that bank has a losing position on that pair that it needs to offset?
  3. Pump and Dump

    If you've seen the movie The Wolf of Wall Street, you know that this is an illegal technique by which a subject pumps up the price of an instrument by buying large volumes. By spreading the word, he then attracts other buyers. Once the price is high enough and a sufficient number of ordinary investors are lured, the originator starts selling ("dumping"), which causes the price to fall. This is an example of an illegal practice often associated with the world of penny stocks. But you can also see it in cryptocurrencies where there is a lack of regulation.
    There have been many films about similar illegal investment practices in the history of cinema. See which 10 financial movies Purple Trading Club members recommend!
  4. Spoofing the Tape

    Another illegal practice is spoofing. Spoofing is when sophisticated short-term speculators enter orders into the market with no intention of having them filled. Other investors see large orders waiting to be filled and believe that the market whale is trying to buy or sell at a certain price. Therefore, they place their order at the same level to buy or sell.
    Mere seconds before the market trades at the price of the large order, that order is withdrawn from the market, but the orders of other, small investors who do not have time to react are subsequently filled. This is followed by a market reversal in the opposite direction to that anticipated by the retail speculators. 
    Because spoofing is a relatively easy way to manipulate the price, it attracts big players despite the threat of heavy fines. After all, the nearly $1 billion fine JP Morgan Chase received for spoofing the commodities market is proof enough of that.
  5. Wash trading

    This form of illegal manipulation consists of a large player constantly and almost instantaneously buying and selling the same security. The rapid buying and selling increases the volume of the stock and attracts investors who are fooled by the soaring volume.

    Manipulations in financial markets have always taken place and will most probably always will. Unfortunately, they are part of the game and there is nothing we retail traders can do about it. But we can accept it as a fact and learn to use it to our advantage.

    The prime candidates for manipulation are instruments that are not so often traded. In the case of Forex, this may be some exotic currency pairs on which there is a lower volume. Manipulations can also occur at times when the market is generally low on liquidity, such as during the Christmas holidays or between 23:00 and 02:00. To avoid the risk of manipulation, it is better not to trade in these cases.

How do we know the activity of the big players in the chart

The big players cannot realize all their resources at one time. If they did, the price would start moving sharply in one direction and would not allow them to realize their full volume. Therefore, each big player places his funds in a price band for a longer period of time and once he has enough loaded, he triggers a major initiating move to the next level.

The gradual placement of orders shows up on the chart as consolidation or the price level at which there is the most interest to trade. In the Volume Profile, this manifests as a level with a high spike in the histogram, indicating an area of interest where the price tends to return.

The main initiating move is then seen as long candles that leave behind distinctive Price Value Gaps. These are seen as low-volume areas in the Volume Profile.

In the following chart, we have this shown on the NASDAQ index. The Volume Profile is for a one-week period.

Chart 1: Weekly Volume Profile and Price Value Gaps on the NASDAQ H4 chart

The initiation movement of long candles is very fast, the price stays at a given level only for a very short period of time, and therefore it is shown with a lower volume in the volume profile for a given period.

How to trade with the big players

As retail traders, we have the advantage of being able to identify the footprints of the big players and then walk inside them. For example, we can do this like this:
  • We identify where the trend movement that accompanies the Price Value gaps began. Often this will be a high-volume spot that is identified on the Volume Profile.
  • We wait for the price to return to that spot.
  • Then we speculate that the price will break out in its original direction.

Let's look at an example, again on the NASDAQ index.

Chart 2: NASDAQ on H4 chart - trade entry levels by volume according to Volume Profile

We have identified three levels where the initiation movement started, which triggered the downtrend. Coincidentally, this is the POC (Point of Control), but this is not necessarily the case. In red on the right side of the chart are the unfilled bearish Price Value Gaps. These represent imbalances and therefore tend to be filled. We will wait for the price to fill the gaps and return to the area from which the downward movement began.  Then we speculate short.

In our case, the ideal levels are II and I. For level III, the situation is uncertain due to the fact that there is another Price Value Gap above this level. Since gaps tend to be filled, there is a risk that the price might not immediately bounce down at level III, but continue upwards towards this gap.

Chart 3: Entering a short trade at a level with significant volume

In the next picture we see that in the following week the price returned to the level II and was followed by another price decline, which stopped practically at the lower Value Area Low (VAL) of the previous week. So here would have been a trade with a potential Risk Reward Ratio of 1:4 if we had speculated to the previous VAL.

Thus, the clues of the big players are seen in the charts in the form of Price Value Gaps and then higher volumes at the price levels that the Volume Profile can show us. Appropriate use of this knowledge can increase the chances of achieving success in the trading industry.

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66.30 % of retail investors lose their capital when trading CFDs with this provider.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66.30 % of retail investors lose their capital when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.