CitiGroup and JPMorgan FX Currency Rigging Fiasco Was Not as Negative to Fundamental Retail Forex Traders as Most People Think, Says Dmitri Chavkerov, CEO of Forex Peace Army
May 14, 2015 --
NORTH PORT, Fla., May 14, 2015 /PRNewswire/ --In November of 2014, the financial markets were shaken by articles from Bloomberg and other reputable news sources about the $4.3 billion fines in the fx rig cases, with CitiGroup and JPMorgan being the biggest and most fined players.
On Monday of this week, Fortune.com reported that US Department of Justice dropped its probe of CitiGroup's libor rigging scandal from 3 years earlier, which involved 6 banks, and which was tied to trillions of dollars in loans and that the US government had no plans to bring any criminal charges against CitiGroup in particular.
While most retails traders felt cheated by these scandals, Dmitri Chavkerov, CEO of ForexPeaceArmy.com, one of the largest forex reviews websites in the world, thinks that these manipulations had almost no effect on the profitability of those forex traders that use fundamental approach to forex trading.
"Either by accident or destiny, as soon as I graduated from high school, I was thrown into the world of big players and understood some of the ways of how big players make their money," says Dmitri Chavkerov, Founder and President of Forex Peace Army.
"When I was 18, I had the privilege of becoming a 50/50 partner on a new venture with the former owner of the largest construction company in Russia, then one thing led into another and at 22, I became close friends with two retired bank traders, who explained to me the concepts of limited liquidity, price, access to clients' order books and how someone in the position with power to execute trading orders for the bank with the combination of those things could easily manipulate even a multi-trillion dollar market like forex and make big bucks," says Chavkerov.
According to Dmitri Chavkerov, the mechanics behind manipulations in the November 2014 $4.4 billion scandal are much simpler than most people think.
"Imagine that you are a bank and you get 100 orders to convert $800 billion dollars into euros (buy EUR/USD). You also get say 60 orders to convert $500 billion euros into dollars (sell EUR/USD). So you match the books internally at current market rate, thus having $300 billion to buy EUR/USD left over, so this order to buy $300 billion of EUR/USD gets passed down to traders to be executed on the open market. Of course, their job is to fill this order in small chunks, in order to get the best possible rate for the bank's clients, because if they just submitted this order into the open market at market price, it would create a significant spike up in the rate of EUR/USD, and the average fill price on the order would be much more unfavorable than if they waited and filled the order in small chunks.
"So now imagine that EUR/USD rate is currently at 1.1320, you chat with some other traders you know from other large institutions and learn that they too have significant orders to buy EUR/USD, so what you do is you go to either your own private trading account or your bank's trading account, and place buy order on EUR/USD with take/profit at say 1.1340. Your buddies from other banks do the same thing, and now instead of working together to get the lowest possible price for your client, you instead submit a series of large buy orders into the market within very short period of time, in order to rapidly bring the rate of EUR/USD up to 1.1340 to ensure that your own profit target is hit," says Dmitri Chavkerov.
In response to why Dmitri does not consider such tactics as harmful to fundamental forex retail traders, here is what he had to say: "If you are a fundamental trader, your job is to remain on top of significant market moving news, and position your orders ahead of them. Say that RBNZ went from neutral to dovish on their monetary policy, so you bought AUD/NZD in response to that within minutes of the announcement. The banks will receive mostly buy AUD/NZD orders over the next few hours and days from their large clients in response to that piece of news, and if traders inside of those banks are making small manipulations up or down, it shouldn't matter to your position, because you as small and nimble trader went in ahead of all of them."
Forex Peace Army is a well-known online platform that provides useful and reliable information on forex trading space for more than 8 years.
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SOURCE Forex Peace Army
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