Lessons from the Pros


The Truth About the Big Boys

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.

Bank of America financial report

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.

Morgan Stanley's financial statement

JP Morgan Chase is known as a banking center and a brokerage, but they also made over $284 million from their trading activities.

J.P. Morgan financial statement

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!

Goldman Sachs financial statement

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.

Wall Street Journal
Unfortunately, their actions are getting worse. Even though the government says it is trying to help small traders and investors, the loopholes are still looming.

U.S. banks moved billions of dollars in trades.

Worse yet is the thought that the institutions would use your trading activity against you. But that is exactly what is happening. A firm, ITG, has been charged with trading against its own client order flow.

Do brokerages trade against their clients?

Free Trading WorkshopDon’t despair, there is something you can do.  Learn how to read order flow and institutional trading activity the Online Trading Academy way and trade and invest the same way these profitable institutions do.  It is the only way to increase your chances for profiting in the financial markets.

Brandon Wendell – bwendell@tradingacademy.com

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.