How does institutional trading influence the markets?

With the growth of online personal finance, the term trading has become more and more popular and today it is possible to find it in various news portals.

Now, there are different types of trading and one of the most frequent to find in the markets and in financial day-to-day is institutional trading. What is it and how can it influence the markets?

It is nothing new to say that online investments are one of the great phenomena of recent years. Investors and savers look for alternatives in the markets thanks to the new technological facilities. To do this, they take into account your level of risk aversion, your personal financial goals and the amount of time you can dedicate to day-to-day operations.

Of course, all that has been said applies to individual investors, known today as traders: those people who are in charge of closing and opening positions in short periods of time, in order to obtain profits thanks to the differentials between the purchase values. and sale. In Forex, for example, this is very common thanks to the liquidity and volatility of the currency market.

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However, as we mentioned at the beginning of this article, there are various
trading classes and one of the most common in the news and developments of the sector
financial is institutional trading. What is it about? Why should you pay special
attention when doing a market reading?

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What is institutional trading?

Institutional trading is the way in which large companies invest in the markets. Large financial companies often have specialized teams that are made up of market analysts and traders. It is the latter who are in charge of carrying out the different strategies that the previous analysis gave as recommended.

The history of Forex trading, without going any further, is full of great stories where institutional trading achieved great market blows. Names like George Soros, for example, are part of popular financial culture thanks to institutional trading and its impact on the market.

Along the same lines, institutional traders have a large amount of funds for their operations, which can lead to preferential positions and prices within the market, as we will see below.

How do institutional traders intervene in the market?

Due to the large amounts they handle, many times some financial assets are reserved for this class of traders, such as the IPOs of company shares.

In turn, as we have mentioned, having a much higher volume of operations, an institutional trader accesses better prices and promotions than a normal trader, which undoubtedly adds a series of advantages when operating and have a higher percentage of success in their movements.

This general panorama is what leads to the fact that many times, when intuiting a market trend, an institutional trader not only operates in that direction, but thanks to the volume of his transactions, he is one of the causes of said trend. So, before operating, it is always convenient to see what institutional traders are doing in that sector to have much more complete information on the market scenario and climates. Following their movements, in most cases, usually brings good results.

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