In the world of trading, it’s a common myth that banks always trade against retail traders — deliberately pushing price into retail stop-losses, triggering fakeouts, or hunting liquidity for their own benefit. While banks and institutions do rely on liquidity (often provided by retail), the idea that they are intentionally targeting retail traders on every move is overstated and misleading. Banks don’t trade “against” retail — they trade through the market based on their own objectives, flows, and client orders.

Why this myth exists

1. Stop hunts and liquidity grabs
Retail traders often place stops at obvious levels. When price suddenly spikes into those zones and reverses, it appears that “the banks are after retail.” In reality, this is how markets function — liquidity attracts price.

2. Smart money marketing
Many courses and online influencers promote the idea that retail traders are always being “tricked” by banks — creating a David vs Goliath narrative that oversimplifies institutional behaviour.

3. Retail losses are high
Since the majority of retail traders lose money, it’s easy to assume someone must be “against” them — when in truth, losses usually stem from poor strategy, risk management, and emotional trading.

4. Institutional precision
Banks often execute trades at levels retail traders can’t see (using dark pools or advanced order types), leading to the illusion of market manipulation.

How banks actually trade

1. Flow-based execution
Banks trade on behalf of clients — including hedge funds, corporates, and governments — executing large volumes while minimising impact.

2. Risk transfer and hedging
A bank may take the other side of a client trade to provide liquidity, but it often hedges the exposure elsewhere, rather than holding a bias.

3. Position accumulation through liquidity
To enter large trades without moving the market, institutions wait for liquidity pools — which often exist at retail stop zones. This is a by-product, not a personal attack.

4. Interest rate and macro themes
Bank trading desks are guided by macroeconomic policy, interest rate expectations, and interbank flows — not charts of where your stop-loss is.

5. Algorithmic execution
Banks use smart order routers and execution algos to minimise slippage and price impact. These algorithms aren’t “hunting” retail — they’re optimising execution.

What retail traders should understand

Myth	Reality
Banks hunt retail stops intentionally	They seek liquidity — and retail stops are a natural source
Institutions are always on the opposite side	Banks hedge and transfer risk, not always hold opposing bias
Retail can’t win if banks are involved	Retail traders with structure and discipline can succeed
Market is rigged against retail	It’s indifferent — structure and timing matter more than identity

How retail traders can protect themselves

• Avoid obvious stop zones: Don’t place stops directly above highs/lows without a buffer or structure.
• Use liquidity zones as entries: Anticipate where price might react — don’t fear it.
• Follow macro themes: Understand what banks care about (rates, inflation, GDP) and align your bias accordingly.
• Think in probabilities, not conspiracy: Losing a trade doesn’t mean someone was out to get you — it means your setup didn’t work this time.

Conclusion: Do banks always trade against retail?

No — banks don’t actively trade against retail; they trade in pursuit of liquidity, execution efficiency, and macro objectives. Retail traders can actually align with institutional flows by learning how liquidity works, understanding macro themes, and avoiding common trap zones. The market isn’t out to get you — but it is out to fill orders.

Learn how to align with institutional logic and avoid common retail traps in our practical Trading Courses designed to help you trade with clarity, control, and real-world edge.