Institutional tier
The Dealer's Book
The Dealer's Book puts you on the other side of the screen. A client asks for a two-way price and does not say whether it will buy or sell. You shade your quote to manage the inventory you already hold, then hedge only what is beyond your limit. It teaches where much of the liquidity on a chart comes from.
Free, with a verified email address. An account saves your progress, and floors and tiers open as you level up.
What it teaches
Where much of the liquidity on a chart comes from: a dealer taking the other side.
- A dealer earns the spread and carries inventory risk in return.
- Skewing quotes is how a dealer steers flow to reduce a position.
- A client trade a dealer absorbs does not reach the wider market directly. The hedge, when there is one, is the part that does.
- The mechanics described in how FX dealers and the 4pm fix work.
How a round plays
- A client ticket arrives. You see your book: how many millions you are long or short, and your limit.
- Set your skew: shade both prices toward getting flat, 0.1 pip for every full 5 million you hold. Lower when you are long, higher when you are short.
- Send the quote. The client deals with whoever shows the better price, so a skew that makes you worse than the rest of the street loses the trade.
- After the ticket, choose how much to hedge: only what is beyond your limit. The rest stays in the book for the next client.
- A run is eight client tickets and takes about four minutes.
How it is graded
You are graded on process against two stated rules: the skew matches your inventory in direction and size, and the hedge covers exactly the part beyond the limit. Hedging inventory you were allowed to keep pays away the spread you just earned, and is marked as a miss.
The honest note
This is a simplified desk with one set of rules and invented flow, not how any particular dealer runs a book. It is meant to show that much of what a chart reader calls smart money activity has a plain explanation in inventory and hedging.