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Supply and Demand – the fundamental cause of market movements
It’s easy for beginners to get caught up in exciting new words and to explore the intricacies of Fibonacci Bollinger exponential moving parabolic resistance zones, but perhaps equally important is asking yourself the question: what actually makes the price go up and down?
Taking this view not only gives you a better understanding of the financial system, but it also gives you a better understanding of how all other strategies work.
Supply is a term used to describe how much of something there is in existence, how many shares in a particular stock for example, how many government bonds have been issued, or how many units of currency there are in circulation. Supply is always finite. There is a limited number of shares in Apple. You can’t keep buying them infinitely, even if you had the money; eventually there won’t be any more to buy and you will own 100% of it! If you study economics, you’ll be familiar with a supply and demand diagram. In this case, the supply is fixed. It doesn’t matter how high or low the price is, the supply is always the same, as shown by the diagram.
Demand represents how much…
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Yulia10 avatar
Yulia10 18 May

good article

AND avatar
AND 19 May

Nice article! Thank you

Fizatata avatar
Fizatata 20 May

Nice, wish you stay winner????

nhamfx16 avatar
nhamfx16 21 May

Good article

AndreK avatar
AndreK 27 May

Good job.

orto leave comments
When Buyer and Seller agree on both Price and Value, no trade will ever be made.
Buyer and Seller have to disagree on Value, not on Price, in order to make trades. Because there are many buyers and sellers in the world of currencies, there are alway people who value a currency different and so price keeps moving around. If one can predict value, one can predict price.
Fundamental analysis is all about predicting value, while technical analysis is all about predicting price. We can see price moving in the charts and so try to predict where it might be going, but forces we cannot see make the price go up or down. If we could only see those forces…
When observing the way market, volume and price change, we can see similar mechanics in the physics of pressure. Hang on for a few seconds, it’s quite simple.
Pressure and Forex: if i shake a bottle of champaign forcefully, the cork will pop out and champaign will be wasted. So if pressure rises in one places, stuff will go from where the pressure is high to where the pressure is low.
The same proces works for Forex price: if value differs, price will move. And again: by knowing where the pressure is, we can tell where …
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Acko avatar
Acko 21 Jan.

Hi, thanks for your article, could you answer the text bellow? I am not sure if I understand well.
To measure pressure you are using volume and range – then you can decide in which phases the market is. If you are in phase of flow, you can follow the global trend, correct?
Can we use this approach also to indexes? Or these markets are not so connected with each other? Could you please also explain in more detail your picture with matrix, I don’t know how the number are counting (why ADX)
Thanks in advance

semperaugustus avatar

I will add the answers to your questions underneath the article.

semperaugustus avatar

Oh, cannot edit...

In each matrix we measure Increase (+) or Decrease (-) of two values. Where values cross, we see the fase that these two values point out.

Volume and Range is one of the three methods to see what fase we have. If all three methods line up, fase is more certain than if they contradict each other.

If fase is Flow, you might follow trend. But if fase is flow, retracement is always around the corner!

I have no experience with indexes whatsoever. So i cannot answer that question.

ADX is one of the many ways to measure momentum. You could use rsi, stochastics, macd...

anna_t avatar
anna_t 21 Jan.

like this article

Durden avatar
Durden 26 Jan.

good job

orto leave comments

There are many Short term trading strategies - many of which can be seen with various articles here, they range from simple Moving average crosses, to using overbought/oversold signals and many, many more technical indicators. Broadly speaking, a rules based strategy involves no skill and this applies to both shorter term and longer term strategies. However, market participants need to know when to use each - for example, using RSI is unlikely to work to effectively over the course of 20 years, but can work quite well on a 30-minute chart, likewise using any of the three main multi year strategies fail to work on shorter term timeframes.
Here is a quick look at some simple short term strategies and their backtests (tested on the AUDUSD), while there are some profitable ones, sharpe ratios and Max DD's are awful and thus these will fail in the long run.
Long term FX strategies:

As highlighted above, there are literally 1,000's of techniques that are used in trading, yet only 3 have stood the test of time, these are as follows; Carry, Value and Momentum. I will look at each one individually to explain what they are, and why they have been successful.

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Daytrader21 avatar

You're correct on the Risk on/risk off environment, if you run a correlation between risk trends like S&P500 and overlaying AUD/USD it can bee seen that from last year's summer the correlation has broke, as SP500 runs to new all the highs and at the same time aussie breaking lower. But at some extend on short time periods this relationships are still present.

mimuspolyglottos avatar

Becoming Hall of Famer. Very glad to see article about trading style of mine. The risk of prolonged stability with low volatility is in a situation,  when people have to put in trade more and more to meet their profit targets. In carries (almost) all use the same approach and  same techniques making ''pump&dump" conditions. This article is useful for me because I have been trying to build carry baskets (risk-adjusted) since 2007 to fund low vols pairs trading (USD/SGD,CHF/EUR).

mimuspolyglottos avatar

Thank You very much.

Armands avatar
Armands 14 Apr.

I guess that in future all central banks will set their interest rates near to 0% and then there will be no carry trades :)Other two I never knew, so I learnt something new. Good job!

dntrader avatar
dntrader 11 June

I like long term forex strategies.

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