Forex Supply and Demand Strategy: Price Behaviour - ForeXposed

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Saturday, February 25, 2017

Forex Supply and Demand Strategy: Price Behaviour

To understanding prices movement and identification of supply and demand, it's will be good if we try to learn what is referred to as price behaviour. The material to be delivered is derived from SpyGlass UK, I summarize it so that easy to learn.

There are three main topics:

  1. The essence of Price Behaviour.

  2. Price Structure analysis.

  3. Market Conditions analysis, and why this analysis is important before taking a decision to entry.

Price behavior and chart structure are one of the most important aspects of technical analysis, but most often overlooked. Even though the understanding about it can make a trade more successful.
Forex Supply and Demand Strategy: Price Behaviour
Illustration

Currently, the condition of the market and trading activity has a lot of changes compared to decade ago:

  1. A growing number of traders exponentially and rapidly advance of trading technology affects the volume and liquidity. It also led to higher market volatility.
  1. The high-speed connection which makes traders ‘fight’ on the nanosecond. Banks and financial institutions are fighting to get the best price, and this battle requires minimal processing time where 1 nanosecond can make a huge difference in determining who are the winners and who the losers, let alone with a trading volume of tens to hundreds of million dollars.
  1. Now, computer with high speed can monitor and sort out the opportunities.
  1. Confidentiality. Bank or market maker intentionally did not want to show their intensity in the forex market in order to exploit the opponent weaknesses.
  1. Trading Algorithms. I.e. quantitative analysis with a computer program to generate buy and sell decisions automatically if the conditions are met. For example, many traders use moving averages cross as the buy/sell signals. The algorithms program used to analyze these trends, and will generate a buy/sell decision shortly before the cross happens. As well as the tendency of the majority of traders are using support and resistance as a reference to entry, where trading algorithms take decisions shortly before the price touch S/R and can make the price reverses direction without ever touching the S/R level. In the past, indicators gave the superiority, but now indicators give other people a chance to beat us.