Intro to Forex Supply and Demand Trading Strategy - ForeXposed

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Saturday, February 18, 2017

Intro to Forex Supply and Demand Trading Strategy

If you want to trade currency there are two primary media. The first medium is Future Market, while the second medium is Cash / Spot Market that usually better known as FOREX.

Intro to Forex Supply and Demand Trading Strategy
Picture foreign exchange market


Although both represent the same market and their movements will not be far away from each other, but there are some differences. Among these; the futures market traded in the exchange such as Intercontinental Exchange (ICE), the Chicago Mercantile Exchange (CME), Euronext and Tokyo Financial Exchange (TFX).

The most important thing  for the beginner is to know HOW and WHY the price is moving. Among the most important thing to be understood is; the price moving caused by function and the result of the Law of Supply and Demand, not due to other causes.
The price is moving when this simple calculation (supply and demand) becomes unbalanced.

This is no different than trading in traditional markets. For example, the price of oranges in traditional markets will spike due to reduced supply from Australia. Or as it approaches the great days such as new year resulting in rising demand.

This is very similar to trading currencies, just different on scale and medium. Therefore, the basic mindset must be owned by a trader is a trader mindset in which he traded for demand and supply presence.

Intro to Forex Supply and Demand Trading Strategy




More simply stated, see example quantification of demand (support) in the chart above. Since the price is consolidating / sideways, a trader can assume that supply and demand are in equilibrium at the 1.0300 price level. But actually, it does not stand balance in fixed prices. It only took the time (more or less), then an imbalance will occur.

And when prices rally from the demand level (between the red lines), it is obvious that more buyers willing to pay in the range of those levels. Therefore, if and when the price return to visit this level, surely we'd better get ready to take buyer position.

Indeed, when we take action to buy, actually we buy from people selling after the price is decline and at the level of the price range where demand exceeding supply.

Looks simple, but it not easy! Online Trading under the laws and principles of supply and demand will really test your emotions.

For example, you can see in the picture below, that the prices in decline/drop, back to the low risk / high reward, which starts with a red candle or bad news prompting mass or more people participate in conducting the mass selling.

But it is different to a smart trader. He knew that somehow, when the last seller had removed the order at the price level where Demand > Supply (Demand is more than supply), then the price will move up (rise).

Intro to Forex Supply and Demand Trading Strategy


Intro to Forex Supply and Demand Trading Strategy


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