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    Thread: Demand and Supply in trading Forex

    1. #1
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      Default Demand and Supply in trading Forex

      I have been trading for several years and the only thing that I have discovered so far in my experience is that currencies pairs donít trade eg eur/usd or aud/usd but only individual currencies do ie EUR, USD AUD etc this I first though about it and started his thread years back http://forum.mt5.com/showthread.php?...nalysis-System
      What does this mean?
      It means that the forex market is moved by the forces of demand and supply so if the euro is strong and the usd is weak then automatically eur/usd will rise and if the usd is strong and the euro is weak then eur/usd will fall.
      Why you ask?
      Well then letís dig deeper into this issue. say the current eur/usd quote is 1.1200 it means that if you have 1 euro then you can convert it to 1.12 usd so if the price of euro usd moves from 1.1200 to 1.1250 then this means that the euro has gained in value because now if you have 1 euro you will now have 1.1250 usd if you convert it so if we look at the percentage gain it will be

      0.0050/1.1200*100=0.446% gain for each euro
      So if we have 1000euros
      In the first quote of 1.1200
      1000*1.1200=1120 usd
      Bu in the second quote where the euro has gained to 1.1250
      1000*1.1250=1125 usd
      So your 1000 euros have gained by 5$ while still in you pocket or account and since the forex market is driven by the forces of demand and supply then this means the euro has gained in demand therefore reducing the supply in the market thus increasing the value of the euro by 0.4% and reducing the value of the usd by the same. For in the first example the value of the usd was 1.1200 for every euro.
      As in
      1euro =1.200 usd
      ? =1 usd

      = x*1.1200=1*1
      = x =1/1.1200
      =0.892
      So one $ is equal to 0.89 euros in the first quotation but in the second quotation it would be valued at
      =x*1.1250=1
      = x =1/1.1250
      =0.8888 euros
      So the euro has gained and the usd has lost

      But the forex market is not all about the euro and the usd for there are very many currencies traded like the GBP, JPY, CHF, NZD, AUD and CAD which are traded along side the EURO and USD. Which have the same effect on each other so to know the demand of a currency we have to have a certain parameter like the percentage gain the pips gain or which ever type of gain. So if we look at percentage gain we can view it in a formulae like this if the mean gain of the euro is +4% for the day and that of the of the aud is +1% while the jpy is Ė 3%. Then it would be advisable to trade the EUR/JPY buy for they are trading in different directions rather than EUR/AUD for it can be very choppy/volatile for they are trading in the same direction for they are both strong and so they have a positive demand and for making profits in the market we want to pair a currency that is strong against a weak or losing currency. but just remember this alone is not a direct signal for entry or exit but other confirmations like break of support and resistance are needed for confirmation. Normally I use previous weeks high and low breaks but that is a subject I will discuss in-depth in my next thread in my trading strategies

      just give your thoughts and lets share on it

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      Mkape (09-26-2017)

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      Demand and supply is the driving force that moves prices in the forex market. It is pure economics, if the demand for a particular currency goes up and increases, there will likely be an increase in the value of that currency. Now, currencies are paired up in the forex market, take for example Eur/Usd, if the economy of US is booming and very favourable to investors, they will most likely be an increased demand for the dollar, and at the same time if the economy of the Euro zone is gloomy, investors will flee. Do these investors will likely sell off their Euro and demand for dollars so that they can catch the moving train in the US economy. This will weaken the Euro's strength against the dollar and result in a fall of the Eur/Usd pair.

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      When you are able to discover the currency that is in high demand in the forex market and trade it against the one that is in low demand, then you can be able to identify good trading opportunities. This will enable you to trade profitably in the forex market.
      THE POSSIBILITIES IN FOREX TRADING ARE INFINITE, YOU CAN ACCOMPLISH ANYTHING !

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      Each trader has different approach in this market, demand and supply applies to every aspect in business and so to currencies, when demand is high then price of the particular product or currency will also go up and vice versa, this is well represented on forex chart which is the best approach to gauge demand and supply in the currency market.

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      kanaphe (09-15-2017)

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      Yes the market is all about demand and supply because some traders will be willing to sell while some traders will be willing to buy and as such one will be more than the other and then the market will be forced to move in the direction of the one that is stronger.

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      kanaphe (09-15-2017)

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      yes the process of traders buying and others selling at the same time is what coses the volatility in the market but at any time there is always a stronger side than the other so the market will go according to the stronger side and this is where the demand and supply analysis comes in handy in trading

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      Demand and supply both are economics words, as demand means that the said commodity or currency is in high demand and its rates must be high as the seller will get the benefit in selling it, the customers are willing to pay it a certain amount for buying it and its requirement is increasing to a high level while supply means that the sellers are selling something and its over all demand is low as compared to its sellers, here the companies/suppliers are the suppliers who are willing to sell their commodity or currency at a certain level of price, so both of these concepts operate in the Forex market as this makes the market sentiment as what currency of commodity is in high demand or in high supply levels,

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      kanaphe (09-16-2017)

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      yes, in the world of economy, there are always two things that can move the market. yes both factors are supply and demand. when there is an imbalance between supply and demand, there will be movement in the market. you can see when the market is at the end or the beginning of the session, then the market will tend to side ways. it is because there is no transaction in the market.
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      you can see when the market is at the end or the beginning of the session, then the market will tend to side ways. it is because there is no transaction in the market.
      no when there is a side way move in the market it means that the buying power between buyers and sellers is equal and therefor there is no clear winner in the market to determine the direction of the trend and until a winner is found then the market is termed as ranging market

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      There are many factors involved with the forex trading business for its daily up and down and we should know that to act accordingly. The world of politics and finance can move the market upside and downside at any time. Supply and demand is also a key factor to make the market either stable or unstable at any time.

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