AIRFOREXONE_

Supply And Demand Basics (Educational Post)

Long
FX:EURUSD   Euro / U.S. Dollar
SUPPLY ZONE :

has a drop then a base in which we have a lot of accumulation of orders being transacted before the mouvement then we have the breakout and drop and finally the retest.


DEMAND

has a rally then a base in which we have a lot of accumulation of orders being transacted before the mouvement then we have the breakout and rally and finally the retest.

has a drop then a base in which we have a lot of accumulation of orders being transacted before the mouvement then we have the breakout and drop and finally the retest.
If you have been led to believe that the prices move depending on the number of buyers and the number of sellers; if the number of buyers is greater than the number of sellers, prices go up, & if the number of sellers is greater than the number of buyers, prices go down. Then you would be wrong. The number of sellers or buyers is not what moves the price. What if one seller is doing all the selling to thousands of buyers? The price will go down. The answer to our question is that it is the degree of aggression of the buyers or the sellers and the volume of order-flow they submit is what moves the price. If a seller is aggressively executing large amounts of sell-orders at the current market price, the price will tick down. If a buyer is aggressively executing large amounts of buy-orders at the current market price, the price will tick up. The volume of the order-flow being transacted is the key. For every buy-order, there must be a sell-order. When the buyer demand exceeds the available supply of sell-orders, the prices increase. When the seller demand exceeds the available supply of buy orders, the price will drop. This entire process is occurring constantly and the market is always trying to reach an equilibrium where buy-orders and sell-orders are continuously matched up to give us the current market price, for that specific moment.

The number of individual buyers and sellers is not as important as the amount of order-flow volume that each buyer or seller is transacting. The amount of order-flow volume being transacted at any one time and the aggressiveness of the submitted order-flow is essentially what moves the price. The degree of aggressiveness is the degree to which price will move. That is the story behind the up-ticks and down-ticks.


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