How financial trading markets work
Many people do not realize that market price action is only a “step foot on snow”. It is a history of that, and no matter is it 1-second history or a 1-day history.
We have to remember that chart shows us only where price moving, and how price action acts at this moment.
As we all know that history likes to repeat itself we know that in the near future we will have the same situation we had in history. That is why many people try to trade with candles or pattern trading.
To realize how markets work we must understand how and for what moves price action in Forex markets, and in other markets. Do not care, is it the Stock market, or crypto market, price action is the same everywhere.
1)So let’s dive in, and try to understand how the market works.
Most of the world traders lose money on markets, and the reason is simple, they do not understand the market structure.
The market moves from one liquidity point to another, it means, that price action will move there, where will be easier to move for price in that particular moment.
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To understand it we should try to realize, that trading is the same as it is selling goods on a market. If many people will want to buy some goods, the price for that particular goodwill goes higher. If none of the people will be buying it, the price for that particular good will fall.
Same and in Forex and other markets. If every market players want to buy and go Long, the price will climb up until liquidity in that instrument will be sustainable. If there will be none who wants to sell this instrument, price action will show us, that price starting to stall and reverse. At that moment, when the whole market will be bullish and all want to buy an instrument, the market will reverse and starts going down.
And opposite, if all sold instruments and none who can sell anymore, the price will stop lowering and will start to reverse.
We have to understand, the price will go from liquidity to liquidity point, and really no matter what price will show us on a screen, if there will be liquidity, the chart will lead us there if not, the chart will change direction.
If we know, that Forex markets engine is liquidity we should understand that liquidity is created from market participants: people, single traders, housewife investors, big investors, banks and etc.
There are millions of market participants who will try to interact with the Forex market and will try to stand on one side or another side of the price action direction.
2) If we know that market moves need liquidity, where could we find these liquidity points?
We have to learn how to read the chart properly. Find proper support resistance lines, channels of price movement, patterns that people see. If many traders see the same resistance line, many will react on that line. Will they sell, or will they buy, we don’t know, but sure it is the place, where the market will have liquidity. This price action point will be a mark, where we will act with one or another decision, like sell or buy trade. With trading years, you start to see more and more liquidity points but for a newbie trader it is enough to find daily trade liquidity point and it will be enough for you.
3) How Forex markets price stops or starts to move?
We know that some price liquidity pints will be on a chart, but we do not know how price moves, and why it moves like this. We should know that markets move because some people are buying or selling using the BUY market or SELL market action. Markets move only when someone is buying or selling from the market. It is essential that the price of an instrument could move.
If we know who moves price, then we should know that price stops only, when it hits Limit orders. So to start moving price we need market order execution, for a market stop we need limit order execution.
In that case, price action will stop when limit orders will exceed market orders, and opposite, market price action will start when market orders will exceed limit orders.
So, if we have a bull run and our price constant grows up, we know, that this price action is made with a market order execution. And the price will group up until it will hit limit orders and there we will see, which side will win. If market orders will “eat up” limit orders, the price will climb further, if market orders will have stuck in a limit order range, the price will stop climb.
This will be a liquidity point that we were searching for. Here the market will make a decision, will it go further bullish, or it will retrace.
These price actions are essential to understand and stop losing money in Forex markets, and any other financial trading markets.
You have to understand why price moves, what it hides inside of the price move, and how to reach into that price move. When you understand the price action move, then you can add some strategies into your trading system. It can be candlestick patters, any figure patterns, indicators and many many other ways to trade the market profitably.
There are many ways to earn in financial markets and only a couple to lose money.