I once had a conference about forex trading.
It was a free event organized by a broker and they asked me to talk about Forex charts.
I remember that I pointed the chart on the wide screen and I asked: "what do you see?".
I got the same response: a chart.
I also heard someone laughing
to be honest. The question maybe seemed to be too easy.
So I asked: "if you focus more on the chart,
what do you see?" Someone started to be interested and tried to listen carefully.
Someone else suggested candlesticks instead.
Well that's correct.
So once again I asked: "if you focus on the candlesticks, what do you see?
Ten seconds of silence.
Questions started to seem harder and no one had any idea of where I was going with my questions.
Someone said that we could see price movements focusing on the candlesticks.
And that's correct again.
I was quite proud of people there, they were right about the first three answers: chart, candlesticks
and price movements.
Unfortunately the last one is the decisive one to understand forex market and to make money out of
it.
So I asked: "if you focus on price movements, what do we see?".
Again ten seconds of silence followed by someone who tried to give very exotic answers but there's only
one answer to this question and it is supply and demand.
What you see on your charts is the result of supply and demand principle.
In other terms if demand exceeds supply the total trading volume of buyers is greater than the total
trading volume of sellers causing the price to go up.
Conversely if supply exceeds demand the total trading volume of sellers overcomes the trading volume
of buyers causing the price to go down. When supply and demand are equal the price will not have
any direction.
That's the case of a sideways trend.
The supply and demand law is valid for any financial market and sometimes not only for financial markets.
Let me give you an example from daily life experience.
Let's go on Amazon UK and search for a GoPro Hero 5,
that is a camera that I bought on the 10th of June. So it is the first one, I click on it and then I use
an extension of chrome that I have.
It is called Camel camel camel and it allows you to check the recent prices for items on Amazon.
I want to have a closer look on the Website so I click here
and here we have the product on camel page
and I want to focus on the last three months.
So here we have a chart that shows the price for the GoPro hero five on Amazon for last three months.
I bought go pro on the 10th of June,
so approximately here and if you go a few days back you can see that the price was around 350 £360 and
then it went dramatically down.
Now what happens with the price here.
It happens that people start to think that the price of the GoPro is very convenient so they start to
buy the GoPro.
It is something that I actually did by myself, I wanted to buy a camera and I saw the GoPro at that
price and I felt that it was very convenient and I bought it.
So many people bought the GoPro in that period and they increased the demand for that item pushing the
price up.
This was a simple example on Amazon, just to give you an idea of how supply and demand work with something
material.
Make sure you understand this concept because all the course is built on the supply and demand law and
the fight between buyers and sellers.