If you have had the chance to take my first course, we have talked a lot about the participants in the
Forex market.
This time we are going to analyze the participants in the Forex market from a different point of view.
From the perspective of supply and demand.
When you buy a currency pair, you are basically increasing the demand for that couple.
While when you sell a currency pair, you are increasing the supply for that couple.
So we can say that buyers and sellers are responsible for the level of supply and demand. In Forex market,
we can find buyers and sellers like me and you.
What are we doing on the market?
We speculate the market. We don't really care about fundamentals.
We maybe read the economic calendar to stay away from trading when important news are released.
Maybe we try to make profit trading the news but we don't do more than that.
We try to make a profit from speculating the market imbalance.
What if euro-dollar pair collapses in a couple of weeks from 1.15 to
0.95?
Is it going to affect us?
Not at all.
Even if we had a long position we probably had a stop loss of 100 pips or less.
So we don't really care if the price went down by two thousand pips in a couple of weeks. So we can summarize
our action on the market saying that we try to make profits on the market analyzing lower timeframes
investing an amount that can go from a few hundred dollars to hundreds of thousand dollars.
What kind of impact do we have on the markets?
Zero! Forex has about 4.1 trillion dollars transactions every day on average. A position of
$10000
is not going to affect the market.
Another category of buyers and sellers are the ones that participate in the interbank market.
The interbank market is the market through which large banks transact with each other for both their customers
and themselves.
Among the largest players are Citicorp and JP Morgan Chase in the United States, Deutsche Bank in Germany
and HSBC in Asia.
The minimum size for a position in the interbank market is five million dollars.
But most transactions are much larger and some can top one billion dollars in a single position.
If you think of a transaction of one billion dollars in a market that has an average of four point one
trillion dollar transactions each day on average, probably it's still not much.
But if you think that 10 or 20 of these transactions are in the same direction, it starts to be relevant
in terms of supply and demand.
So throughout this course, I will talk a lot about buyers and sellers or bulls and bears if you want to
use Forex jargon and I want you to understand that I'm not talking about me and you.
We don't have any power on the market so there's no point to study our action.
When I talk about buyers and sellers I mean the large participants in the Forex market.
So the ones that can have a huge impact and can change the balance between supply and demand.
They are the ones who move the market.
So it makes sense to study their behavior,
how price moves as a result of their actions and formulate concepts to try to be in the same boat with
them.