I have a few questions about certain market behaviors.
First - in a stock market, Trader A buys shares from the company, and the price of shares moves up. In the forex market, to my knowledge you are not "buying" anything when you trade. You are exchanging. This means that Trader A buys 1lot of GBP/USD from Trader B who is selling 1 lot of GBP/USD. There is always someone on the other side of the trade. (Lets assume the whole "broker's book" thing here is not in play, but even if it were, this means THEY were on the other side of the trade.)
My question is, if there is always someone on the other side of a trade like in my example above, how does price move up and down? I would buy 100,000 lots of something, but that means various others would have to sell a cumulation of 100,000 lots to fill my order, and price would remain in the middle. Where is this logic flawed?
Second - Again, Forex differs from the stock market because of who is behind each trade (Stock = company; Forex = broker/other party). Does this mean there is a difference in stop hunting? In forex stop hunters buy into areas of consolidated stops, therefore they are effectively "buying" the stoplosses from the holders. In the stock market you are not buying other peoples positions, so what does that mean when you stock is hit?
My guess is that price moves relatively the same regardless of who is on the other side, so one can still collect stops via price manipulation or reaction at the consolidated areas. But if anyone has a more detailed explanation on how the two markets differ in this area I would be interested.
Third - Is leverage calculated into the "multi-trillion" dollar claim about how big the Forex market is? Trader A can control of thousands of dollars with his leveraged $1,000 account. All those leveraged thousands do not technically exists, so when people say how big forex is, does it include this factor?
Thanks all, if you need clarification on any of this stuff, please let me know.
-Marsh
First - in a stock market, Trader A buys shares from the company, and the price of shares moves up. In the forex market, to my knowledge you are not "buying" anything when you trade. You are exchanging. This means that Trader A buys 1lot of GBP/USD from Trader B who is selling 1 lot of GBP/USD. There is always someone on the other side of the trade. (Lets assume the whole "broker's book" thing here is not in play, but even if it were, this means THEY were on the other side of the trade.)
My question is, if there is always someone on the other side of a trade like in my example above, how does price move up and down? I would buy 100,000 lots of something, but that means various others would have to sell a cumulation of 100,000 lots to fill my order, and price would remain in the middle. Where is this logic flawed?
Second - Again, Forex differs from the stock market because of who is behind each trade (Stock = company; Forex = broker/other party). Does this mean there is a difference in stop hunting? In forex stop hunters buy into areas of consolidated stops, therefore they are effectively "buying" the stoplosses from the holders. In the stock market you are not buying other peoples positions, so what does that mean when you stock is hit?
My guess is that price moves relatively the same regardless of who is on the other side, so one can still collect stops via price manipulation or reaction at the consolidated areas. But if anyone has a more detailed explanation on how the two markets differ in this area I would be interested.
Third - Is leverage calculated into the "multi-trillion" dollar claim about how big the Forex market is? Trader A can control of thousands of dollars with his leveraged $1,000 account. All those leveraged thousands do not technically exists, so when people say how big forex is, does it include this factor?
Thanks all, if you need clarification on any of this stuff, please let me know.
-Marsh
All I ask for is a chance to prove that money cannot make me happy.