How many units of EUR can move USD by 1 pip??

Newton's second law
F=ma
Force = mass × acceleration

Ohm's law
I=V/R

Almost in all the fields we can guage things related to that field.

Is there any way to guage forex currency movements??
I belive their will be people in this community who can come up with such formula or equation!!!

its not possible it depends on the market participants.
what is EUR/USD? its the value of 2 currencies compared to each other. EURUSD bid=1.18 means 1eur is worth 1.18 usdollar.
if you buy (BID) EURUSD you get 1 euro and you pay 1.18 usd. if you sell (ASK) EURUSD you get 1 usd and you lose 0.84 euro in a world without spread.
i.e. you see a red EURUSD candle which means that EUR lowered in value and/or USD raised in value.

how you determine the value? the market is a market.
i go to a big egg market and want to change 1 apple for eggs. the market owner plots a chart (APPLE/EGG chart) and i can see 1 apple is worth 4 eggs, he knows which trader pays the most for my apple and the best offer i could get was my apple for 4 eggs so i make the deal.
but after that trade no one is willing to make the same deal because eggs are getting rare and the next best offer is 3 eggs for 1 apple the next 1 hour. so the APPLE/EGG chart shows a red H1 candle, the value of apple vs. egg was lower than 1H before because no one was willing to give me more than 3 eggs for 1 apple.

that tells you that the price movement you see on your chart is moved by supply and demand and its impossible for non insiders to know if the egg market will get more eggs the next day than today which will lower the value of the eggs if the demand on eggs is the same like today.

You have been involved with FX for more than 7 years and still haven't figured out how the market works?

Do you know how this clever device works?



Markets work the same way!

Its all about balance!

If demand> supply price goes up
If demand <supply price goes down

In order for the price to move, at least one of the following things must happen:

a) Executed market order. (consuming liquidity)
b) New added Bid above the highest Bid or new added Ask below the lowest Ask. (adding liquidity)
c) Removed best Bid or Ask. (canceling liquidity)

See this order book example and assume this is the whole market:

Ask 1.2253 6M
Ask 1.2252 5M
Ask 1.2251 4M
Ask 1.2250 2M (best ask)
(spread)
Bid 1.2248 1M (best bid)
Bid 1.2247 2M
Bid 1.2246 3M
Bid 1.2245 4M

What will happen if you buy 1 million at the current price (with market order)?
What will happen if you sell 1 million at the current price (with market order)?
What will happen if all buy limit orders at 1.2248 are removed?
What will happen if all buy limit orders at 1.2246 are removed?
What will happen if you submit Buy limit order at 1.2249?

Now imagine all these things happening simultaneously hundreds of times per second. Traders buy, sell, and submit or cancel limit orders....this constantly changes the balance in the order book and as a result the price moves up or down.

This is how the market works on centralized exchange where there is only one order book.
With FOREX there are hundreds of order books because the market is decentralized. But the order books are synchronizing with one another super fast.
That's why FX arbitrage is almost impossible today.

And now to answer your question, what is needed? You have to know the total supply and demand across ALL order books! Only then you will know how many unit of currency is needed in order for the price to move by one pip.

For the retail trader it's not possible to obtain this information. Even the biggest banks(market makers) don't have the complete info. But they know over 90% of the orders at any time. They often use this information to orchestrate stop hunting events. Or to manipulate the market if they need to balance their own order book.

[quote=alphaomega;10392453]ou have been involved with FX for more than 7 years and still haven't figured
Well detailed explanation of market making or price movements. This just explains the complexity of currency market. Even some experienced traders don't know fully of such currency activity.

I'm neither a math nor a science guy, but I think you'd have to have just two variables, one for action (a), the buyer and one for reaction (r), the seller. It doesn't seem too complicated, p (for pip) = 1 if a>r and p = -1 if a<r. Or maybe I'm all wet...

The only formula is for you to bash one side and see .

I hate these supply and demand arguments.... because for every single buyer there is a seller, and for every seller there is a buyer; meaning supply always equals demand -------> Go figure; doh

Here is another stinky alternative for you; if trader A buys XY at price Z then the market maker has supplied XY at price Z.... do we argue that supply has increased or that demand has increased? (From the traders view demand has increased however from the MM the supply has increased)

this is why i love forex cause people dont even understand the simplest things even when you explain it well.
no dumb money no profit. they dont even understand that they trade pairs.

For every single buyer that buys there is a seller that sells exactly the amount bought by the buyer.

If there are many sellers ready to sell but not a single buyer willing to transact at this price there is an imbalance.

- Seller removes his offer that nobody is interested in ---> c) Removed best Bid or Ask. (canceling liquidity)
- Seller bid another lower price to attract buyers ---> b) New added Bid above the highest Bid or new added Ask below the lowest Ask. (adding liquidity)

The price went down but not a single transaction occured.

Q: How many units of EUR can move USD by 1 pip??
A: Zero units are sometimes enough!

The "there is a buyer for every seller" argument is not completely true. There can be a lot of buyers and much fewer sellers, if the sellers offer more than the buyers accept, the price will move down.

If there are 10000 buyers, each for 1 lot, and 1 seller offering 10001 lots, the price will move down as long as it will find the 10001th buyer lower accepting the remaining lot. Although the real flow of the market is much more fluid than this, but this is basically how price really moves.

In the end it does come down to the basic law of supply and demand.

Rule 1: If demand is greater than supply, prices rise. If supply is greater than demand, prices fall.
Rule 2: Lower prices attract demand, higher prices attract supply.

If you learn to utilise these 2 simple rules on the market, you can make money out of it fairly consistently.

Also if S&D would be always equal, the chart would be a straight line.

lol lol lol lol the best thread i ever read in ff.