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Trading concepts and questions

  • #1
  • First Post: Jun 17, 2018 8:01am Jun 17, 2018 8:01am
Hello everybody.Newbie here,so bear with me
1. I hear this phrase many times:"If there is more buyers than sellers-price goes up.If there is more sellers than buyers-price goes down."But how this could be possible?
For example:
At point of time currency pair "A" has a price 1.0000.Big boys,banks or whoever wants to buy alot of it at this price, but at the same time nobody wants to sell it at this price...so,following the logic of "If there is more buyers"... price should go up...that doesn't make sense...maybe if "If there is more demand than supply-price goes up and vice versa"?When we see an UP daily candle-we say well,today buyers were in control...but when the day is starting no one has a clue what's gonna happen today.Same goes for trading sessions-if during Asian session buyers were in control doesn't mean that price will continue to go up on London session.
Common sense seggests that if the buyers don't have anyone to buy from-they simply CAN'T buy
2.Many traders say that "big boys" are manipulating prices,like putting them higher to trigger buy trades and then puting them lower to trigger SL's on those trades to
further have enaugh liquidity for their own buy orders.(SL on Buy order is Sell order not "close" or "SL").I can understand the logic,but still I don't get HOW they move prices to make such a maneuver.
Got many other questions,but lets see first how this will "play out".
  • #2
  • Jun 17, 2018 8:26am Jun 17, 2018 8:26am
Great questions you have there )

To start off, most people share around quotes without even trying to understand what they mean. Why ? To feel cool, thats how we as humans are.
I totally agree with you on the first point, I believe the quote originally meant buyers as in "willing to buy" rather than "actually bought". Which as you have said starts to make logic in the context of supply & demand.

As for the next session continuing the behavior of the previous...
The thing about the markets is that literally anything could happen
I remember reading about this in a book about Jesse Livermore (probably), there was a story where a boss calls in his analyst in the office and they participate in the following dialog:

-So you are sure that the prices are going to drop?
-Yes, bears are totally in control !
-Are you really sure?
-Ofcourse, my analysis can`t be wrong.

So the boss picks up the phone, and buys a huge amount of shares, which leads to the prices rising.
The moral of the story is - whatever you have analysed, has already happened. And what can happen, can be anything.

As for your second question, this can be best observed on crypto currency trading platforms.
Mainly bittrex and crypto watch from kraken.
Where you can see the real volumes and even limit orders. There are "whales" the so called "big boys" who in a way manipulate prices by starting to bid/ask way away from the current prices. Which triggers a reaction.

For example the price is 1.000, a huge bid is made at 1.250.
This gives out an illusion that the prices must rocket upwards after breaching 1.250.
And the race to 1.250 starts, more and more start buying, which causes others to join in once they see the trend.
The sellers recognize that there is clearly a demand, start raising up asks. Why ? Because its more profitable to sell at 1.200 rather than 1.175
The truth is hidden from you
  • #3
  • Jun 17, 2018 10:41am Jun 17, 2018 10:41am
Quoting MaxenshteinD
...For example the price is 1.000, a huge bid is made at 1.250. This gives out an illusion that the prices must rocket upwards after breaching 1.250. And the race to 1.250 starts, more and more start buying, which causes others to join in once they see the trend. The sellers recognize that there is clearly a demand, start raising up asks. Why ? Because its more profitable to sell at 1.200 rather than 1.175
Hello.Thanks for response!
So if I understand correctly:
1.The price is 1.000.
2.A huge bid is made at 1.250.
3.Price will tend to go to that level.
4.Some sellers will recognise this therefore will be wanting to sell around that level.
5.If and when price will reach that level-the buyers will have enough supply to buy from.
Right?
So after price reach that level 1.250 we have three scenarios:
1.Price will continue go higher.
2.Price will "stall".
3.Price will retrace/reverse.
Right?
  • #4
  • Jun 17, 2018 10:51am Jun 17, 2018 10:51am
Hi G.Kad, after the price reach 1.250..if most people choose to sell their currency then the price will decrease back to 1.000...It's so simple like that..It's Supply and Demand rules.
  • #5
  • Jun 17, 2018 10:59am Jun 17, 2018 10:59am
Quoting G.Kad
{quote} Hello.Thanks for response! So if I understand correctly: 1.The price is 1.000. 2.A huge bid is made at 1.250. 3.Price will tend to go to that level. 4.Some sellers will recognise this therefore will be wanting to sell around that level. 5.If and when price will reach that level-the buyers will have enough supply to buy from. Right? So after price reach that level 1.250 we have three scenarios: 1.Price will continue go higher. 2.Price will "stall". 3.Price will retrace/reverse. Right?
Yeah you summed it up )
After all what else could the price do...
However what can be used in my opinion, is the "lag" of each of those 3 phases. When a phase happens, it could continue for some time. And violently switch in to the other phase. So to abstract it even more, lets sum it up to 2 outcomes instead of 3. Either the price will continue higher/retrace or it will stall.

I like to see it in the context of Pump and Dump scheme, this is a completely real, objective and observable on the chart example.
And once again I really recommend you to see it in action right now live at any charting solution to view cryptocurrency prices along with its dom.
Such as btc/usd from cryptowat.ch (p.s. sounds like im advertising but i was fascinated by the ability to view the market with such details and completely for free).
Once again this is just for knowledge )

https://en.wikipedia.org/wiki/Pump_and_dump
The truth is hidden from you
  • #6
  • Jun 17, 2018 11:04am Jun 17, 2018 11:04am
Quoting MaxenshteinD
{quote} Yeah you summed it up ) After all what else could the price do... However what can be used in my opinion, is the "lag" of each of those 3 phases. When a phase happens, it could continue for some time. And violently switch in to the other phase. So to abstract it even more, lets sum it up to 2 outcomes instead of 3. Either the price will continue higher/retrace or it will stall. I like to see it in the context of Pump and Dump scheme, this is a completely real, objective and observable on the chart example. And once again I really recommend...
Thanks for valuable information!Will definitely look at it.
  • #7
  • Jun 17, 2018 12:39pm Jun 17, 2018 12:39pm
Think of it this way.. When there is a high demand for something the prices rise.. Simple economics...

It's a hot sunny day and the ice cream seller is selling ice creams for $1..... The crowds are buying it and he might run out so he puts his prices up to $1.2
Still people are buying the ice cream but the crowd is not so big as they don't want to pay that price. He still puts his price up though to $1.30 as he still has buyers.
Now he gets greedy as still people are buying and puts the price up to $1.5.

Everyone stops buying the ice creams at that price. They won't pay it as they want a bargain...

He drops the price until the buyers come back again and start buying ice creams.

At the end of the day the crowds go home but he still has a few ice creams left...

He keeps dropping the price all the way down to 50 cents just to get rid of them....
And on it goes...

An other example. The London 2012 summer Olympics.... More tourism, so more demand for the British pound... The more tourists that visited London in 2012 the more demand.... So the GBP rose in price as there was a high demand for it.

The more demand for something the more the prices rise... As the supply runs low (The buyers in forex) the prices will fall.

But not fall as look at a currency pair as two currencies -

People look at it as a currency pair when you should be looking at it as two separate currencies..

EUR/USD -- If there is a high demand for the EUR and not the Dollar the price of the EUR/USD will rise and keep rising as the demand is there and little to no demand for the USD.

As the price of the EUR gets to high they will stop buying it, so no demand.. and they sell it.. So as in forex for the pair EUR/USD they sell the EUR and have to buy the USD.

So the price will drop on the pair but in reality the EUR currency will go down and the USD currency will go up in price.

So the trick to being successful in the currency market is determining where there is increasing supply in the market for a currency and where there is increasing demand for a currency..... If you can determine that, you are well on your way to making significant profit in this dynamic market.
The most violent element in society is IGNORANCE
  • #8
  • Jun 17, 2018 12:53pm Jun 17, 2018 12:53pm
Quoting neilsdigest
Think of it this way.. When there is a high demand for something the prices rise.. Simple economics... It's a hot sunny day and the ice cream seller is selling ice creams for $1..... The crowds are buying it and he might run out so he puts his prices up to $1.2 Still people are buying the ice cream but the crowd is not so big as they don't want to pay that price. He still puts his price up though to $1.30 as he still has buyers. Now he gets greedy as still people are buying and puts the price up to $1.5. Everyone stops buying the ice creams at that...
Thanks for response!
Yes I understand the basics of supply/demand(Economics for dummies is a good read).
Quoting neilsdigest
..... If you can determine that...
Yes...if i knew where to dig for knowledge on how to do it...
  • #9
  • Jun 17, 2018 1:00pm Jun 17, 2018 1:00pm
Quoting G.Kad
{quote} Thanks for response! Yes I understand the basics of supply/demand(Economics for dummies is a good read). {quote} Yes...if i knew where to dig for knowledge on how to do it...
Very good and I love your quote... Don't waste your time on FF... Nice one. That's the most important.. Don't waste time, especially here ;-)
The most violent element in society is IGNORANCE
  • #10
  • Jun 17, 2018 1:07pm Jun 17, 2018 1:07pm
Quoting neilsdigest
{quote} Very good and I love your quote... Don't waste your time on FF... Nice one. That's the most important.. Don't waste time, especially here ;-)
Glad you like it
Lets see how it goes...so far I have received valuable info from replies in this thread...atleast I will learn something in this HolygrailseekersFactory lol.
  • #11
  • Jun 17, 2018 1:33pm Jun 17, 2018 1:33pm
Quoting G.Kad
{quote} Glad you like it Lets see how it goes...so far I have received valuable info from replies in this thread...atleast I will learn something in this HolygrailseekersFactory lol.
Just doubt everything you hear and you`l be fine )
Theres no truth, and no lies.
The truth is hidden from you
  • #12
  • Jun 17, 2018 1:37pm Jun 17, 2018 1:37pm
Quoting MaxenshteinD
{quote} Just doubt everything you hear and you`l be fine ) Theres no truth, and no lies.
Haha... I am pretty good at this
But a piece of additional knowledge never hurts.
  • #13
  • Last Post: Jun 18, 2018 9:03am Jun 18, 2018 9:03am
Another common quote-"Trend is your friend" or "Don't trade against the trend".
What is the trend?Well,we all know that trend is a series of consecutive higher/lower highs and higher/lower lows.
And your trend analysis will fully depend on the timeframe you are looking,because what seems like down trend on H4 TF could be just a retrace from a long term up trend on Weekly TF...or maybe you are lucky and this is not retrace but start of new trend?
And why bother to look on those higher high/lows?Pull up a monthly chart-if previous monthly candle was green(up) without significant weaks-you got an up trend on previous month...and here comes next question-if direction(color) of previous candle doesn't mean or advice the direction of next candle why you think it's a good idea to go long?yeah,you are trading with trend...
On the other way-price is in an uptrend for a couple of months but this will not help an intraday trader(who enter and exit relatively fast for a target of 30-50 pips everyday) much because "big boy" can be like "whatever,I will Short $5mil EUR today and I don't care about up trend" or news release...or whatelse
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