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Market mechanics

  • #1
  • First Post: Jan 2, 2019 11:14am Jan 2, 2019 11:14am
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
Hello and happy new year everyone.
Newbie trying to learn so bear with me.
I have questions, would like to hear your opinions.
So first question:
Books and trading websites say that currency pair charts go up/down because:
1.There is more buyers/sellers
2.One of the currency appreciate/depreciate.
They also tell us that if currency pair doesn't move much in any direction (stays flat/range) it means that both currencies in that pair is equally strong/weak.
So... Here is a thing
Let's look for example at Gbp/Usd during the London session(only London till the New York opens).
Gbp/Usd goes down.
According to what books and websites tell us it's because:
1. More people sell GBP.
2.GBP depreciates(I don't think USD can appreciate during London session)
And now finally the question.
How can it be that there is more sellers?I mean those "Big boys" who want to sell big amount of GBP need somebody to buy from them at that point of price. If they got those buyers according to market theory price will not drop significantly... On the over hand if there is little or no participants willing to buy at that price-it will drop until buyers will be happy to buy at lower price which in turn will mean that initial seller will get his sell at much worse price which doesn't make any sense...
Is my logic flawed?
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  • #2
  • Jan 2, 2019 12:22pm Jan 2, 2019 12:22pm
Basic knowledge:

https://www.thebalance.com/how-marke...elling-1031049
It never gets easier, you just get better
  • #3
  • Jan 2, 2019 1:52pm Jan 2, 2019 1:52pm
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
Quoting Shabs19
Basic knowledge: https://www.thebalance.com/how-marke...elling-1031049
Thanks for link

So if I understand correctly:
GBP - base
USD - counter
Bid - price levels at which you can sell GBP
Ask or offer - price levels at which you can buy it.
If big amount of GBP is sold by market order pair price will go lower seeking for bid orders?
==
  • #4
  • Jan 2, 2019 5:13pm Jan 2, 2019 5:13pm
Quoting WSoar
{quote} Thanks for link So if I understand correctly: GBP - base USD - counter Bid - price levels at which you can sell GBP Ask or offer - price levels at which you can buy it. If big amount of GBP is sold by market order pair price will go lower seeking for bid orders?
Also add to that the currency being bought/sold against other base currencies. Intermarket relationships with Stock market/Commodities/Treasuries etc.
You get the picture ?
It never gets easier, you just get better
  • #5
  • Jan 2, 2019 5:24pm Jan 2, 2019 5:24pm
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
Quoting Shabs19
{quote} Also add to that the currency being bought/sold against other base currencies. Intermarket relationships with Stock market/Commodities/Treasuries etc. You get the picture ?
Hmm...
This sounds very complicated...
Thanks. Will try to learn more.
==
  • #6
  • Jan 4, 2019 4:34am Jan 4, 2019 4:34am
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
OK... After visiting some websites and investigation about relationships between currencies and related stocks, commodities, treasures, futures I come up with an idea that that could be just too much things to analyze... That's just analysis paralysis. Well, maybe for a long term investment this can bring a lot of insight but for a short term(intraday) this is overkill I think.
Another question is why currency moves on a trading session in which it not "belong"?
For example Gbp/Usd goes up on Asia session while Usd/Jpy goes down.
It's Asian session and New York session is closed so supply for USD stays unchanged meaning that JPY is what drives the Usd/Jpy pair for now... yet Gbp/Usd goes up despite London/New York is closed... Doesn't make sense or I don't get it.
==
  • #7
  • Edited 7:49am Jan 4, 2019 7:36am | Edited 7:49am
Your questions concern economical fundamentals. If you want to trade Forex fundamentals, outside of news releases, you are in for a very confusing ride, because all those decisions are human-based and impossible to predict. These are great topics for Forex "educators", but completely useless and ridiculous for Forex "traders". As with any business, you should do a SWOT analysis: Strengths, Weaknesses, Opportunities, and Threats. Since trying to trade, based on economics, is a weakness, then do you really want to spend hours and hours and hours and hours trying to make decisions, (while the market moves without you), or just ignore that thought tangent and do things more productive to profit? Good Luck.
You cannot be extraordinary by being normal
  • #8
  • Jan 4, 2019 8:10am Jan 4, 2019 8:10am
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
Quoting dkrock
Your questions concern economical fundamentals. If you want to trade Forex fundamentals, outside of news releases, you are in for a very confusing ride, because all those decisions are human-based and impossible to predict. These are great topics for Forex "educators", but completely useless and ridiculous for Forex "traders". As with any business, you should do a SWOT analysis: Strengths, Weaknesses, Opportunities, and Threats. Since trying to trade, based on economics, is a weakness, then do you really want to spend hours and hours and hours and...
I have no idea what you mean but thanks for feedback.
==
  • #9
  • Jan 9, 2019 3:35pm Jan 9, 2019 3:35pm
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
OK... So I keep on slowly improving my knowledge and here is something that I spotted recently "surfing" through the currency pairs:
We have "major"( like Gbp/Usd, Usd/Jpy... well you know that) currency crosses and "minor" (like Eur/Jpy, Gbp/Aud etc).
What I am thinking is that "minor" crosses are just a reflection of "major" crosses moves.
Example:
Today Eur/Usd daily move ~+107 pips
Gbp/Usd daily move ~ +83 pips
Usd/Jpy daily move ~ - 86 pips
Eur/Gbp daily move ~ +33 pips
Eur/Jpy daily move ~ +35 pips
Gbp/Jpy daily move ~ flat 1-2 pips.
While this may sound logical and to not deserve any discussions the big question arises-->If "minor" crosses are just a reflection of "major" crosses action is it a good idea to watch at "minors" for trading decisions?
==
  • #10
  • Jan 9, 2019 4:17pm Jan 9, 2019 4:17pm
Quoting WSoar
OK... So I keep on slowly improving my knowledge and here is something that I spotted recently "surfing" through the currency pairs: We have "major"( like Gbp/Usd, Usd/Jpy... well you know that) currency crosses and "minor" (like Eur/Jpy, Gbp/Aud etc). What I am thinking is that "minor" crosses are just a reflection of "major" crosses moves. Example: Today Eur/Usd daily move ~+107 pips Gbp/Usd daily move ~ +83 pips Usd/Jpy daily move ~ - 86 pips Eur/Gbp daily move ~ +33 pips Eur/Jpy daily move ~ +35 pips Gbp/Jpy daily move ~ flat 1-2 pips. While...
Your direction of thinking is correct!
The market is 100% mechanical and controlled.
The hidden underlying correlations between the currencies are fixed and stable.
Only the price action on the surface appears somewhat random.
Real randomness does not exist in the universe, and certainly not in the market.
Forex is all about math and probability!
The general theory suggest that if you know the right formulas and equations you can predict around 50% of all highs and lows on every time frame with 90%+ accuracy.

To understand what I mean, look at the mechanism of the double pendulum.
The blue line in isolation looks random. But its not! If you know the exact parameters of the black mechanism in the center at any point in time, then you can predict the next move of the blue line with high accuracy. However the more you go into the future, the lower the accuracy becomes.
This is how the market works! The blue line is the visible price action. And the black mechanism which creates the price action is the hidden formula.
Only a few people in the world know that formula.
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  • #11
  • Jan 9, 2019 4:45pm Jan 9, 2019 4:45pm
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
Quoting alphaomega
{quote} Your direction of thinking is correct! The market is 100% mechanical and controlled. The hidden underlying correlations between the currencies are fixed and stable. Only the price action on the surface appears somewhat random. Real randomness does not exist in the universe, and certainly not in the market. Forex is all about math and probability! The general theory suggest that if you know the right formulas and equations you can predict around 50% of all highs and lows on every time frame with 90%+ accuracy. To understand what I mean, look...
While I have little to no knowledge in statistics and other "math works" that's still an interesting approach.
The question is-Does market fundamental data, intermarket relationships etc "weigh in" in formulas of first or second "leg" of that pendulum?
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  • #12
  • Jan 9, 2019 8:37pm Jan 9, 2019 8:37pm
Quoting alphaomega
{quote} Your direction of thinking is correct! The market is 100% mechanical and controlled. The hidden underlying correlations between the currencies are fixed and stable. Only the price action on the surface appears somewhat random. Real randomness does not exist in the universe, and certainly not in the market. Forex is all about math and probability! The general theory suggest that if you know the right formulas and equations you can predict around 50% of all highs and lows on every time frame with 90%+ accuracy. To understand what I mean, look...
Are you one of those few people in the world that knows the formula ?
  • #13
  • Jan 9, 2019 11:40pm Jan 9, 2019 11:40pm
  •  WSoar
  • | Joined Jun 2018 | Status: It's a businessNot "Get rich quick" | 56 Posts
This sounds like a trillions worth formula.
While I like to "think out of the box" still I don't understand how all the dynamic market with all his fast changing variables could fit in one formula...but maybe that formula exist or maybe no... All we can do is build our knowledge, scratch our heads and ask why...
On the other hand - knowledge is nothing without experience.
I see there is a new "trend" on trading forums - about market randomness and that trading is about probabilities...yeah.. sure... last time I checked it was called GAMBLING not trading but maybe I miss something.
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  • #14
  • Jan 10, 2019 3:25am Jan 10, 2019 3:25am
Quoting metta87
{quote} Are you one of those few people in the world that knows the formula ?
Do I know the formula? No.

Ask the Swiss, they know everything: https://en.wikipedia.org/wiki/Bank_f...al_Settlements

Switzerland is the KEY to the whole machine of international banking!

What are the Swiss most famous for?

Mountains? Chocolate? Watches? Money? Banks?

They are the masters of TIME and MONEY!

And here you go down the rabbit hole......
  • #15
  • Jan 10, 2019 4:23am Jan 10, 2019 4:23am
Yes, don't be a popsickle.

It falls because people sell
It rises because people buy

Don't bother yourself too much with inner workings, focus more on what's on display. It's masses who moves markets not couple Barclays or HSBC.
Check profile for my blog
  • #16
  • Jan 10, 2019 5:24am Jan 10, 2019 5:24am
Quoting BreakDaStops
Yes, don't be a popsickle. It falls because people sell It rises because people buy Don't bother yourself too much with inner workings, focus more on what's on display. It's masses who moves markets not couple Barclays or HSBC.
Nobody moves anything! The market is basically a fixed mechanism like a Swiss watch! When you rotate one gear, all other connected gears rotate proportionally based on their size.

The only thing that is really moving is the money from your account to the account of the broker/banker on the other side.

The original concept of the mechanism from 1900 was probably based on actual mechanical gears located in some secured bank basement in the Swiss Alps.

Today it's all electronic. (Or at least that's what they tell us.....).
  • #17
  • Jan 10, 2019 6:39am Jan 10, 2019 6:39am
Quoting alphaomega
Nobody moves anything! The market is basically a fixed mechanism like a Swiss watch! When you rotate one gear, all other connected gears rotate proportionally based on their size.
Yet we have exchanges
Quoting alphaomega
The only thing that is really moving is the money from your account to the account of the broker/banker on the other side.
..And broker/banker's money to your account?
Quoting alphaomega
The original concept of the mechanism from 1900 was probably based on actual mechanical gears located in some secured bank basement in the Swiss Alps.
So let it stay there buried
Check profile for my blog
  • #18
  • Jan 10, 2019 6:54am Jan 10, 2019 6:54am
Alpha makes some very good observations and is certainly with my perspective of this market.trying to understand the underlying structure as a whole .
The underlying blocks of this market and understanding how that structure has a certain deterministic reality allows us to not get so fooled by the chaotic random resulting p/a that can best be described as a somewhat illusion to confuse.
There are so many variables that make market structure on the surface look chaotic and pure random ,which result in the failing over time of all the tools at ones disposal.
Trying to understand the mechanism, s of the market underlying structure allows one to see something very different.
The inter relationships between the values of individual currencies and the effects of those nations policy regarding how much they are borrowing and at what rates has an effect across the market as a whole ,this is something that can be clearly seen if you are looking at the effects .
There are many components which make up this structure and these can be identified with a high degree of accuracy ,some have the calculations and hence will always be front running creating the chaos left behind of which we watch and try to make sense of on a chart with tools of a caveman.
I certainly not sitting here with a magic formula but my years of research allow me a clearer understanding and occasion the perspective to see clear enough to take advatage
  • #19
  • Jan 10, 2019 7:22am Jan 10, 2019 7:22am
Just keep that barrel rolling
Check profile for my blog
  • #20
  • Jan 10, 2019 7:40am Jan 10, 2019 7:40am
Quoting diceman555
Alpha makes some very good observations and is certainly with my perspective of this market.trying to understand the underlying structure as a whole . The underlying blocks of this market and understanding how that structure has a certain deterministic reality allows us to not get so fooled by the chaotic random resulting p/a that can best be described as a somewhat illusion to confuse. There are so many variables that make market structure on the surface look chaotic and pure random ,which result in the failing over time of all the tools at ones...
Yes. We only see the history and we try make a good logical guess about the near future. Accurate long term predictions are impossible.

The market does not follow any fundamentals. 99% of the price movement is mechanical as a direct consequence of current supply and demand in the top 8 currencies. Someone buys one currency - all other currencies go down proportionally. And the same in reverse.

The whole system is made for stability!
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