How does the FOREX price move and who decides on the prices?

Yesterday GBPUSD shot up within minutes after the comments by Germany's Merkel on BREXIT.

what baffles me is that there is not an EXCHANGE in FX like we do with Stockmarket.

when just who decided the price?
there are thousands of brokers and most were in line within seconds!!!!

so just who DECIDES on the BIG MOVE!

Same with NFP day, within seconds, all brokers have similar prices!!!!!
just WHO HAS SET THE PRICES!

Really baffled!!

any videos would be appreciated or links to any blogs etc

really want to learn about this

it's not a "WHO" but a "WHAT" that decides price... Computers run the show my friend, it takes mega computers around the globe to capture millions of bits of data by the millisecond to give instant feed and generates an average price...there are high security warehouses with these computer systems that are run and owned by the top tier banks (reserve banks and the top global mega banks). man does not control this it's all algos now. Gone are the days when man ran the markets, its the age of AI.,,info on how the details of all this works will take a thesis to write. even the devs who the banks hire to write all these computer codes and algorithms cannot control this thing that runs the markets. that's why we get flash crashes....remember FX also has a futures market and on some news like Merkel's comment Algos are triggered and go into action and generate millions of orders by the second and price will move,,,, it is an interesting subject maybe there are those with some better and more detailed enlightenment... regards.

Thanks for the input. appreciate it.

however there are so many market makers worldwide, and banks.............. each having their own algo
many competing against each other.

so how come majority of brokers prices are in synch....

How does forex price move?
Supply and Demand, It’s very different than the stock markets where we can see how many number of shares are there in circulation and how many are being offered in the market.

Who decides on price?
Perceived value of an asset by everyone. Institutional players, banks, traders, All of them.

brokers prices are not all perfectly in sync. they do vary slightly it depends on which LP's (liquidity providers) they use for data feed. for example with my broker i trade on 2 different accounts one is an OTC acc. where i deal with the broker's dealing desk my broker takes the opposite end of those trades, those trades don't even go to the open market (most retail traders are trading that way). and my other acc is a STP (straight through processing) same as an ECN acc. those trades go straight through to the open market . now on both my accounts i get slight variations in price and candle prints, same broker slightly different prices. and those account's platforms perform differently for example on my STP acc on NFP news my trades are executed at market price instantly because i'm on the open market but my OTC is useless on big news announcements because the broker withdraws liquidity and i get slippage.

The simple answer is: The Market Makers. The Big Guys. This is not a conspiracy theory. This is the truth. They have billions of dollars at their disposal and they MAKE the MARKET. Without them, there will be no movement. Or at least, not the significant ones. No trends. They can move the price at any given time in any direction. They buy and sell from themselves in order to move price. They don't pay spread. It is like moving the money from your left pocket to your right pocket. And then moving it back. They can do it as many times as they want.

Now, you are thinking: "If so, why doesn't we see the movement in price all the time?" The reason is twofold. First, although they have more money than everybody else combined, they still don't have an infinite supply of money. So, while they are moving certain currencies, the others are chopping around. Second, the main reason they move the price around is to make money (rip everybody off). So when the price is chopping they are accumulating contracts (buy and sell orders). They are the only ones who have the book of orders, so they can clearly see where the money is. Then, they will usually make few false moves to pick up that orders, move away from that area in order to get them into trouble. When they clear the board, then they move the price to the predetermined direction.
After that, they will chop around in order to wait for the participants to lick their wounds and start committing their money again. That is why you usually see the sideways price action after a big move.

Sometimes they hide behind the news. That's why you see a wild price action during the news. Everybody thinks: "Well the MARKET reacted that way." The truth is, they moved the price. When they collect the contracts, they wait for the IMBALANCE. If there are, say 500 million of buy orders and 500 million of sell orders, they will continue chopping. BUT, when there is an imbalance (600 m buys and 200m of sells), then they will move the price. Guess where? Opposite of the majority! That's how they make a lot of money. That is the reason why you can see for instance, good news for USA economy while dollar falls off a cliff at the same time. Or there are really bad news for the dollar but it goes up like a rocket. That is Market Makers playing (and ripping off) everybody else.

a good research is to check out is HFT (high frequency trading) the way modern day trading is done on in the banks.

Great question. The big moves are mainly from pending orders set around news releases. I have attached a video from a commercial FF member that shows trading on a Level II platform. You will see it is just a matter of seeing what orders are in the queue and stacking the bank's preferred price against them. Some orders are hedges, others are transfers, and others are speculation. Some make manual trades, some use algorithms to find entries and exits, and some do a thing called high frequency trading, which is to attach to price momentum and take small pieces of price fluctuations as new money is injected, whether through buy orders or sell orders. The high frequency trades obviously have no spread, so you should just consider them irrelevant to you if you are a retail trader.

The structure of the Level II platform is what should open your eyes for retail trading. It should show you how ridiculous it is to trade support/resistance because it simply does not exist for big money trading. S/R's function is to brainwash retail traders into creating large pools for the Level II pyramid to target. It establishes liquidity for the big banks to place pending orders on each side of the price pool that the S/R traders created for them. Then they simply wipe out the retail traders by running both directions, which activates the retail trades and the retail stops. They can see all the active trades, and the pending trades, such as line touches and projected stop loss points. On the Level II platform they are all simply orders, so the market moves to activate them. Since the banks know this, and see this, they place their trades on either side and wait for your orders to fill, whether they are entries or exits.

Hopefully seeing this real world structure can help you develop an edge now. This is why I trade probability and pay no attention whatsoever to support/resistance. S/R is meaningless. It is a fake structure created to steal retail money as the opposing trade of bank entries/exits. So, just like you would measure the height of everyone in school and develop statistics for tallest, shortest, and average; that is also how you should trade the market, by averaging the trades into sample sizes and measuring the direction and momentum of price against them. It is really not much different than how a sports announcer or coach knows the average performance statistics of the players and teams. If you create similar analysis tools for trading, you might have a chance of making profit.

Hope this helps you understand how the market works and how to capitalize on its design features. Good Luck.

[quote=fxguru2010;12459239]
what baffles me is that there is not an EXCHANGE in FX

Hi Guru checkout the CLS group https://www.bis.org/about/index.htm
https://www.cls-group.com/

The price will move in the direction that causes the most financial damage to the largest number of accounts.

When the taxi driver tells you all about Brexit and that the pound is in the dumps and will be worth nothing and you should sell, sell sell and that he and other people he knows are of the same opinion and that his cousin who has a friend who is a broker has told him to sell the pound and the news on every TV news channel and newspaper and financial market gurus are all dumping the british pound and the future looks very bleak because Brexit then you know it's time to BUY.

This topic sure it's interesting.
I'm covering something similar in my thread here on FF.

fxguru2010:
In my opinion, everything about the fx market is rigged about making money off non-professional traders. I believe it to a way for the market makers to add additional sources of income since otherwise they 'only' make money from trading commissions.

Brentrading:
I agree with your theory about the fx market has turned automatic. So yes, it's both 'what' and who's behind those algorithms and high frequency trading.

TradeMinim:
You are right about the financial terms and drivin factors about the market. But these would only apply to a free non manipulated market. If supply and demand are rigged, the price will be rigged and not in fair value. Perceived value set by everyone yes it's correct, but if a few of the parties involved in the market got a monopoly and can easily control and manipulate, then where is the free market.

MasterNed:
I agree with most of your arguments. I like your way of describing this topic and the theories evolving it since we're basically talking about the same issues.

dkrock:
Good post also, I recommend viewers to read his post along with other mention traders contributions.

Squiggles:
The links you are proving is in fact some of the mainframes of the markets.

Mingary:
totally agree. This is the main topic in my thread and I'm currently accurately testing to prove, that trading against retail clients volume is profitable.

The big banks, such as Barkly,s and Franklins, and the Daucher bank ect

The Forex market today is completely automated and most of the small intraday movements on tick level are random. International cartel of banks owns the market and the top 10-15 of them provide over 90% of the liquidity. The same banks are the major share holders of most central banks, where the central banks are members of BIS in Switzerland. This is the central bank of the central banks. They give the orders. Most likely BIS (or the shareholders behind BIS) own the secret algorithms (or the rights). These algorithms are very complex and made of multiple layers.

On the base layer they use some trigonometric formulas to peg all currencies together with balanced percent ratios where the US dollar has the largest share.

On the second layer they employ the liquidity provision mechanisms which are essentially pseudo random generators based on Black–Scholes model where the size of the available liquidity at each price level depends and various factors such as: MM net exposure (most important), demand from buy side customers, and various risk factors like news events and economic data....

There are other less important layers such as setting of interest rates, control of money supply and so on.....these things depend mostly on the long term economic cycles.

The important thing to remember is that Forex is controlled market (not free) and the banks which are the main liquidity providers can set any price they want at any time. But you also have to remember that these banks are not in business just to move prices for fun. They are in business to make more money. And to make money they need relatively stable environment. The liquidity providers make money from the spreads. To maximize the profits they always manipulate the prices in such way that the majority of the buy side is on the wrong side of the "trend" most of the time.

And this is the reason why the forex behavior appears to be so irrational. You often see the price moving opposite to fundamentals, or changing directions multiple times on the same event. This is because the traders try to bet with fundamentals and by doing so they create herd behavior. They all trade in the same direction. Such situations create ideal opportunities for market makers to swing the price in opposite direction as soon as they accumulate enough exposure. OR they use such situations to reduce exposures generated by previous events.

And this is how the price moves.

My 11-year-old asked me this very thing last week! I'll send her this thread... :-))

..AND TRUMP

No

Just one Algo does all the work. It doesn't matter how much money the big players have, if one goes short at the same time one goes long, nothing happens.

Its just a waste of money and too much risk for them.

The Algo runs a code which can be understood after a few years of studying the market flow. Its designed to move in a direction to encourage traders to place trades (trend) then also asks the same trader to place their stops as close as possible to a recent high or low. It does this by creating false patterns traders believe are resistance areas (they don't exist) so they feel safe and keep their stop there.

Then WHAM

A big clean out occurs and traders have loss their money and just blame themselves instead of the ALGO.
I showed this setup on GBPUSD this week as well as DAX last week- easy to see the trap when you realise that RESISTANCE trading term is all a LIE

It feels so good not to give a flying FK about any of the above and still make money in FX>>>>>>>>>>>>>> Freedom!

We need manipulation of the market to occur so I do give a flying FX.

We would have less chance of being profitable if one big player could move the market 100 pips to hit their targets. TA rules would collapse because there could not be any logic reason for that move. But here is the real point to the Algo manipulating the market which we should relish.

The Algo uses consolidation zones to encourage traders to move their stops closer to the price. It creates patterns the traders labels as a resistance price levels. The Algo’s goal is create large pools of liquidity and locate them as close as possible to the current price. When this pool of orders is sufficiently large enough, it will run the lot just like what’s happening on DAX at present.

The Algo’s code therefore is designed to create a market that has weight, density and vacuum. It groups orders into dense clusters to create weight on the market then uses vacuum areas of little or no orders to be able to move freely between these large pools of orders to consume them all at will.

So rule number one is stop acting like a herd of sheep.

Here is what I posted a week ago, check out the chart to see what happened.
That box contains 80% of present weight of all orders on this chart - is it no surprise where price did return to consume ALL those orders.