A few basic questions about currency.
In order to buy and sell currency, you buy and sell it through your broker which in turn connects to the interbank. The interbank is made up of big banks like UBS and Citigroup.
Correct me if I'm wrong, but the interbank(citigroup,UBS etc) buy currency units from the Central banks like RBA and ECB and the FED?
My question is: Is there a limit as to how much currency can be bought off the RBA or ECB or FED by these big banks(UBS, Citigroup etc)?
I'm trying to examine the supply and demand dynamic of currency. Lets see.
-Demand/Desire
-Supply
-Support
-Resistance
-Buying Pressure
-Selling Pressure
Some examples:
UBS bank decides it wants to push the EUR/USD down by 50pips. So UBS sells the EURO and simultanously Buys the USD. UBS is a member of the interbank network which connects the FED, RBA, ECB and other central banks around together.
The catch here is that for this scenario, lets assume that there is a really obvious trend going down due to a natural disaster or something like that. So the price of the EURO is desperate to go down. ALL the big players in the interbank know this and so the EURO makes its dramatic fall.
NOW, during this fall, if everyone knows the currency HAS to fall, then WHO in their right MIND would buy the EURO if they knew it HAD to fall? I mean it would be stupid to do that. Yeah I realise that nothing is forever and there could be a correction that sends the EURO higher. BUT if everyone knows that the EURO is going down then to complete the transaction there have to be those who are willing to buy at that cheaper price.
Now to put this into context. The big guys are the big banks and central banks. The little guys are us retail traders (we make up 14% of the liquidity in Forex). There won't be enough people willing to buy the EURO when it is so obvious that it is going to fall? So where do these mysterious buyers come from?
Are this mysterious buyers the central bank such as the ECB? (European central bank?)
If it is the ECB in this example that provides the liquidity for buying the EURO to keep the EURO up, then where does the ECB get all of its money from? Buyers and Sellers must be equal, and the only thing that moves price in one direction or the other is demand/desire and people who are willing to trade either to sell units or to buy units.
All of this relates into trying to break forex down into periods of accumulation and distribution. If we can figure out what the big guys are doing then all we need to do is follow them and we're set for big profits. But I was just wondering where all of this money flows from.
Also, who in their right mind would buy a currency if they knew it was going to fall through the ground?--the only answer I have for that is the central bank for the region/country concerned--such as the ECB in this case.
In order to buy and sell currency, you buy and sell it through your broker which in turn connects to the interbank. The interbank is made up of big banks like UBS and Citigroup.
Correct me if I'm wrong, but the interbank(citigroup,UBS etc) buy currency units from the Central banks like RBA and ECB and the FED?
My question is: Is there a limit as to how much currency can be bought off the RBA or ECB or FED by these big banks(UBS, Citigroup etc)?
I'm trying to examine the supply and demand dynamic of currency. Lets see.
-Demand/Desire
-Supply
-Support
-Resistance
-Buying Pressure
-Selling Pressure
Some examples:
UBS bank decides it wants to push the EUR/USD down by 50pips. So UBS sells the EURO and simultanously Buys the USD. UBS is a member of the interbank network which connects the FED, RBA, ECB and other central banks around together.
The catch here is that for this scenario, lets assume that there is a really obvious trend going down due to a natural disaster or something like that. So the price of the EURO is desperate to go down. ALL the big players in the interbank know this and so the EURO makes its dramatic fall.
NOW, during this fall, if everyone knows the currency HAS to fall, then WHO in their right MIND would buy the EURO if they knew it HAD to fall? I mean it would be stupid to do that. Yeah I realise that nothing is forever and there could be a correction that sends the EURO higher. BUT if everyone knows that the EURO is going down then to complete the transaction there have to be those who are willing to buy at that cheaper price.
Now to put this into context. The big guys are the big banks and central banks. The little guys are us retail traders (we make up 14% of the liquidity in Forex). There won't be enough people willing to buy the EURO when it is so obvious that it is going to fall? So where do these mysterious buyers come from?
Are this mysterious buyers the central bank such as the ECB? (European central bank?)
If it is the ECB in this example that provides the liquidity for buying the EURO to keep the EURO up, then where does the ECB get all of its money from? Buyers and Sellers must be equal, and the only thing that moves price in one direction or the other is demand/desire and people who are willing to trade either to sell units or to buy units.
All of this relates into trying to break forex down into periods of accumulation and distribution. If we can figure out what the big guys are doing then all we need to do is follow them and we're set for big profits. But I was just wondering where all of this money flows from.
Also, who in their right mind would buy a currency if they knew it was going to fall through the ground?--the only answer I have for that is the central bank for the region/country concerned--such as the ECB in this case.