I've posted this before, but due to the damn hackers my post is lost 
Basically i'm trying to understand how the market operates right after the news release and how are the price levels established. I will be looking at what's happening from the perspective of a centralised market place, however i would imagine forex operates in a similar way. However if anyone can clear up the similarities/difference it would be great.
Anyway, let me illustrate with a hypothetical example.
This is how the market looks before the release:
Price Volume (Billions)
1.34 10
1.33 20
1.32 30
1.31 40
1.30 30
1.29 20
1.28 10
The news comes out positive, and 80 billion worth of buy orders comes in, everything up to 1.33 gets eaten up and hence this is the next tick. Another batch of orders comes in and the action continues. Additionally MM/Trades pull back a lot of liquidity which makes large moves possible.
Waiting for your wise comments
Best regards,
Vlad
Basically i'm trying to understand how the market operates right after the news release and how are the price levels established. I will be looking at what's happening from the perspective of a centralised market place, however i would imagine forex operates in a similar way. However if anyone can clear up the similarities/difference it would be great.
Anyway, let me illustrate with a hypothetical example.
This is how the market looks before the release:
Price Volume (Billions)
1.34 10
1.33 20
1.32 30
1.31 40
1.30 30
1.29 20
1.28 10
The news comes out positive, and 80 billion worth of buy orders comes in, everything up to 1.33 gets eaten up and hence this is the next tick. Another batch of orders comes in and the action continues. Additionally MM/Trades pull back a lot of liquidity which makes large moves possible.
Waiting for your wise comments
Best regards,
Vlad
