When considering what moves the market i think it's essential to understand how an exchange rate is exactly determined, and what considerations are taken into account to come to the 'x.xxxx', that we all pay for.
I know people out there will say it's the simple supply v demand equation which determines the rate at which people are willing to 'pay' for a currency. But i want to know/understand what constitutes the markets interpretation of supply/demand.
So as the first leg of this question is > what constitutes the supply/demand? Is it the total cumulative average of all trades 'in play'(we'll call these live trades) and 'outstanding'(these trades i consider being market orders, stop losses yet to be activated, but will if price prevails)? I'm most interested to understand if these 'outstanding' trades have any bearing on what the prevailing market rate is from a purely mechanical rate determinant sense? i do understand there is stop hunters out there targeting these 'outstanding' trades and has a bearing on where price goes, but yes that's not what im asking.
Second leg of this question is if this is true, that outstanding orders have an affect on the rate of the currency from a cumulative average sense.. is it possible that areas of high stop loss/market orders have the ability to drag the currency rates' 'average' towards these clusters which many people have set up to stop/limit there risk/reward and therefore can be exploited? I've heard people using the expression 'magnet effect' near round numbers etc as i believe these are areas that people generally places there stops/orders. also if this is true that people who do run stops etc contribute to there own detriment.
As i understand these stop loss/market orders are just as valid as live trades as it's a price that market participants have submitted to the market indicating what they are willing to buy/sell for if reached, and I'd think would come into consideration?
Great to hear your thoughts and how people use this information 'big players' to exploit these market inefficiencies.
If I'm completely off with my understanding of what determines the exchange rate please someone explain or at least point me in the right direction.
Cheers
Steve (an inquisitive one)
I know people out there will say it's the simple supply v demand equation which determines the rate at which people are willing to 'pay' for a currency. But i want to know/understand what constitutes the markets interpretation of supply/demand.
So as the first leg of this question is > what constitutes the supply/demand? Is it the total cumulative average of all trades 'in play'(we'll call these live trades) and 'outstanding'(these trades i consider being market orders, stop losses yet to be activated, but will if price prevails)? I'm most interested to understand if these 'outstanding' trades have any bearing on what the prevailing market rate is from a purely mechanical rate determinant sense? i do understand there is stop hunters out there targeting these 'outstanding' trades and has a bearing on where price goes, but yes that's not what im asking.
Second leg of this question is if this is true, that outstanding orders have an affect on the rate of the currency from a cumulative average sense.. is it possible that areas of high stop loss/market orders have the ability to drag the currency rates' 'average' towards these clusters which many people have set up to stop/limit there risk/reward and therefore can be exploited? I've heard people using the expression 'magnet effect' near round numbers etc as i believe these are areas that people generally places there stops/orders. also if this is true that people who do run stops etc contribute to there own detriment.
As i understand these stop loss/market orders are just as valid as live trades as it's a price that market participants have submitted to the market indicating what they are willing to buy/sell for if reached, and I'd think would come into consideration?
Great to hear your thoughts and how people use this information 'big players' to exploit these market inefficiencies.
If I'm completely off with my understanding of what determines the exchange rate please someone explain or at least point me in the right direction.
Cheers
Steve (an inquisitive one)
