does pair go up or down when buy or sell?

Sorry, I never really grasped this concept, because I once thought when price on a currency pair goes up, it was because people were buying (long) it more than selling (short) it. Then, I heard somewhere else that price goes up because people are selling (not enough buyers). So which is truth?

Hi Sonic,

That can be a hard question to answer it depends how you look at the market.

Governments, Corps and many others need to move money in some cases transfer one currency for another for payrolls, then you have the banks moving money for clients add too spec traders who are trying to profit from the up and down moves in the currency.

Also the value of a currency compared to another... interest rates difference

Hope this helps

-Mike

Hmm, I still don't get it, but thanks for explaining. Perhaps it will make sense later.

Sonic,

Maybe this will help...

Look at the interest rate of AUD and compare that too USD, thinking from where would rather have your money?

Higher yeilding interest rate or lower?

That's why Aud has had an uptrend

-Mike

You're giving me fundamental reasons as to why a currency pair moves. Which is great, might come in handy. But my question was more simple than that. More technical, I guess.

If some random bank or guy with millions of dollars wanted to put a really big long market order on the EURUSD right now, what would happen to its quoted price? Will it go up a few pips, or go down? I know if a retail trader put up their measly $10K trade, the market would move such a small fraction of a pip that it wouldn't be noticed at all.

Price should rise on that pair. The buy order will be matched with sell orders at current price. When all the sell orders at current price are filled by the big buy order, the buyer will have to pay the next highest price and the process repeats until the big buy order is completely filled. That's why the big buy order would normally be moved into the market in pieces. Otherwise the big buyer would move prices against himself.

simplify it.

think of it like... hmm... maybe like wind tunnelling horizontally through sand. if you come to a sand-castle then it is going to take longer to tunnel through that part.

there is a hole in the sand where the wind was recently blowing into. either side of this hole are sand particles representing buyers and sellers who have their pending orders sitting in the market at different price levels, either ahead (sellers) or behind us (buyers). the current dip in the sand is the bid/ask spread. on either side of the spread are the buyers and sellers. if the wind (new MARKET orders / immediate orders / orders to buy or sell at whatever the price currently is) starts pushing forward into the sellers ahead of the hole in the sand then if there isn't much sand in the way (pending sellers in the order book / LIMIT SELL orders) then it will be easy to push forward into this area. if there is a lot of sand, such as a sand castle or just some random hills of sand (pending sellers) then it will take more wind to move into this area as more sand needs to be blown away.

the same is true in the opposite direction regarding pending buyers behind the current hole in the sand.

now, as the wind tries to push forward or back through the sand the sand ahead and behind moves around and re-establishes itself at different positions (buyers / sellers chasing the market, removing orders, adding orders, and everything in between). this maintains a relatively similar-sized hole in the sand at any moment as any space left where the wind was previously pushing through and has succeeded gets filled by the sand re-establishing itself into new positions and sometimes more sand is added, and sometimes some is removed etc etc and so on.

keeping this in mind it doesn't only take the wind (MARKET orders) to move the sand around. sometimes the sand re-establishes itself into new shapes (ie the order book changes) all on it's own (as again, buyers / sellers change their pending orders, add orders, remove orders, and everything in between). for a gap to be created ahead of the hole it takes all the sand at the edge of the hole to be removed, either by the wind taking it away or by the buyers or sellers (depending on which edge of the hole we are talking about) removing the sand themselves (removing their orders). in the reverse way is how the hole remains a relatively similar size... that is, more sand is added by buyers / sellers.

keeping all of this in mind, and taking this from a centralized stock market perspective instead of the decentralized FOREX market... if you MARKET BUY and take a chomp out of the sell side of the market (SELL LIMIT orders sitting in the order book) then you could possibly remove all sellers at that price level, and further into the next level. this would result in the sell price becoming higher. in the same vain, if there are more sellers at the sell level than volume you are buying then the sell level will remain with the leftover sell orders and so the sell price will not budge at all as there is still sell orders at that level. if you do take out a sell level and push into a higher price then this might take the price to a higher level which triggers BUY STOP orders (stoploss orders of sellers who are already in a trade and which the current price has risen too high for their liking) in which case further MARKET BUYING (as the stop orders get executed they become a market buy, ie an instant order that isn't previously sitting in the order book) may occur and these orders can start eating into the sell side of the market further pushing the sell price up... also causing the buy level to rise as well as the order book changes to chase the market.

alternatively, if you MARKET SELL and eat into the current BUY LIMIT orders in the order book then you might, or might not, remove all of the volume of LIMIT orders at that price level. if you take all the volume then the price drops, and if you don't then the price remains. you might trigger SELL STOP levels (stoploss orders for the buyers already holding a buy trade) which could push the price down further.

at this point you should look up the term STOP HUNTING.

now... even if you do move the market higher or lower you might simply be moving the market prices to levels that favour someone bigger and badder than you who loves the new price levels and pushes big orders through the market in the opposite direction. e.g. if you buy into sell orders and manage to push the market higher then there might be someone sitting in a room somewhere, martini in hand, just waiting for the price to retrace higher to the price your order just put the market price to. when they see the new higher price they are ready to SELL SELL SELL and in this way their MARKET SELL orders chew into the BUY LIMIT orders sitting in the order book... further and further down through each level, triggering stoplosses or not, or gaining the attention of other sellers further adding momentum to the dropping of the price as buy levels get smashed. obviously the reverse situation could occur as well, ie a buying stampede pushing up into the sell limit orders.

in this way you can see that with enough volume your MARKET orders may, or may not push the market a certain direction and may or may not trigger other traders orders which further flood the market into that direction or your order may simply inspire others to also go with you in the same direction. however, it is also possible that as you push into the market one direction someone else may be pushing back in the opposite direction. if you remove a price level and another trader removes the opposing price level then you are left with a wider spread/gap than usual, and at that point it is simply a case of the market filling one side or the other (or both) with newly added limit orders to fill the hole created. if you are using LIMIT orders that sit in the book then you are doing nothing except being a part of support/resistance at that price level... ie you are a grain of sand in the sand-castle at that price level. your limit order might slow down a freight train, or it might push right through your price level.

basically, in summary, anything can happen. your market orders simply eat into volume of limit orders. your limit orders simply sit in the order book as volume to be consumed by other traders market orders.

i don't know. that was probably a pretty crappy explanation. i am 80% certain i used the correct terms in the correct places. if you don't yet know what MARKET, LIMIT, and STOP orders are (and ORDER BOOK) then i suggest you go read some stock market tutorials. i say stock market and not forex as any forex info is almost guaranteed to be bloated with extraneous information that will just overwhelm you and probably offer no real help, whereas stock markets are a much simpler and structured orderly beast that can be defined into smaller easier-to-digest boxes of information that is based on real tangible things.