Why Is Price Doing What It's Doing?

This would be a long topic and a bit difficult to explain.
In short... Limit order are irrelevant to current quotes moves.
Limit orders are static, they do not move they do not change... unless of course the party that place them, does change them, move them or cancel them. They do not change according to the current supply and demand.

Current orders.. or market orders is the only thing that change the quotes.
Without current orders, quote will not move. If the orders are balanced, quotes will not move.

Have you ever placed a limit order?... of course we all have. All stops (SL and TP are limit orders). Have your limit ever changed?, in size or price after you place it? Of course not. If the current quotes are 50 pips away, and a million people place limit orders at the same price you do... the volume of orders at that level increase... but is irrelevant to the current prices... The current prices will move closer or will go in the opposite direction according only to the "current" demand and supply.

Your limit order may never be hit.

In an hypothetical scenario if in one specific millisecond the whole world does not place a single "market" order... the quotes will not move. Pending order will not be filled. (No orders is a balanced market, 0=0)

A chronological example would be: (made simple for understanding).
Bank and Brokers quote euro/usd ask 1.3110/bid 1.3108 ... orders come in
1000 buy Euro, 1000 sell euro ... matched units... they do not need to move the quotes....(make 2 pips from buyer and 2 from seller).

Next orders, 3000 buy euro, 1000 sell euro. ..Immediately they move the quotes up 1/2 pip or so... to be able to buy the 2000 units and fill the order... and like that every single tick.

PS. We all know very well that if our limit orders are between 1 or 2 pips from current price... it is like a market order for the broker,, right? .
Hide them.

J.

This would be a long topic and a bit difficult to explain.
In short... Limit order are irrelevant to current quotes moves.
Limit orders are static, they do not move they do not change... unless of course the party that place them, does change them, move them or cancel them. They do not change according to the current supply and demand.

Check out some thin markets like Coffee on Liffe exchange .... you will have real prove there
They (limit orders) do change according to the current supply/demand forces... heck ... they represent the passive supply/demand in the market.


Current orders.. or market orders is the only thing that change the quotes.
Without current orders, quote will not move. If the orders are balanced, quotes will not move.

There are stop/market orders and limit orders. The first one is consuming the latter. Price moves only when limit orders on bid or ask side gets consumed or taken out by the owner. It may sound very abstract for currency traders but it is visible in DOM in some Futures instruments.

Have you ever placed a limit order?... of course we all have. All stops (SL and TP are limit orders). Have your limit ever changed?, in size or price after you place it? Of course not. If the current quotes are 50 pips away, and a million people place limit orders at the same price you do... the volume of orders at that level increase... but is irrelevant to the current prices... The current prices will move closer or will go in the opposite direction according only to the "current" demand and supply.



Stops are not limit orders ... they are simple market orders. It seems you are confusing the limit orders with actual trading activity.


Your limit order may never be hit.

In an hypothetical scenario if in one specific millisecond the whole world does not place a single "market" order... the quotes will not move. Pending order will not be filled. (No orders is a balanced market, 0=0)

No orders = no market. How do you come to such conclusion? LOL


A chronological example would be: (made simple for understanding).
Bank and Brokers quote euro/usd ask 1.3110/bid 1.3108 ... orders come in
1000 buy Euro, 1000 sell euro ... matched units... they do not need to move the quotes....(make 2 pips from buyer and 2 from seller).

Next orders, 3000 buy euro, 1000 sell euro. ..Immediately they move the quotes up 1/2 pip or so... to be able to buy the 2000 units and fill the order... and like that every single tick.

Who move the quotes? ....

PS. We all know very well that if our limit orders are between 1 or 2 pips from current price... it is like a market order for the broker,, right? .
Hide them.

Check out some thin markets like Coffee on Liffe exchange .... you will have real prove there
They (limit orders) do change according to the current supply/demand forces... heck ... they represent the passive supply/demand in the market.

There are stop/market orders and limit orders. The first one is consuming the latter. Price moves only when limit orders on bid or ask side gets consumed or taken out by the owner. It may sound very abstract for currency traders but it is visible in DOM in some Futures instruments.

I am not sure how the regulated markets works. Actually don't know if the original question was intended for forex only or for any market.

In any case.. I do not understand what you mean by "Limit orders do change according to current supply/demand" They don't. (maybe you explain that in detail).

But it is like you mention in the second phrase. "Market orders" are the ones that prevails and is what moves or not moves the quotes in one direction.
That is what I am saying.

You call it consume I call it fill . Same thing.... but when you say that price moves "only" when "limit orders are filled" on both sides,... that is not correct. In a way by saying that you are denying the existance of market orders.


Stops are not limit orders ... they are simple market orders. It seems you are confusing the limit orders with actual trading activity.

mmm.. terminology .. always confusing. Maybe You could define what is a "stop" for you...
for me Stops it is "the selling part of our transactions". I can make it a limit orders or market orders. ( in forex it is just more commonly used to describe the act of placing a pending order. .. like putting a SL or TP X pips from Current price).

Say I purchase euros...... if I place them for sale in any other price then current price... that is limit order or pending order whatever we want to call it. It will become market order if, and only IF.. the units of the "market orders" are un-balance and quotes moves to our static order.

Now... If I am holding euros... and at any point on time I just sell them,
that is a market order.

We can only do 2 things in forex and it is chronological: a) First we buy a currency then we can sell it. ( "All first" transactions are buys and the closing of that transaction is a sell).

Those 2 transactions, can be done in 2 fashion, execute at the current price "at market" , or we can place a limit order at a different price then current price.

No orders = no market. How do you come to such conclusion? LOL

You just misread what I said.
If the "units" supply and demand are balanced... price do not change...if no "market order" enter the market... zero supply and zero demand... price does not change.

Who move the quotes? ....
Rhetorical question.. we all know who moves the quotes. Banks.
The whole issue of the thread is "why"?. .. and the answer to that is: To Fill "market orders".

The general conclusion is still that only "Market orders" are the only ones that move the prices. (both, bid and ask) .

PS. We all know very well that if our limit orders are between 1 or 2 pips from current price... it is like a market order for the broker,, right? .
Hide them.

J.

It doesn't matter if its forex or centralised market. Same principles apply. Summary of (Stop/Market)/Limit orders coming into the market represent the current supply/demand flow. Some players are willing to buy at the market... some players set their orders at fixed price. In both situations the driving force is desire to profit.

By standard definition Stop orders are market orders triggered at the price set by trader ie. Stop Loss. These are pending orders aswell.

You have to grasp the concept of market moving without any trading going on. Prices can move on 0 volume just by shift/change in liquidity near the current price. I've seen some large moves as a result of dissapearing offers/bids without any market orders coming in.

It doesn't matter if its forex or centralised market. Same principles apply. Summary of (Stop/Market)/Limit orders coming into the market represent the current supply/demand flow. Some players are willing to buy at the market... some players set their orders at fixed price. In both situations the driving force is desire to profit.

Well, it does matter. In centralized markets it is true that in both situations the driving force is desire to profit... ( speculative purchases expecting just a favorable price change and non-speculative expecting a favorable price change +dividents in case of stocks.) But in forex the driving force of the non-speculative it is not the desire to profit from price changes. But that is a different topic.

By standard definition Stop orders are market orders triggered at the price set by trader ie. Stop Loss. These are pending orders aswell.

Ok.. now I understand you. You call a pending order a "market order" because has already been placed in the "market", thus a market order .. ok I can agree with that. Then, I need to re-define what I am talking about.

Price move "only" by "New non-pending orders" or what most call spot orders... any orders that is meant to be executed at the at the current quotes. Does that make sense?


You have to grasp the concept of market moving without any trading going on. Prices can move on 0 volume just by shift/change in liquidity near the current price. I've seen some large moves as a result of dissapearing offers/bids without any market orders coming in.

Difficult to grasp.. I have never seen large moves as a result of dissapearing orders without any orders coming in... I mean I don't even know were to look for that info. Looking at the futures order flow on currencies, does not even tell 10% of the total picture of what is happening. In essence, the spot forex rules, no volume is available, and no one knows more then their own internal order flow.

But yes, I do understand perfect that volume is irrelevant to price changes. Little or big volumes does not matter... only the difference in units supply/demand is what it does. Now, lets say at one millisecond the "new non-pending orders" is 0... yea... Banks and Brokers will "reach" for the pending orders in both sides... that is what I mentioned in the previous posts.. I mean they do it with or without liquidity just to match orders and make a few extra $$. .. the key world is like you said "near" current price.. the usual 1 or 2 pips below/above Current price. No bank or Broker will venture more then that to fill their internal orders.. they would get their butt whip every time by arbitration.

I guess that almost cover "why" price does what it does... right?

J.

.....But in forex the driving force of the non-speculative it is not the desire to profit from price changes. But that is a different topic.


Thats right....there is also non-speculative interest in Commodities but it is all part of supply and demand. It is a sum of all buyers/sellers, no matter what kind of orders they are using and what is their expectancy.



Ok.. now I understand you. You call a pending order a "market order" because has already been placed in the "market", thus a market order .. ok I can agree with that. Then, I need to re-define what I am talking about.



Stop orders work like market orders when price aproach them. When you put a buy stop or buy market order you are always buying at the BID.

Buy limit order for example is sitting there waiting to be filled with ASK price.


All Limit/Stop orders are pending orders. When you put limit order into the market then you are waiting in the cue to be executed depending on entry_time and size of the order. When you put stop order into the market, it gets executed as a market order as soon as first trades start hitting this level. It is somehow oversimplified explanation becouse different markets use different algos but you see my point.



Difficult to grasp.. I have never seen large moves as a result of dissapearing orders without any orders coming in... I mean I don't even know were to look for that info. Looking at the futures order flow on currencies, does not even tell 10% of the total picture of what is happening. In essence, the spot forex rules, no volume is available, and no one knows more then their own internal order flow.


There is no point in watching currency DOM @ Futures. These orders don't have much impact on the price you see there.