Supply And Demand In Forex

Supply And Demand In Forex Basic Definition. The basic thing for novice traders is to know how and why prices can move. Therefore it is important to understand that prices move only because of function, and as a result of the Law of Supply and Demand, not because of anything else.

Prices move only, and only, if simple calculations become unbalanced. Let's just say that currency trading is not much different from trading in our traditional markets. Onion prices, for example, will soar due to reduced supply from New York. Or because it's approaching the big days the demand soars. So don't be surprised if women grumble because the price of onions or chicken has gone up in the market.

It is almost the same as currency trading,and our previous discussion related to support and resistance. It's just different scale and medium. Therefore, the earliest mindset possessed by a trader is the mindset of a trader, who trades because of demand and supply.

Once again the author repeats, prices are always formed based on the law of supply and demand, to emphasize how important this law is in the world of economics. If the supply of an item is high, but the demand for the item is low, then the price will fall. Vice versa, the demand is soaring but the supply is limited, the price automatically rises.

The basic concept of supply and demand

In short, if many are selling but few are willing to buy, it means that the item is not selling. As a result, the price of the good will decrease. Conversely, if many are willing to buy but the supply is limited, the item will sell well. Automatically the price will skyrocket up. This is basic knowledge for novice traders, in order to know how and why this price moves.

Economic laws are always outside the object under investigation, but their situation remains unchanged. In short, the law of demand is: "Demand will increase when prices fall and what will decrease when prices rise." The law of demand is based on the fact that people must meet their needs within a certain budget or income.

Here finally arises the problem of why humans have to meet various needs, while the budget they have is limited? The reason is, every need-fulfilling object has its own use. So that people will try to meet the needs by equating the increase in the use of objects that satisfy the needs they consume.

While sellers usually want to sell the goods or services they produce at high prices. Although the risk is that the items sold will be relatively few. To sell at the desired price level, a seller must have a careful observation of market behavior.

Example of supply and demand

A fruit seller wants to sell fruit at a high price in the market. Unfortunately, that wish coincided with the main harvest season. As a result, there will be a crowd of fruit sellers in the market, so the price of fruit will fall.

Likewise with traders. A trader must understand that the market mechanism is nothing more and no different from other markets he knows. Whether in the stock market or fish market wherever it is, we witness how the law of supply and demand works with the human factor involved in it.

This is the main price driver, and opportunities arise when the simple relationship becomes unbalanced. If only we were willing to observe the interaction of "supply and demand" which is always there all the time, the process of identifying when the price will reverse direction is not too difficult in a chart pattern.