I'm learning english. There will be a lot of mistakes, so if you don't understand sth, please feel free to ask any questions.
1. Who do control transactions? Buyers or sellers?
It's a fundamental question and the answer is very valuable.
There are 3 possibilities :
1) control of buyers
2) control of sellers
3) Neutralized market:
- a) neutralized market with buyers influence
- b) neutralized market with sellers influence
- c) Very neutralized market (neither buyers nor sellers control transactions.)
Some examples:
1) Buyers control the auction process: why? Because you can observe prices is moving up in a fast way.
2) Auction process controlley by sellers
3) Neutralized market
a) buyers influence::
b) sellers influence:
c) Very neutralized market:
Do you understand why am I talking about very neutralized market? Because the Bullish auction process isn't effective anymore. Indeed, Buyers control the auction process in periode 1. Then in period 2, you observe that Buyers wait TOO MUCH TIME to show that they're still in control. You can say that they are not able to push up price anymore and that's why I use the term of"very neutralized market"
2. Let's talk about the concept of value
What's the purpose of a market?
A market does exist in order to facilitate transactions between buyers and sellers. That's all. I assume that you're familiar with the concept of supply and demand and price of equilibrium as called "Value".
In fact (in normal market conditions), price is lateralizing when markets participants have found the Value. Why?
1) Trends appear when there is a disequilibrium between supply and demand. Why? Because the purpose of a market is to facilitate transactions.
So, when there is too much buyers, we need to move up IN ORDER TO FIND SELLERS.
2) And then you can see a sideways market/trading range/balanced market/neutral market, whatever, it means that BUYERS and SELLERS are making business.
Buyers do agree to buy at that price and sellers do agree to sell at the same (zone of) price.
Also we don't need prices moves because the both side are satisfied. Do you understand? We don't care what is the real value of sth. We just need to consider what is the value according to markets participants. It's sth quite ironic becauser sellers consider that price is too high compared to their perception of value and buyers think price is too low in relation to their value's perception. Therefore, their trading flow neutralizes price because supply is equal to demand and vice-versa.
Typically, these balanced area are highest volume zone and price tends to spend a lot of time around it. I think you can understand why? Because if we, buyers and sellers make huge transactions then market-makers make a lot of money thanks to fees. That's why we are always looking for a Value trading area and don't be suprised if trading ranges just occur the majority of time. That's why you may even say that volume made is a synonym for value. I want to be sure that you understand me well.
Trading range means that buyers and sellers are making a lot of business (volume). So, if there are making a lot of volume, you can say market participants have found the Value because there is an equilibrium with supply and demand.
Market makers may push down/up the price if there is a huge historical volume zone at proximity.
3. Do I understand value?
http://www.forexfactory.com/showthre...52#post7703752
4. Importance of Time (part one)
http://www.forexfactory.com/showthre...24#post7704424
5. Importance of Time (part two)
http://www.forexfactory.com/showthre...04#post7707104
1. Who do control transactions? Buyers or sellers?
It's a fundamental question and the answer is very valuable.
There are 3 possibilities :
1) control of buyers
2) control of sellers
3) Neutralized market:
- a) neutralized market with buyers influence
- b) neutralized market with sellers influence
- c) Very neutralized market (neither buyers nor sellers control transactions.)
Some examples:
1) Buyers control the auction process: why? Because you can observe prices is moving up in a fast way.
2) Auction process controlley by sellers
3) Neutralized market
a) buyers influence::
b) sellers influence:
Attached Image
c) Very neutralized market:
Do you understand why am I talking about very neutralized market? Because the Bullish auction process isn't effective anymore. Indeed, Buyers control the auction process in periode 1. Then in period 2, you observe that Buyers wait TOO MUCH TIME to show that they're still in control. You can say that they are not able to push up price anymore and that's why I use the term of"very neutralized market"
2. Let's talk about the concept of value
What's the purpose of a market?
A market does exist in order to facilitate transactions between buyers and sellers. That's all. I assume that you're familiar with the concept of supply and demand and price of equilibrium as called "Value".
In fact (in normal market conditions), price is lateralizing when markets participants have found the Value. Why?
1) Trends appear when there is a disequilibrium between supply and demand. Why? Because the purpose of a market is to facilitate transactions.
So, when there is too much buyers, we need to move up IN ORDER TO FIND SELLERS.
2) And then you can see a sideways market/trading range/balanced market/neutral market, whatever, it means that BUYERS and SELLERS are making business.
Buyers do agree to buy at that price and sellers do agree to sell at the same (zone of) price.
Also we don't need prices moves because the both side are satisfied. Do you understand? We don't care what is the real value of sth. We just need to consider what is the value according to markets participants. It's sth quite ironic becauser sellers consider that price is too high compared to their perception of value and buyers think price is too low in relation to their value's perception. Therefore, their trading flow neutralizes price because supply is equal to demand and vice-versa.
Typically, these balanced area are highest volume zone and price tends to spend a lot of time around it. I think you can understand why? Because if we, buyers and sellers make huge transactions then market-makers make a lot of money thanks to fees. That's why we are always looking for a Value trading area and don't be suprised if trading ranges just occur the majority of time. That's why you may even say that volume made is a synonym for value. I want to be sure that you understand me well.
Trading range means that buyers and sellers are making a lot of business (volume). So, if there are making a lot of volume, you can say market participants have found the Value because there is an equilibrium with supply and demand.
Market makers may push down/up the price if there is a huge historical volume zone at proximity.
3. Do I understand value?
http://www.forexfactory.com/showthre...52#post7703752
4. Importance of Time (part one)
http://www.forexfactory.com/showthre...24#post7704424
5. Importance of Time (part two)
http://www.forexfactory.com/showthre...04#post7707104