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The Nature Of Foreign Exchange Market

When you expect to catch some fishes in the pond, you need to know/understand about the fish. You have to know what, why, where, when, how they eat, rest, leap, dip, mate, etc.

The fish here is the price of good (in this topic is money), the pond is the market.

Facts:
- The concern is price.
- The actors are market participants.
- The derivative market is a zero sum game, that’s when someone looses money the other will gain the money.
- The market is 100% liquid (you can always sell or buy at any time you want).
- To profit we need to buy at lowest possible price and sell at highest possible price.
- When you buy at a price, other who sells you will reach BEP, profit, or loss.
- So for every flash of time there are emotions involved. When someone profit they’ll be contented/ happy/ excited/ proud, loose they’ll be understanding/ sad/ angry/ frustrated, etc.
- The price never justify the real condition since there are lots of distortions.

The price always moves up and down.
It moves because of the demand and supply the buyer and seller.
It rises when there is more demand than supply.
It sinks when there is more supply than demand.

Demand is created because of want and/or need with the ability to buy.
Supply is created because of want and/or need with the ability to sell.

Those who need to buy/sell are not interested to the price.
While those who want to buy/sell are interested to the profit, the price difference.
They all influence the price movement.

Who are they?
- Human.

What are the factors influencing the human action?
- Mental (knowledge), Emotional (feelings), Spiritual (holistic beliefs).

Which is most influencing?
- Depends, mental when the condition are normal, as they foresee, emotional when the condition is not as they expected.

When is the time to take action?
- In a normal condition, any time as long as you go with the market.
- In an emotional condition, before they realize that they are being irrational or you can enter against the market with certain precautions.

How can we see those condition, situation, etc?
- From the graphic that shows price movements. Market participants are not forgetful, when they profit they remember exactly about the process and the outcome of their decisions, sometimes after they take profit the price raise and they’ll take mental note to hold their next positions longer, etc.
 

Perdagangan barang yang hampir 100% liquid