ameyalokras
Recruit
- Messages
- 1
Hello, I have just started reading forex education material so please bear if this is really stupid, I am confused how price action is driven in forex market.
In a typical stock exchange, when you need to buy or sell an equity, your order is executed in the exchange and because of your order execution the price of that particular equity changes. Then the exchange finds appropriate counter party for your trade and finally its settled and your equity is bought / sold.
But in spot forex there is no exchange. All the trades are done 'over the counter', so when you trade a currency pair, your order is matched to a counter party(traders/market makers/institutions) and the exchange happens. Now my understanding of price action is related with demand and supply, If a currency quote is lower, more people are interested in buying it which increases its price to a point that people aren't interested anymore, and vice-versa for sell.
But what I don't understand is because all the trades are over the counter, the number of buyer and seller should always be equal, because unless some one is willing to sell a currency who are you going to buy it from. And if there are always same number of buy and sell transaction occurring, why should the quote change.
In a typical stock exchange, when you need to buy or sell an equity, your order is executed in the exchange and because of your order execution the price of that particular equity changes. Then the exchange finds appropriate counter party for your trade and finally its settled and your equity is bought / sold.
But in spot forex there is no exchange. All the trades are done 'over the counter', so when you trade a currency pair, your order is matched to a counter party(traders/market makers/institutions) and the exchange happens. Now my understanding of price action is related with demand and supply, If a currency quote is lower, more people are interested in buying it which increases its price to a point that people aren't interested anymore, and vice-versa for sell.
But what I don't understand is because all the trades are over the counter, the number of buyer and seller should always be equal, because unless some one is willing to sell a currency who are you going to buy it from. And if there are always same number of buy and sell transaction occurring, why should the quote change.