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Thread: Forex Market Structure - Q/A

  1. #11
    Quote Originally Posted by ;
    quote , I don´t know whether you´ve attempted to done this particular search, but you would be surprised that this fundamentals are very tough to find. Eve..., thank you for your answer and I hope this thread will grow more interesting for you as we will discuss more details. Cheers.
    On the ribbon being interesting, certain hope so..as for the fundamentals questions being answered, given a few of the brokerages list sparse information but there's a wealth of information online..just to set it in perspective we did exactly that, online research, gummed up on all of the information we could get our hands on and yeah, all of the info was free. . And now, we are far better off for it..will review the thread afterwards for much more interesting comments. .

  2. #12
    Let us bear in mind there are two standard forms of orders, market and limit. There is a lot more complexity to it than this but for the moment it will be sufficient. A market order may be considered an active order as it draws on the liquidity of existing limit orders that we'll consider the passive counterpart. Limit orders are also the source of this spread.

    A limit order says that you will transact at a specific price, and we're given two groups of people with different desires in the market. One group wants to market, another to buy. The sellers put forward limit orders to sell at $1.10 and the buyers state interest to buy, but may just cover $1.09 in this example the spread is $0.01.
    Nothing happens, no-one buys or sells, then for whatever reason the sellers pick $1.10 will be to low a figure.
    They pull off their limit orders and say they will now sell at $1.11 the price has changed without a transaction having taken place and the spread is now $0.02. The buyers recognizing that the price is climbing concede and increase the price they will pay for $1.10, yet the quoted price varies, yet no trades have taken place, and also the spread shrinks and returns to $0.01.

    Throughout the example so far we have seen changes in price though no commerce has taken place, this change has simply occurred by the two opposing parties as a collective altering what price they transact a transaction at. Let us continue.

    I have decided that I would love to buy 500 lots of anything exciting thing we're trading, looks like a great opportunity to elevate my blood-pressure and declare at the monitor. There are two ways I can go about it, I could put a limit order to buy 500 lots at $1.10 and expect that somebody will come along with a market order and market at the price I've quoted, this leaves me open to the chance that I will miss the expected rise in market price nonetheless means I avoid having to cross the disperse to trade. My limit order in the situation means that the bid price cannot go below $1.10 until my order is full, this is the liquidity I said before, hefty liquidity means that there are a high number of lots available and will normally have the effect of decreasing the spread. Low liquidity leads to price slippage and a widening of disperse amongst other things, as a general principle we want to trade whenever there's high liquidity.
    The next technique is to put a market order, which is rather than estimating the price I will buy knowingly moves and purchases from the vendors at whatever price is available. Lets say that the market thickness (that we sadly cannot see in Forex) is along these lines:

    $1.13 - 500 Lots
    $1.12 - 250 Lots
    $1.11 - 150 Lot

    I will have my commerce stuffed, 150 lots at $1.11, 250 lots at $1.12 and the remaining 100 lots at $1.13. This is exactly what traders generally refer to as $ #*ing slippage, and one of the reasons the game changes when you start investing in quadrillions of dollars.
    Following this has happened we'll observe the quotes have changed, sellers are now $1.13 ask with 400 lots and the buyers remain stable at $1.10 and the spread widens to $0.03.

    The price collapses in an unprecedented move, and I lose everything.

  3. #13
    Quote Originally Posted by ;
    Let us keep in mind there are two basic kinds of orders, market and limitation. There is a lot more complexity to it than that but for the moment it'll be sufficient. A market order may be considered an active order as it attracts the liquidity of existing limit orders that we'll consider the passive counterpart. Limit orders will also be the origin of this spread. A limit order says you will transact at a given price, and we're given two groups of individuals with alternative desires in the market. One group wants to sell, another to buy. The...
    hi hoot,

    the process mentioned above in regards to this market order is to get large players directly where after a specific price level is absorbed,the price qouted will be of the next price level? Is it applicable to retail traders such as us who cope with, for instance in miniature lots? Kinda confused with how prices rise and drop to get brokers such as oanda..hoping you could enlighten me. thanks.

  4. #14
    Of all of the threads in the conversation area, THIS gets moved to the newcomer section.

    Unbef******lievable

    Good question EQ,

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