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Originally Posted by tommyfx
"But FX ticks are not based on people's supply demand."
So are you suggesting that if there is a 1 billion dollar buy order (therefore demand) for euro at 1.2000, this will not have an effect on price and it won't therefore rise.
Or a billion dollar sell order at 1.9990 wont cause the price to free fall from this long held support?
"The price is where it is ideal for (banks,government,country's economy,exporters/importers) needs."
Yes this is very true, however they dont do this by not just not moving the price to an area that doesn't suit them they spend billions each day maintaining certain levels, thus causing demand, i can't remember the exact figure but the bank of england spends billions each day from stopping GBP diminishing too much as do all other countries.
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And how much will the 1 Billion dollar buy order move the market ?? Not too much probably, just a few pips, merely not more than 15 to 20 pips max. The market is too huge to be affected dramtically by a 1 billion order. Another fact, is that nobody will place a 1 billion buy order as a single block, he will probably break it down to small moderate pieces of say 200 millions an order. When you want to enter the market that large, you want to be as anonymous as possible, all professional traders do this, because if you picked up the phone and called your broker or bank to place a 1 billion order, the next 5 minutes after your order have been executed, half of the worlds' traders will know about it and know who is having this position now. In a sense for professional traders, you are losing an edge, because you are giving the market and the traders out there more information. Professional traders don't like this, because it can turn against them. For example, Warren Buffet banged the world by saying that he is bearish on the USD and Bullish on the GBP early this year. Other Pros who don't share him the same opinion, will try to spot when is he going to probably enter his positions, and they will consider these entries as huge pullbacks, in which they will be selling the GBP at and buying the USD at.
Also keep in mind that the 1 billion dollars you are talking about will have a small effect on the daily or weekly chart and you will merely identify it as a correction to the major trend.
It's all a supply and demand game. Which currency does the people want to own the most and which is the one that people don't want to own??
Thanks,
Nader