Forex Prices

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To get an idea of ​​what actually moves in prices or exchange rates to get the interbank market, we must first understand that can happen for each transaction must be the buyer, and there is a seller – it is only his party have each trade. Open interest in the forex as a loose combination of all the rest (limit) orders have been defined. Many market participants to use these orders, either above (limit sell), or less than the current price (purchase limit). These orders to be filled only if the price of the set value can be achieved.For example, let’s say the EUR / USD and 1.2500 to the current bid. We made a signal to sell limit order at 1.2501. When our order is triggered? When all the sell orders are 1.2500 buyer is found, the offer price promotion to the next available machine, which is 1.2501. As soon as buyers enter the market at this price (they actually pay the asking price, and the broker is to collect the difference), they met the other party, and our trade mission. One way is to look at it, that there are mainly two kinds of orders: limit orders and market orders. There are other ways, but they can not always keep these two subtypes are classified. Limit orders are set up to work if and only if you set the price level is reached when the market contracts is set to operate at current market prices. Alternatively, the limit orders are intended to control the open interest on the market orders in a complex open interest may be appointed. This is a very important distinction, because it is the backbone of the price.
It should be noted that the only relationship between the purchase and sale offer is that the asking price, which can, by definition, should never be lower than the offer price. Every other aspect, the two are not related, so spread the two varies depending on where the open interest. In times of low liquidity may be interested in purchasing one of about 1.2450, and no one is interested in selling 1.2550, so the spread is 100 + points. This product is not necessarily shady dealer practices (even though it may be a retail store), but caused me to normal market conditions, mechanics – all the open interest was consumed either by market orders, or withdrawal (limit orders may be revoked before they are implemented). Such a situation usually happens when it is important, unexpected information in the market, such as the reading of the reform is so absurd. In this case, open interest is consumed in one direction, flooding the market orders, and other open interest in the direction of market participants to cancel orders in Peru. This means to say that liquidity is not “dry” and that the Tender opening downwards, until it jumps to buy limit order, and the asking price until a sell signal is reached the limit orders. Please note that no one will come and “set” the spread. The spread is not a parameter that can be set, but is rather the result of the market mechanism at its lowest. Should not be surprising that even today’s technology to quickly, the delay of the market order entry and execution, during which you can not open the desired rate of consumption, particularly in rapidly changing markets. In such circumstances, there is no market for the other party to the desired level, and it can either be filled at a worse price (slip), or it can be re-quoted. This is not necessarily indicative of abuse by the broker, but is most often a natural consequence of the market mechanism, and delays in communication tools. It should be noted, however, that as soon as the prices move through several stages and get to the end, they may not be “massaged” (a practice known as price shading) by any means. This is the reason why many of them offer a preferential trade via ECN instead of the traditional retail broker. In reality, there are advantages and disadvantages to both. You can examine exactly how and why this is true in our follow-up article, forex brokers work.


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