What Really Makes Markets Move?

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THE WORLD'S MOST TRUSTED NAME IN PROFESSIONAL TRADER EDUCATION™    SINCE 1997

Market Volatility: What Really Makes Markets Move?

Dear Colleague, Whenever I meet a new group of students in the classroom, one of the first things I like to introduce them to is our rules based core strategy and how an understanding of imbalances between supply and demand show themselves on a price chart and also provide us with low risk trading opportunities. You can find out more by attending one of our free workshops. A great example occurred with the USDCHF currency pair for January 15, 2015. That was the date Swiss National Bank scrapped its three-year-old cap on the Franc, sending the currency soaring against the Euro. That fateful day, the USDCHF saw a drop of nearly 2000 pips in the shortest possible time. The truly interesting thing we can take from this drop, however, is that once a low was created the chart suggested to us that the market had a really decent chance of rallying back to where it dropped from originally. You may be asking yourself why? Well, simply because the origin of the imbalance occurred at the origin of the drop itself, which in turn created the level of supply. The supply level was only created because not enough people who were willing to sell at that price got their orders filled. Once the buyers stepped in after that drop, the path of least resistance was objectively back to the origin of supply, as we can see here: The market did rally back to the origin of the initial drop, which was made easier due to the fact that there were no other levels of imbalance for it to deal with on the way back up. As the market is pushing back down again now, objectively it looks like there is an imbalance around 0.9250 which could be another decent buying opportunity. So what can we take from this? Can we take advantage of such market volatility? I found that my own trading benefited greatly once I truly understood that down markets were actually being controlled by the people who were willing to buy, and that rallying markets were really being controlled by the people who are willing to sell. Prices will continue to move up or down until they find the next majority of orders and it is these unfilled orders from the past which become the most likely obstacle to halt the current direction of any market. To find out how you can start changing your own results through a better understanding of supply and demand, sign up for a free workshop. Be well and safe trading, Sam Evans Instructor Online Trading Academy

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