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  1. #1
    Active Member

    Do our trades affect price movement? !!!

    Whether I place a £10 trade or a £100 trade, does it actually affect price movement?

    I'm thinking no, because we're not actually buying or selling any particular asset rather predicting whether the asset in the market will go up or down in value, but can someone please confirm?

  2. #2
    Master Member Bogdan G's Avatar
    Your trades do not affect price movement.
    A 100 bucks trade cannot affect price movement even. A 10 million bucks trade is not even felt by the Forex market. Latest data shows that Forex market has a daily turnover of 5.3 trillion bucks PER DAY. Imagine that...

  3. #3
    Legendry Member willyw's Avatar
    Quote Originally Posted by Bogdan G View Post
    Your trades do not affect price movement.
    A 100 bucks trade cannot affect price movement even. A 10 million bucks trade is not even felt by the Forex market. Latest data shows that Forex market has a daily turnover of 5.3 trillion bucks PER DAY. Imagine that...
    Yes, Bogdan is correct. How trades cannot affect price movement. Our volume is an ant compare to an elephant.

  4. #4
    Active Member
    Wow!! That's unbelievable! 5.3 trillion a day!

    That's obviously spread across the entire forex market though, as opposed to any one particular asset. I imagine EUR/USD and other majors must account for the bulk of that...

    But are you also saying that even though our trades won't affect price movement, they do actually account for that day's trading volume? i.e. I'm actually trading an asset rather than just predicting an outcome?

    Makes me wonder if it's wise to avoid the more exotic currency pairs and those assets which are less traded.

    Thanks a lot for clarifying this!

  5. #5
    Master Member Bogdan G's Avatar
    Yeah, that 5.3 trillion is spread across the entire market. FOREX market. Binary Options... that's another thing. Totally different; and has nothing to do with the 5.3 statistic. Anyway, when you place a call or a put on BO, your order doesnt even reach the real market... most of the times, depending on your broker.

    If you would trade Forex, then yes, your order would be a part of that daily trading volume (assuming you are not trading with a shady Forex broker who doesnt transmit your order)

    Yes, EUR/USD accounts for a big part of that volume.

    Now about exotic pairs: it's a double edged sword because sometimes those are less affected by speculation, Draghi/Yellen/Carney speeches and they sometimes have more predictable movement. Sometimes. On the other hand, they have bigger spreads (u care about that only if trading fx) and movement can be choppy, with irregular volatility (ie. one minute it moves like crazy and immediately stops and trades sideways for a few hours)
    Cheers

  6. #6
    Rookie Member
    Yeah forex is the biggest market in the world and 5.3 trillion is spread across the entire market daily. it is huge amount and our capital is few bucks compare with this.

  7. #7
    Active Member
    Oh I see... Thanks for this explanation!

    I suppose even if my broker did reach the market, the value of my trades would be so small on the major currencies that it wouldn't even make a difference. That's probably another reason to trade during the peak trading hours.

    Anyway, thanks for this. Very useful to know and I definitely want to find out if this is the case with TopOption. (Who btw, for anyone reading this, I don't necessarily recommend as a broker. They're okay. But their site and platform can be painfully slow and laggy.)

  8. #8
    Active Member RichardD's Avatar
    Quote Originally Posted by Bogdan G View Post
    If you would trade Forex, then yes, your order would be a part of that daily trading volume (assuming you are not trading with a shady Forex broker who doesnt transmit your order)
    How could even a reputable FX brokerage could transmit your let's say 0,10-1 lot of EURUSD mkt buy order to the "real" market? I doubt that. In my understanding even the most popular, well-known FX retail brokerages (given that ALL of them are market makers) would just take the other side of mostly every incoming order and do the biz in-house only. Except for those orders more than like 5 lots, but I am not sure if there would be too many of them? Or am I wrong?

  9. #9
    Active Member COGSx86's Avatar
    Binary Options, are paid from in house, so yes your bids can affect the price the broker is showing. It will not affect the market price!! What this means is, you should never TRADE when the brokers strike price they offer you, is outside of the bid/ask range of the market price, some times at key Support and Resistance it might be outside this range, because a larger number of traders are active to the positive side. This in turn will result in the house being OTM, this will then lead to the house having a price move outside the BID/ASK price.

    Also to add thou at these key reversal points of S&R, if the price is outside the bid/ask price by less then 10 points it most likely wont affect you if you are trading 30 minute or higher expiry times IMO, but it is still the most important factor when it comes to trading BO's and the broker house due to the fact they pay from the HOUSe just like a casino
    Last edited by COGSx86; 06-21-2014 at 12:12 AM.

  10. #10
    Master Member Bogdan G's Avatar
    Quote Originally Posted by RichardD View Post
    How could even a reputable FX brokerage could transmit your let's say 0,10-1 lot of EURUSD mkt buy order to the "real" market? I doubt that. In my understanding even the most popular, well-known FX retail brokerages (given that ALL of them are market makers) would just take the other side of mostly every incoming order and do the biz in-house only. Except for those orders more than like 5 lots, but I am not sure if there would be too many of them? Or am I wrong?
    First of all, how do you know that ALL FX retail brokerages are market makers ?? What about teh agency model, what about Straight Through Processing, what about NDD, ECN, etc?
    Your 0.10 lot trade is automatically coupled with other thousands of such trades and then it goes into the big ocean. I do not know the exact procedure because I was never interested in it.

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