Sam Seiden
Independent Analyst
As I have written about so many times, the movement of price in any and all free markets is simply a function of an ongoing supply and demand equation. Trading opportunity exists when this simple and straight forward equation is “out of balance.” Meaning prices turn at price levels where supply and demand are most out of balance, in any market. The key for the market speculator is to have the ability to identify what this picture of opportunity looks like on a price chart. The lowest risk, highest reward, and highest probability time to buy into a market, for example, is to buy at price levels way down on the supply/demand curve where demand exceeds supply. At these price levels profit margins to the upside are huge and the risk is low. Unfortunately, price does not fall to these types of desired levels as much as we would like and when it does, it doesn’t stay their long. Of course, this is because demand exceeds supply in such a big way.
Another thing to consider is how and why prices in markets fall to these desired sale prices. The stronger the news event, the greater mass perception is created. The stronger the mass perception, the more buying and selling happens and this moves price. Last week we had a Fed day. While the news was not all that unexpected, price moved fast and far.
Supply/Demand Grid 03/18/15: NASDAQ Buying Opportunity, Fed Day
Many traders ask me the same question regarding news days like the Fed day. They ask if they should pull their orders from the market around news events like the Fed news day last week and not trade. I have two answers… first, if you’re new to trading and don’t know how to identify real supply and demand in the markets, don’t trade around news events (don’t trade period). Second, if you are good at identifying real supply and demand in a market, you really want to be ready with orders in the market around news events. When it comes to price movement the news typically speeds up what was going to happen anyway. As you can see on the NASDAQ Futures chart above, just prior to the Fed announcement, price declined in somewhat strong fashion right into our demand zone from that mornings supply/demand grid. Next, price exploded away from that demand zone. Whatever the news is, however strong it is, the movement of price is always a function of pure supply and demand, a simple numbers game.
Wall Street tells us that you can’t time the market’s turning points and that it’s a waste of time. Of course they tell us that. If the average person could time the market’s turning points no one would need Wall Street. I would argue that the average person can time the market’s turning points like we did with the NASDAQ. It’s not that we are always right and can pick every turning point in a market. With our rules however, I would argue that the average person can time the market’s turning points with a very high degree of accuracy.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
EUR/USD steadies near 1.1750 ahead of final Eurozone CPI amid fading USD recovery
The EUR/USD pair steadies around the 1.1750 area during the Asian session on Wednesday, and for now, seems to have stalled the previous day's sharp retracement slide from the highest level since September 24. Meanwhile, the fundamental backdrop remains tilted in favor of bullish traders and suggests that the path of least resistance for spot prices remains to the upside.
GBP/USD gains ground above 1.3400 on UK PMI optimism
The GBP/USD pair gains momentum to around 1.3425 during the early Asian session on Wednesday. The Pound Sterling edges higher against the Greenback on the upbeat UK preliminary S&P Global Purchasing Managers' Index data. Traders will take more cues from the Fedspeak later on Wednesday.
USD/JPY weakens below 155.00 as BoJ rate hike speculation grows
The USD/JPY pair attracts some sellers near 154.80 during the early Asian session on Wednesday. The Japanese Yen strengthens against the US Dollar amid growing speculation that the Bank of Japan will hike rates to 0.75% on Friday.
Editors’ Picks
AUD/USD hangs near one-week low; downside seems limited
AUD/USD trades with a negative bias for the fifth straight day on Wednesday, just above a one-week low touched the previous day, as a weaker risk tone and China's economic woes undermine the Aussie. However, the RBA's hawkish stance could limit deeper losses. Moreover, bets for more rate cuts by the Fed in 2026 keep a lid on the attempted US Dollar recovery, warranting some caution for bearish traders ahead of US CPI on Thursday.
USD/JPY weakens below 155.00 as BoJ rate hike speculation grows
The USD/JPY pair attracts some sellers near 154.80 during the early Asian session on Wednesday. The Japanese Yen strengthens against the US Dollar amid growing speculation that the Bank of Japan will hike rates to 0.75% on Friday.
Gold extends the range play around $4,300
Gold edges higher during the Asian session on Wednesday, though it remains confined in a multi-day-old trading range. Dovish Fed-inspired bearish sentiment surrounding the US Dollar, along with the risk-off mood, acts as a tailwind for the safe-haven bullion. However, hopes for a Russia-Ukraine peace deal hold back the XAU/USD bulls from placing aggressive bets. Traders also seem reluctant ahead of the crucial US consumer inflation figures on Thursday.
XRP dips as bearish pressure persists despite ETF growth
Ripple is finding footing above $1.90 at the time of writing on Tuesday after a bearish wave swept across the broader cryptocurrency market, building on persistent negative sentiment.
Ukraine-Russia in the spotlight once again
Since the start of the week, gold’s price has moved lower, but has yet to erase the gains made last week. In today’s report we intend to focus on the newest round of peace talks between Russia and Ukraine, whilst noting the release of the US Employment data later on day and end our report with an update in regards to the tensions brewing in Venezuela.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.