Sunday, May 17, 2009

Price action and price fluctuations--


Price is never wrong and price is the only honesty you will ever get in this market because the market itself is never wrong, it cannot be wrong. If the market says the price of the EUR/USD at 1.3594 is too low, is a good value, and should be valued and priced higher, a larger degree of the market will attempt to buy the euro at 1.3594 than what supply would be available to buy at that exact moment in time. More humans believe they can gain by purchasing the euro at that price as opposed to the amount of humans who fear the risk of loss. Conversely, there may be almost just as many humans who believe they can gain by selling the euro at the price of 1.3594. Both sides might be correct, but only the future holds the answer to that question and this is where the two emotions of fear and greed control the decision making once the trade has been made and must be managed by the human who decided to participate at the price of 1.3594.When the supply of available contracts at the price of 1.3594 cannot meet the demand of bidders who want to buy the available supply at 1.3594, the price changes, it goes up and forces those who wanted it at 1.3594 but didn't get it at 1.3594 to pay more to get what they want. As long as more humans demand to buy the euro than there is supply at any given price, price will have to go higher, it cannot work any other way. Now this doesn't mean those humans who thought the dollar was a better value when the euro was at the price of 1.3594 are ultimately wrong, it just means there were more humans who wanted something that was in greater demand but had lesser supply at that given moment in time.

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