What moves the market?

Many people answer (indadquiatly) that if there are more buyers prices goes up, if there are more seller prices goes down.

This is not true.

For every sale, there is a buyer. For every buy, somebody is selling.

In fact, you could say that you are trading people not shares or currencies. Who is the greater fool the person who buys or the person who sells? And which one is you?

Prices moved by two factors:

  • Supply vs demand (not buyers vs sellers)
  • Manipulation by market makers (by people with a large pocket)

By the way, this is the reason why people monitor volume of trades not just the price. Volume will tell if the price was moved by real big demand or by just a temporay weak supply or demand. The volume tells this story.

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