Hello,
I am Absolutely new at Forex. I am confused at buyers and sellers terminology used here.
If I am a Buyer, I would like the prices to come down as low as possible so i can buy more, but according to Forex Articles, [B]Buyers bid high[/B]. can anyone explain and clear my confusion.
depends on the style most probably. Its like a buyer will wait for a resistance upwards to be broken before buying.
By the way is forex trading allowed in Saudi Arabia? You got strict laws there.
As a buyer, yes you want to buy at the lowest price. But to be able to buy you need a seller, and sellers want to sell at the highest price. only one trader will be right. So if you are a buyer you must buy at a price where you think the price will go up and sellers believe that the market will go down. Your analysis is what you rely on to tell you this
There is some serious confusion here.
When you “buy” a currency pair on the forex market, [B]you are not really buying anything.[/B] You are entering into an agreement to buy something later. “Later”, in the forex market, means two days from the time you execute your trade.
Your broker requires that you post a good-faith deposit — called margin — at the time that you execute your trade. Many brokers (including my broker, FXCM) base this margin amount on the number of units of base currency in your trade, regardless of the market price of the pair you are trading.
As an example, let’s say that you trade through one of these brokers, and let’s say that you buy 10,000 units (1 mini-lot) of the GBP/USD. Your broker will require the same margin whether the GBP/USD is priced at 1.5000, or 2.5000, or 10.5000.
[B]Therefore, when you execute your trade, you don’t care how high (or low) the price is; you only care about which direction the price is going from here.[/B]
When a trader refers to the “high price” of a currency pair, he is not thinking of the high cost of buying that pair; he is thinking of the probability that the price will decline from that “high” level. A decline will cost him money.
If I knew that the GBP/USD was headed higher from here, I wouldn’t care how high its current price is. Whether it’s 1.5000, or 2.5000, or some other price, it will “cost” me the same 100 USD in margin to trade 1 mini-lot of GBP/USD.
[B]Therefore, only one thing is important to me: that the price is higher when I sell, than it was when I bought. [/B]
If the price increases from 1.5000 to 1.5100, I make 100 pips. If the price increases from 2.5000 to 2.5100, I make 100 pips.
Either way, it’s the same cost (margin) to transact business, and it’s the same profit.
[B]The “purchase price” of the GBP/USD (that is, the dollar-cost of the British pound) is of no concern to me.[/B]
I hope that helps you.
Clint
having determined which way price is potentially going, would you not attempt to find the best entry ?
I don’ t consider myself as a buyer/seller of anything when I am trading in the forex. More at my level !
I think we are more like follower. we are following where the market will go, like small fish are following the wave. the technical term of buy/sell are just there to indicate if we are following by going up or going down.
[B]kockneerebel,[/B]
By “best entry”, I presume that you mean entering LONG at the lowest possible price, or entering SHORT at the highest possible price. That may, indeed, be part of your method.
But, other methods employ exactly the opposite approach. Consider a typical breakout strategy, in which you look for price to break out of a trading range. In such a strategy, you are actually waiting for a[B] higher[/B] price at which to enter LONG, and/or a [B]lower[/B] price at which to enter SHORT.
But, I don’t think this is addressing the original question on this thread.
If I correctly understood the intent of the original question, faisal was equating (1) the “buying” of a currency pair with
(2) the buying of a product in a store (where you would look for the lowest price available, and you might scale the size of your purchase to the unit cost of the product).
In my answer to his question, I tried to make the distinction between two very different concepts of “buying”.
When you “buy” a currency pair, there is no unit cost to be borne by the buyer; there is simply a fixed, refundable margin required as a good-faith deposit on the transaction. In ordinary commerce, on the other hand, when you buy an item, cost is a critical consideration.
[B]faisal,[/B]
If I have misunderstood your question, please explain in more detail what you are thinking.
Clint
Clint
Point taken, different stratagies require different entries. It is highly possible that I misunderstood the origional question, in which case I apologise for causing confusion.
[B]Faisal[/B]
as you can see, in forex trading there are different views depending on trading system used. When you find a strategy that you are comfortable with, the rules off that system will tell you whether to look for high’s to enter or wait for pullback before entering
regards
Dave
This was really helpful. Thanks!
For sure it needs to be explained, you are putting the bids here anyway. For sure you need to be able to buy at lowest possible price but when sellers do sell they want to get as high as possible and probably choosing highest buyers bid, so take that in account.