Hi Y’all, Please i have this question bothering ma mind all the time.
- Which people make up a Bulish Market ? I know its Buyers that make up a bullish market but which kind of buyers?
A. It is the forex trading buyers; those traders looking for profit by buying with the idea of selling it at higher price ? Or
B. a different person, institute or company that only need to buy a “base currency” to transact his or her business or probably pay his workers , travel , pay educational fees without neccesarily looking for profit in the " buying or exchanging of the “quote currency” for the "base currency "?
PS: if the answer to my main question is “A"
then i think this is where my problem lies because it does not make sense to me; take this senario for instance. Assuming there is a room called “Bullish Room” which is full of traders who are only looking for opportunities to " buy and sell” a currency pair in the same room to make profit, my sub-question is ; from whom are they goin to buy from ? and to who will they it sell to ? The reason i am asking this question is ; the traders in that “Bullish Room” has the same idea of making a profit.
I believe my questions is well put and can be understood, trust me this would be my best way of puuting this question . Thank you
Ambrose,Ghana
The majority of the market is made up of institutions such as banks and hedge funds. They are buying and selling mostly on behalf or under instruction of their clients. Sometimes governments get involved too, throwing taxpayers money into the pit to try and manipulate their currency to stimulate exports. Apart from the government interventions, just about everyone else is trying to make a profit - which puts them into your “A” category.
So who are they buying and selling from? Each other. The market is so big (liquid) that for every trader who thinks now is a good time to buy, someone else thinks it’s overpriced and they want to sell. There are also different motivations - some institutions will close out their positions at the end of the month or quarter for profit taking. Others are trading different timeframes - if you’re long GBPUSD on the daily chart, there are plenty of dips that I can take short on the 5 minute chart - and we can both make money. Others will buy and sell in anticipation of fundamental announcements - another area where two people with the same information can value a currency differently.
In short, the market is huge and at any moment traders can only take one of three positions - buy, sell or stay out. And while everyone is trying to make the right call, being wrong is part of the game too.
Woooooooow, it cant be more explained than this. Thankx " thedatrader" I have clearly understood it now .
Thank you “TheDayTrader”. You have well answered my question. I think my “headache” is over now .
Best Regards
Ambrose, Ghana