In Forex trading market, Technical indicators is needed to determine the pattern of price movements, are fundamental indicators (economic data) is of particular interest to determine the cause of price movements. By using a combination of the two main tools that we can predict the market direction next. The main basis of Technical analysis and fundamental fact is the principle of supply and demand (demand and supply) in the economy.
In the era of the free market as it is now, the market price changes that occur from time to time is the result of an imbalance between demand and supply. When demand exceeds supply in the market, then the price will go up. Conversely, if the existing supply in the market is greater than the demand, then the price will go down. For example, when the Internet boom between the years 1999-2001 almost everyone wants to use this technology to industry demand at its center in Silicon Valley United States is soaring. This leads to the demand for US dollar skyrocket. While the demand far exceeds supply, US dollar exchange rate rose sharply.
Players in the forex market including speculators, institutional and retail traders continually make buying and selling of various Currency pairs. They sell a country's currency if the country's economic fundamentals are not as expected and buy the currency of a country that is economically good condition. The value of the currency of a country that was in a good economic fundamentals tend to be stronger, therefore the demand and supply of the currency of a country depends on the assessment and expectations of market participants in the country's economic fundamentals. The better Economic Fundamentals, the higher the demand for the Country's currency and vice versa.
At the Support level of market participants in general assume that the price is too cheap, and predicts demand will exceed supply until the price drop is going to halt. Demand can also be interpreted bullish or buy. By the time the price reaches the support level buying will increase and prices will rise.
In the resistance level market players think the price is too expensive and demand estimates will be reduced. When the price reaches the resistance level, the pressure to sell or supply will increase and prices will fall. Offers can also be interpreted as a bearish or sell.
Balance and price movements
The market is the arena of battle between the buyers (buyers) and sellers (sellers). Prices will reach the level of balance (equilibrium) and do not move when the number of buyers still needs can be met by the seller. If the amount of any of the buyer or the seller has run out (zero) then the price will move. Example: in the market there are 300 buyers and 200 sellers at a price $ 20.50. Prices will remain stable and not move up to 200 sellers to transact, and will begin to move when the seller to complete the transaction 200 100 buyers where there is still an unmet need. Imbalance occurs in the market and the price will go up. In practice, the balance is not necessarily at the level of prices, but can vary significantly, although not an area that can be considered as a temporary Price balance
A is the area of temporary equilibrium price. Price movements (B) occurs because buyers unmet needs to be balanced again in a new area of higher prices. When the price movement back to 'visit' area A as shown in C, market participants consider that the price was too cheap to re-occur and buying prices back up. Thus, the area A can be called as a Support area.
