First part of Trade Like Institutions mini-course, in this video it will be covered the concept of supply and demand and what it really means for the forex market. What is the definition of supply and demand? The term supply refers to how much of a certain product, item, commodity, or service suppliers are willing to make available at a particular price. Demand refers to how much of that product, item, commodity, or service consumers are willing and able to purchase at a particular price.
In other words, supply pertains to how much the producers of a product or service are willing to produce and can provide to the market with limited amount of resources available. Whereas, demand is how much of that product or service the buyers desire to have from the market.
This concept can be easily applied in forex trading too, OIL is the best example of this and is the pair i love the most when it comes to supply and demand trading, the less supply there is, the higher OIL prices will be and vice-versa, now there are different factors affecting supply in the OIl industry, one of them is the OPEC that controls 81% of the world oil supply, so they have the power of cutting or increasing supply at their will to increase or decrease the price according to their interest and te world interest too, other affecting factors are tensions in the middle east, the middle east is, of course, a big producer of OIL and if issues like wars, civil wars, rebels etc are on the rise then the middle east OIL producers are at risk thus the supply of OIL is at risk, just keep in mind that 65% of the OPEC OIL reserve is located in the middle east, so you see how valuable is it? anything putting the middle east at risk will put a lot of OIL supply at risk too.
The best example if the Gulf war, where prices grew exponentially and from a mere $70 per barrel 20 days before the conflict, the price for oil peaked at $180 after the first month of the conflict.
How can this apply to the currency market?
Central banks have the power to inject and withdraw money supply, so what happens if they inject money into the markets? Supply rise thus the value decrease, if they withdraw money, supply is cut thus value increases.
Telegram Channel:
Instagram:
Twitter:
DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.
0 Comments