✅ Lesson 1.5 – Market Price Basics

What moves the price in the Forex market? It’s all about supply and demand.

🧭 The Driving Force Behind Price Movement

In Forex—and all free markets—the price of an asset moves for one reason only:

The interaction of supply and demand.

This lesson explains how supply and demand drive price changes in currency pairs and how traders can use this knowledge to their advantage.

📈 How Supply and Demand Affects Forex Prices

Let’s say the EUR/USD exchange rate is 1.3375.
This means it costs 1.3375 U.S. Dollars to buy 1 Euro.

Now imagine a large bank submits a market order to buy €500 million.
This sudden demand increases pressure on the market:

• It consumes all sell orders at 1.3375

• Then moves up to 1.3376, 1.3377, and beyond

• Until the entire order is filled

➡️ The result? Price rises, simply because demand for EUR > supply of EUR at that moment.

🔄 Understanding Trading Dynamics

For every buyer, there must be a seller.
That’s why Forex is called a “market”—each transaction is an agreement between parties to exchange one currency for another.

Even though we use terms like “buy” and “sell,” the market is all about trading one asset for another based on perceived value.

🧠 Smart Trading With Supply & Demand Zones

Professional traders don’t always buy all at once.
Instead, they:

• Wait for key levels where supply or demand is stronger

• Accumulate or offload positions in phases

• Aim to minimize price impact and maximize profit

Example:
A bank wanting €500 million might set buy zones where EUR is cheaper, gradually building its position rather than pushing the price up all at once.

🛠️ Order Types That Affect Price

✅ Market Order

Executes immediately at the best available price.
Used for speed, but not price precision.

✅ Limit Order

Executes only at a better price than the current market.
Used to buy lower or sell higher.

✅ Stop Order

Executes at a worse price than current market.
Often used for breakout entries or trend continuation.

⚠️ Don’t Confuse: Stop Orders vs. Stop Losses

• Stop Order → Entry technique at a certain level

• Stop Loss → Exit order to limit loss if price moves against you

• A Stop Loss can be either a stop or limit order.

Large visible stop or limit orders can influence price movement because they shift market perception of supply and demand.

📘 Lesson Summary

• Currency prices move only due to changes in supply and demand.

• Market orders, stop orders, and limit orders all play roles in shaping market action.

• Traders who understand and anticipate supply/demand behavior can enter and exit the market more effectively.

✅ Mastering this concept is essential for identifying strong entry and exit zones.

📘 In the next lesson, we’ll explore price charts and how they reflect supply and demand in real time.