Market Forces – What causes it to move?

This post is not meant for the ego’s of trolls. Although they will respond and give a chuckle, this post is meant for those that want to know how the markets move. From turn to turn. When you have this information, then you can overlay strategy.

In contemplating analysis, and ultimately strategy, the basis for all of it comes first in the data that you’re given. When I took my first industry job it was as an analyst tasked with dissecting and understanding exactly what caused every market to move, and more explicitly change direction.

In translating this to FX, as all other markets, it’s Sentiment that transitions (changes direction) first, followed by market volume and as a result of the cumulative volumes, price then changes direction.

This is the very core reason why price action itself is lagging in nature and not the optimum approach as it leaves you at the whim of the market while costing you the range of the turns. 82% Efficient.

Volumes on the other hand lead price movement in a fairly fluid movement. I’m not talking tick or ‘quote’ volumes in any retail platform, that’s purely nonsense, what I’m talking about is aggregated data from institutional venues (ECN’s) that permit the access to limit order books and transactional data. This data provides imbalance on the individual currency pairs. – 97.25% efficient.

Sentiment via Intermarket or cross market analysis – the imbalance and pressures of price to move higher or lower at any given tick – is created in a multi layered approach of cross market and intermarket analysis that looks at all rates and standardizes each one to give a basis for value. That value in comparison to other currency values exposes sentiment.

It’s important to note that when you’re looking at a raw chart, there is insufficient information to determine directional bias with any certainty – which is a core reason why traders confidence stumbles to 30-40%. But, when the optimal configuration is present, in this discussion, all major currencies are in fact integrated into the analysis that gives the result of the pair you’re trading.

Sentiment – Sentiment is the bias right now of where prices are going. And prices will ALWAYS continue that direction until both sentiment AND volume shift direction again. But proper sentiment exploits market imbalance and shows the direction of the next 30 to 60 seconds of price movement.

So, no matter the strategy – without the forces that cause the market to move in the first place, you’ve left out the critical component and are putting your capital at risk.

In the attached chart, the red line is sentiment presented as it correlates to bid.. giving us the sentiment in the current candle to continue higher, move lower or change direction – before the candle does so.

Trade Well.

https://preview.redd.it/0inbnf00zgz81.png?width=1784&format=png&auto=webp&s=0004a0d2330caf1e2f955823490987709ed912b3