Forex Trading Education - Market Price Basics

By: Harold Hsu

Every trader must know the meaning of price. Without a good understanding of what market prices mean, it's unlikely for anyone to succeed in any type of trading activity. Your success or failure as a trader depends on it.

What Is Market Price?

Put simply, the market price is the price at which supply and demand agree with each other. Every single chart movement on your screen represents a deal made between a buyer and a seller. Buyers buy because they think the prices are low, and sellers sell because they think the prices are high. The buyers are expecting the market to rise, and the sellers are expecting it to fall.

The chart patterns that subsequently form on your trading screen thus reflects the psychology and thinking of all the traders who transacted with each other. And although different traders have different expectations about where the market price is headed, there are general price levels where most traders agree that are either too high or too low; thus forming support and resistance price levels.

What Are Support And Resistance Levels?

A support level is a particular price at which many buyers would be entering the market. When the market price is going down (i.e. when there are many sellers), support levels are areas on the trading chart where the price may reverse due to the entry of new buyers.

A resistance level works in a similar manner, except that it is a price level where sellers (not buyers) are likely to enter the market.

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