How Does Market Depth Work?

After the training last week, I thought it would have been a good idea to give you some actual examples of how market depth works. Watch how I can move and “manipulate” the Forex price just like banks and brokers do.

 

Note: The Q&A will automatically play after the training video.

 

What Is Market Depth?

The definition of market depth is simply a list of both buy and sell orders that you can see on a platform.

It is displayed as two columns, one for bids and one for offers along with the prices and volume amounts at each of those levels in real-time.

Some brokers refer to this information as “Level 2″ quotes and it gives you an idea of how much liquidity is available on both sides of the market.

 

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What Causes The Forex Price To Move

Have you ever wondered “What Causes The Forex Price To Move?” Don’t worry, you are not alone and today I am going to teach you how it all works and debunk the common myths.

 

Note: The Q&A will automatically play after the training video.

 

How Is The Spread Determined?

Many traders believe that the broker makes up the spread, this is not entirely true.

A market maker/bucket show may create the spread on their feed as they manipulate the price, however, this is not the case for true ECN brokers.

An ECN broker shows you the actual bid/ask that is available from it’s liquidity providers.

The more relationships and centralized liquidity that a broker has, the better the spreads are. The bid price is simply the best price a liquidity provider will give to a liquidity consumer.

As a retail trader you can actually act as both a liquidity provider who offers a price and amount to the market via pending entry and SL/TP orders, and a liquidity consumer who uses a market order.

 

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