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  #235  
Old Jan 20, 2011 9:05am
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Good day everyone.

I've been watching this thread closely the last few days. Very interesting info and ideas has come from a few members here. So thanks for that.

I've been trading for 2 years now and I've spend a lot of time researching, that includes reading, back testing and trading, but up until the start of this thread I still couldn't understand the most basic thing and that was how and why prices fluctuate. I knew when there is a demand for a currency for whatever reason, traders will buy it and price will head up, but that is too simple. I had to know more and get a better understanding.

Now that I've read some posts about liquidity, the distribution of it and equilibrium, things make much more sense, although I now only understand a very small part of order flow. I'm going deeper into the rabbit hole and I want to know more. I know this is something that will take time, but there is no turning back now.

I have taken the red pill.
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  #236  
Old Jan 20, 2011 9:33am
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There is a lot of things that has been posted in this thread that I don't understand so I want to ask a few questions and clarify a couple of things for myself.

The best way to do this is by an example:

Trader X is watching the USD/CAD pair and from his analysis he decides it's time to buy USD. So he buys 1000$ @ 1.0000 (The figure is irrelevant and is just used for the example.)
If there is enough liquidity available, his order will get filled without the price moving up.
If there is not enough liquidity, the broker will fill his order at a higher price where there is enough liquidity, lets say at 1.0020. Is this correct?

I have read that market orders demand liquidity and limit orders provide liquidity, but don't you also provide liquidity when you place a market order? ex. if Trader X buys his 1000$, don't he provide liquidity to Trader Y who wants to place a short order?

After an order has been filled, does it still affect liquidity while it is open or does it only affect liquidity when you want to exit that trade or when your stop is hit?

This is basic questions, but I hope I can get some clarity on it.
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  #244  
Old Jan 20, 2011 11:18am
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DS and auxesis, thank you for your replies.
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