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Knowledge of how prices are formed gives an opportunity to better understand the markets and improve trading on binary option. This article will consider the main or, better said, global principals of functioning, which all markets follow with no exceptions.
The mains drivers of any asset price in binary option market are participants themselves - from largest banks to ordinary traders. The price changes due to well known supply and demand rule only.
In trading it is metaphorically called the fight between the bulls and bears, but it does not change the essence of it. Demand for an asset directly affects its pricing. If a product, company or a currency is in demand, it is widely bought i.
When demand for an asset falls, so does the price as nobody needs cheapening asset, and it is widely sold here bears are majority of the market. When demand for a given asset increases, the following happens in the market. Most participants actively invest in a rise of the asset.
Then, at some point, the number of buyers is so big that the sellers cannot satisfy their demand. Bulls get over the bears and sellers understand that they better buy the asset. As a result, the price increases and there is an obvious trend.
There are more and more buyers, everybody aims to buy the asset at any price. Trends are not endless - bulls start to lose their positions at some point. Most participants realize that the price has reached its maximum and it is too high to continue growing. This is not an instant process and there is no certain point where it happens.
Every trader has his own opinion as to when the price exceeds its real value and that is why the slowdown and the turn happen gradually until the sellers will outnumber the buyers. It happens quite frequently that the power is distributed evenly between the bulls and bears. To be precise, it is passing from one to another and there is no evident winner. This period is shown as fluctuation within a channel that has upper and lower barriers.
Traders call it a flat or sideways move. Reversal of an upward trend follows the same principles as a trend emergence. The majority of market participants understand that the price of an asset is inflated and soon will go down, and hence the asset will be sold widely. In a period when there are more bears than bulls a downward trend forms, joined by even bigger number of sellers.
Since the price is dictated by the majority of market participants, the demand for a given asset depends on their decisions. Their decisions in turn are affected by various factors starting from important news and gossips, and ending by such basics of technical analysis as trend lines and support and resistance levels.
And Yulanta Business Ltd, with registration number , address: Comece a ganhar dinheiro Registar-se. Formation of asset prices.