Price is an auction
Every tick is the result of an auction. How the order book, the spread and impatient orders move price, and why ranges show where big money is comfortable.
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In this video
- Limit orders wait in the order book. The best buy price is the bid, the best sell price the ask, and the gap between them is the spread.
- Price moves when someone is in a hurry: market orders eat through the levels.
- Before big releases many market makers pull their orders, the book gets thin, and price can spike.
- Large players build positions slowly while price moves sideways, so ranges show where they agreed on a fair price.
Next videoMacro FirstReading the chart1:373 questions read any chart: the condition, the phase and the levels. Then the candles show the turn.
Key terms
- Spread
- The gap between the buy price and the sell price. It is a cost you pay on every trade, and it widens when the market is quiet or nervous.
- Liquidity
- How easily you can buy or sell without moving the price. FX is most liquid when London and New York are open.
- Range
- A market that moves sideways between a ceiling and a floor instead of trending.
- Volume
- The amount being traded over a period. Rising volume at a price level shows that a lot of buying or selling is happening there.