Someone told me demand and supply analysis does not apply to forex. This is because currency can be printed by central banks. Look at QE. There is no finite supply for a currency because money can be printed. So, demand and supply analysis for forex is pointless. So, what is the view of the more experienced forex players on this issue? Is it true that demand and supply analysis doesn't apply to forex? If yes, what are the implications when using technical analysis / chart analysis on forex?
I don’t believe that to be true. I use the same exact supply and demand strategies for forex technical analysis as I do for futures and equities with little difference in how the instruments move.
It would be better if you could distinguish between Supply & Demand and Support & Resistance. Forex Volume for example is not measurable, because there are too many de-centralized exchanges (black pool). The forex futures exchange, which is regulated, is too small to have any impact on the forex market. The spot forex market is the biggest on the planet, exceeding a daily volume of 5.1 trillion dollars! How could you measure Supply & Demand depending on real volume here?! The only way to go (and get 50% of the volume) is to get CLS data, which you can have at Quandl.
Simply because the total supply is neither directly visible nor permanently limited does not mean that current supply and demand are powerless.
Yes, if it would be powerless there would be for ex. no range trading possible in forex, which is. But the question here is: How can you get to know where the Supply & Demand levels are...
Easy. I don’t use volume at all in my analysis except in the case of the Asian market when comparing it to the US or London markets. On a macro level Asia isn’t as big of a forex market as the US or London. So in my analysis I recognize any trading done during Asia’s trading day may not be as reliable as supply and demand compared to the US or London markets.
Price movement? Although only an indirect summary of the divergence between actual supply and demand, its still a workable solution.
supply demand applies to goods & services, not currencies I doubt you can get spot forex volume as there are numerous OTC markets all over the world. I trade currency futures and that's where I can get the volume from the exchanges like CME. my chart is volume based, not time based.
Your first statement is not correct. Currencies obey the same supply and demand laws just as anything else in this planet. Would like to have an example? In the Japan's tsunami of 2011 the Yen appreciated because insurance companies went to the market to buy the local currency in order to fulfill the huge amount of claims. More demand? Price rises. Still not convinced? Go to the documentary "Billion Dollar Day" on youtube skip to 26:53 and you will hear it from the horses mouth. Your second statement is also not very correct. Volume in Forex is not measurable because Forex is decentralized. Third ....if you trade forex based on volume you are losing money !! Forex turns 5 trillion ( plus) in 24 hours. The CME " volume" is not an accurate representation of the whole forex market, therefore not reliable.
Not to put words in maxinger's mouth, but I believe what he was referring to is the bullshit/lie from Online Trading Academy to the effect that a falling market that rebounds and then cycles at a lower-than-prior level comprises "retail" sellers and "wholesale" (institutional) buyers making up "market SUPPLY", and that a rising market that pauses/rebounds is likewise comprised of "retail" buyers getting fleeced by "wholesale" (institutional) sellers, making up "market DEMAND" or some such. Their flummoxed conclusion is, "Stay with us, and you'll behave like institutions and buy at the bottoms and sell at the tops." They get people to pay for that. I'm serious. They are saying that institutional elephants survive/thrive by feeding on the blood of retail fleas. Run that around your brain a few times. Go ahead. Try to imagine ANY INSTANCE whereupon institutional trades could be greased with retail cash. Just try.....