Supply, demand and price
When more people want to buy than sell at the current price, buyers must offer more and the price rises. When sellers outnumber buyers, the price falls. Everything else, news, interest rates, earnings, fear, works through this one mechanism.
- The South African Reserve Bank raises interest rates more than expected.
- Investors want rand to earn the higher interest, so demand for ZAR rises.
- More people buy rand and sell dollars, so USD/ZAR falls (the rand strengthens).
Questions people ask
Why is the spread wider at night?
Fewer banks are active between the New York close and the Asian open, so there are fewer prices competing and the spread widens.
Does my broker trade against me?
Market-maker brokers can take the other side of client trades. That is legal under licence, but it is one more reason to use a regulated broker with clear order execution rules.
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Educational content only, not financial, investment or tax advice. Trading forex and CFDs carries a high risk of losing money. Look up any term in the trading glossary.