Understanding Drawdown/Market Drops Part II
By FX Insights
Understanding Drawdown/Market Drops Part II
2. What causes the EUR/USD to drop or correct?
Profit taking – profit taking is one of the biggest factors that account for drops in the market. When a large bank or institution closes a multi-million or multi-billion dollar entry, this will have an adverse affect on the market, and cause the market to de-value the price of the currency based on the liquidation of that position. A profit taker literally takes money out of the market – somebody had to loose in order for that trader to win.
Example: suppose you and I bet on a football game… you bet me $100 that the Packers would beat the Giants in the NFC playoff game… we both put our $100 dollars in a bowl… at the end of the game the winner would not only get his $100 back, but would get an additional $100… game’s over, Packers […]
Original post by adriaani001