A friend asked me to explain the concept of equilibrium within the market. I made this illustration to show how equilibrium is the balancing point between buyers and sellers and what happens when imbalance occurs towards buyers or towards sellers.
When price is at equilibrium, the market is in a neutral state. It is an area of agreement between buyers and sellers of fair pricing. The market is undecided on whether price should go higher or lower. This is typically found in ranging market conditions and can be a dangerous place to trade.
Let price reach discount pricing or premium pricing and trade back towards equilibrium. Attempting to trade from equilibrium towards discount or premium is a recipe for blowing your account. In short, don't diddle in the middle.
© 2022 - 2024 Martial Charts FX Trading™ | FiReZ Trading Strategy™ | The Smart Fibonacci Method™Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones' financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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