Berlin, Europe
Market Wizard
Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker: Interactive Brokers
Trading: Keyboard
Posts: 9,888 since Mar 2010
Thanks Given: 4,242
Thanks Received: 27,102
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Reads like an excerpt from a beginner's tutorial for undergraduate students in economy. The approach helps to understand an order book.
However, it is not really applicable to trading for a simply reason .. It assumes that there is a negative feedback which creates demand at lower and supply at higher prices. Limit orders tend to create negative feedback, but market orders do not always follow that logic.
Market prices of stocks and commodities actually often behave in the opposite way. If price moves up, this increases demand, as more traders jump on board the train when it takes off. That principle is what trend following is based upon.
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