Forex market algorithm is a process used by artificial intelligence to run the market. The process includes how the price will move and how it will reverse after maintaining a rule.
If you were wondering to see your A+ trading set up to get a stop-loss hit or your trading strategy is not working, you might want to know the reason behind this. The basic idea of retail trading in the global financial market is run by the market maker who creates the market to make a balance between buyers and sellers. They will not allow you to take all the money from the market where buyers’ should lose the money to get the market to the seller’s side, and sellers should lose the money to get the market to the buyers’ side. All of the processes are done through an algorithm known as the Forex market algorithm.
In the following section, we will see details about the Forex market algorithm, including how it works and how you can use the drawback of this method to boost your training performance.
Evolution Of Retail Trading
If you have been in the trading industry for the last 10 to 20 years, you would know the indicator-based trading system was quite profitable back in 1990 or 2000. Now people have become very smart as they understand that any fixed rules cannot apply in the forex market as it depends on the market sentiment where ad hoc decision-making is needed.
Here comes the price action trading. The price section is a process to anticipate the price movement of an instrument by understanding what buyers and sellers are doing in the market. Instead of relying on a fixed system, price section traders understand the market trend and short-term or long-term momentum to run with the flow. However, this method is logical and moves through supply and demand.
Is there any true supply and demand available in the forex market?
Supply-demand & Smart Money Concept
Supply and demand represent buyers’ and sellers’ sentiments in the market. When the buyer’s orders exceed sellers, the price should move up, and when the sellers’ order exceeds the buyers’ order, the price will move down.
However, the hidden truth in the forex market is that it is run through an algorithm run by artificial intelligence, not true supply and demand. Therefore, if you buy EURUSD with $1 million or $2 million, it does not guarantee any profit. Because the market does not care about your sentiment, rather, it uses your sentiment to make it stable. You cannot buy an instrument forever because it will move down today or tomorrow.
Supply-demand trading, or smart money trading, has become popular, and people believe that Smart Money trading presents institutional traders’ activity in the market. However, the market algorithm knows well that people are moving to smart money, and to make the price stable; they have to violate the smart money rules.
If you are stressed about seeing your order moving down from a bullish order block instead of moving up, the following section is for you.
Forex Market Algorithm- What People Don’t Know
The Internet will show you several automated trading strategies when you search for its market algorithm. Still, the hidden truth is that the Forex algorithm is a process to run the market. The buy and sell orders and traders’ sentiment is not happening with any human appearance. Instead, market makers use artificial intelligence to create a scenario or environment where buyers and traders can meet and make a transaction between them.
Moreover, although artificial intelligence can do quick things and make complex calculations in a second, the biggest drawback is its compatibility with the human brain. A human brain scan easily gets new ideas and implements them to be a better version the next day. On the other hand, artificial intelligence follows the same rules repeatedly. Therefore, if you understand how the forex market algorithm works, you will know when and how the manipulation will appear; if your strategy is very simple, you can still make money if the manipulation is over.
Forex Market Manipulation
If you have gone through smart money trading or ICT, you would know the market moves to handle liquidity. The higher time frame liquidity is stronger where the original move comes from the liquidity hunt.
Therefore, if you want to save your ass from getting lost in the financial market, the first thing you need to understand is liquidity, more specifically retail liquidity. Whether you trade from an order block or a supply or demand level, considering the liquidity will give you a higher success rate.
One thing you should understand is that the buyers and sellers are visible to the market maker. Therefore, they know well where liquidity is. It does not make sense if you blindly believe that the liquidity is above the daily high or weekly high. We trade on probabilities where the possibility of having liquidity is our main weapon.
In this section, I will explain the best places to have liquidity so that you can filter your order block to eliminate the loss.
Forex Order Block Trading Strategy
The primary idea is to buy an instrument from law and sell it from high. Therefore, identify a trading range and find where the current trend is heading. If it is a sell trend, you should create sales 50% above the swing. The same theory applies to the bullish market where you must find a discounted price to take it by trade.
Therefore, considering the forex market algorithm, the following trading strategy would change your thoughts about the market.
Identify Logical Order Blocks
You know your direction if you have found a discounted and premium price. But there is no way to take trade from a random place with the hope of the future price moment. Moreover, inside the range, you will see several swing highs and lows on the lower timeframe from where finding the logical order block is the key.
- The logical order block should calm after retail air manipulation. You should find an order block that violates any swing levels in a buy trade.
- Later, the logical order block should leave some portion of the price untested before breaking the structure.
Find the Entry Level
After getting the perfect order block, you know your direction and bias. But you must wait for the price to move from the order block and come back.
Once the price reverses back to the order block, mark the next imbalance candlestick below or above the order block. The imbalance candle should be below the order block low for a buy trade.
Let’s see the example:
Let’s summarize the trading strategy-
- Identify the market direction using swing levels.
- Identify discounted and premium locations to trade.
- Filter the order block.
- Identify the next imbalance of the order block.
- Open trades from the imbalance zone after having a rejection.