When talking about volatility as you go through your lessons on ‘What is Forex Trading? ‘ You will surely need to learn how to understand the principle of supply and demand. Speaking about these two concepts, you will also have to learn how to understand another basic concept of economics and this is called ‘The supply curve and law.’ In this post, we will help you review these concepts and explain its significance in the FX trading industry.
Supply Defined
This is known as the number and quality of goods or services that a producer provides into the market at a given time or date.
Supply Curve
It is the graphical representation of the relationship between the total number or quality of products or assets and its rate at a defined schedule. IN this graphical representation, it is a must to be aware that the supplied quality of goods stay on the x axis while the price stays on the y axis.
Supply Schedule
Prior to the graphical presentation of the price and the quality of goods, economic researchers still need to make sure that they put the data in tabular form so they could easily plot it on the supply curve. This table is known as the supply schedule.
The Law of Supply
This is a very common concept which is included in basic economic classes. Supply law states that suppliers or traders market their products at a higher rate considering a constant situation if there is an increased quantity of supply.
Factors Affecting the Law of Supply
As someone who is to understand the flow of supply in the market, you should understand that the law of supply can differ when affected by other factors such as the ones on this list:
1. Having Better Options
A supplier will not obtain an increased supply given if in between the timeframe, another supplier provides better quality of products as a potential option. If this happens, you would expect that the supply curve will move to the right instead of left.
2. Natural Phenomenon
When natural calamities or disasters affect a particular area, the amount of supply that is being marketed in the area may become lesser due to the destruction caused by natural phenomena such as earthquake, storms or even drought.
3. Price Adjustments
If price adjustments with the supplied products are made, it will be expected that the number of supplies will be affected thereby resulting in a reversed trend.
4. Technology
As the digital world continues to introduce technologies that either help increase or decrease the supply of products in the market, its effect on the supply trend will always be visible.
Conclusion:
On our journey towards understanding ‘What is Forex Trading’. Traders must never forget these basic terms as they do not just serve as a foundation of the forex market principle but they help us understand why certain consequences happen when supply and volatility is involved. Finally, these basic concepts in economics are also useful towards planning for the best strategy to be utilized in the market during a particular trading session.