How Markets Actually Work

This article opens our new educational series "Road to Your First FTMO Reward". Over the next few weeks, we will guide you through the full trader’s journey. We will cover everything from basic market mechanics and building a strategy to setting up risk management and finally preparing for trading on the FTMO Challenge.

Our goal is not to overwhelm you with marketing jargon but to provide a methodical and technical manual. If you are serious about trading, you must treat it as a business. And every business starts with a thorough understanding of the environment in which you work. The first step towards professionalism is, therefore, an analysis of why the vast majority of people fail in the markets and what successful traders do differently.

Why Do Most Beginners Fail?

Many beginner traders make the same mistake: they view charts like a video game where green and red candles move up and down at random. They often search for "magic" indicators without understanding what those candles actually represent.

However, if you want to succeed in the financial markets, you must understand that behind every price movement lies a specific logic and a battle for liquidity. In this introductory part, we will explain what is actually happening "under the hood" of the financial markets and why this knowledge is crucial for building your future trading strategy.

The Market is an Auction, Not Just a Chart

A financial market (Forex, indices, or commodities) is essentially a gigantic global auction. Price moves as a result of an imbalance between buyers and sellers. If there are more buy orders than sell orders at a certain price level, the price must rise to find new sellers.

Who Moves the Market?

Retail traders (trading with relatively small capital) do not have the power to move the market by a single pip. Your goal should be to identify the footprint left behind by the "big players":

• Central Banks: They set monetary policy and interest rates. They are the primary engine of long-term trends.
• Commercial and Investment Banks: They provide liquidity for global trade and execute massive currency exchanges.
• Hedge Funds and Institutions: They speculate on price movements with capital worth billions of dollars.
• Retail Traders: These are traders with relatively small capital compared to the previously mentioned institutions. Their task should be to "ride the wave" created by these giants.

Liquidity: The Fuel for Every Move

You will hear the term "liquidity" daily in trading. Simply put, liquidity is how easily the market can absorb large orders without the price jumping uncontrollably.

For large institutions, the biggest challenge is filling their orders. If a bank wants to buy $1 billion worth of Tesla shares, it needs to find someone to sell that amount. This is why the market often moves towards areas with a high concentration of stop-loss orders; these serve as the ideal counterparty (liquidity) for large institutional orders.

Supply and Demand

Most beginners are taught to look for support and resistance as solid barriers. In reality, these are not magical lines but zones of imbalance:

• Resistance: A zone where there are so many sellers that they completely absorb the demand, and the price is pushed downwards.
• Support: A zone where buyers think the price is cheap, so their orders halt the decline and start the bullish activity.

Understanding this mechanism will protect you from blind reliance on technical indicators. Indicators are merely a derivative of price – they are secondary. The primary factors are always price and order volume.

Key Takeaways From This Part

Trading is not about predicting the future; it is about reading the current distribution of power between buyers and sellers. As a beginner trader, you should stop asking, "Where will the price go?" and start analysing:

• Who is currently in control of the market (buyers or sellers)?
• Where are the logical points where big players might want to enter positions?
• Is the market structure clear, or is it just random noise?

In the next part of our series, "Road to Your First FTMO Reward", we will look at how to select the right market and why choosing the correct timeframe is a critical factor in determining whether your account survives the first week. Furthermore, we will introduce simple price action patterns and the multi-timeframe strategy, showing you how to use two timeframes properly.