When it comes to economics, supply and demand drive market prices. This principle also applies to the foreign exchange market (Forex). When a currency is bought, the demand for it increases, which pushes its price up. Likewise, every time a currency is sold, the supply increases, which leads to a decrease in its price. The impact of each purchase and sale in the forex market is directly proportional to the size of the transaction for each operation. Most of the news and economic events that happen around the world have an impact on the forex market. Therefore, understanding what drives prices is your key to becoming a good forex trader..