A spike refers to a larger than normal movement in a currency pair’s price action. A spike can be upwards or downwards in direction. Although a spike is large price movement, the duration is usually short. Because of the short duration, a spike will stick out on a chart like a sharp mountain peak or steep valley (or, more accurately, like a spike).
Spikes in price action are often attributed to a larger financial institution or trader entering the market. Some spikes are the result of a fat finger error where a trading desk has entered the wrong amounts on a trade, but such cases are rare. Spikes most often signal a temporary imbalance between buyers and sellers as a large trader enters a position.
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