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DEMAND & SUPPLY

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DEMAND AND SUPPLY

The origin of bullish trend is known as Accumulation or Demand and the origin of bearish trend is known as Distribution or Supply zone.

Supply and demand derive the whole market. When lots of people are interested to buy a thing at certain rate with limited quantity, the prices will go up. On the other hand if buyers are not interested to buy a thing at certain price, the sellers have to sell the things at low rates until buyers become interested to buy at that particular rate.

Supply and demand is the core point of support, resistance and all trends. Before a trend starts, prices stay in accumulation zone till big players take their positions and drive the price up. If there is narrow supply and demand zone before breakout, it typically depicts better chances of strong reaction.

Supply and demand are actually support and resistance zones. Combination of support and resistance with the concept of supply and demand provides better understanding of price movements.

A trader must consider demand and supply trading and should combine it with other price actions.

Good supply zones are usually narrow and do not hold the position too long. If the demand and supply zones are narrow, then there are better chances for good reactions. The shorter supply zone is good for finding re-entries.

As soon as the price leaves the supply zone and starts trending, the strong imbalance between buyers and sellers lead towards the strong price movement. The strong breakout indicates better demand zone.

While doing trade through supply zones, make sure that the supply zone is still fresh; it means that after creation of the supply zone, price has not come back to that point yet.

It is necessary to enter through fresh supply zone because each time the price re-visits the supply zone, it fills more and more orders and supply zone becomes weaker.

When you have to book the profit, place your target ahead of a zone and in this way you will not take risk of giving back your profits. For stop loss set your order outside the zones to avoid premature stop runs.

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