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Showing results for tags 'supply and demand'.
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An asset that is heavy will lose value as traders dump it or refuse to buy it; two factors that cause excess supply. So traders can either sell heavy assets to profit from the downward move, or they can wait for the drop in price before considering long positions.
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Most of you have heard the term, "Pure Price Action" many times and probably believe it to be a great method of trading. First let me clarify that there is no argument here. We trade "Pure Price Action" everyday, however we take it many steps further. For you to truly understand price action you should understand that it is nothing more than a painted picture of many things. Trading psychology and Supply and Demand are the most important things within price action. If we ask ourselves why price moves in any given direction there is always one answer..... because of the equilibrium of Supply and Demand. If the equilibrium is off, supply or demand will create balance once again which causes price action candles, bars or other chart types to display a trend. If the equilibrium is in balance then we will show sideways movement. Every candle, bar etc. represents thousands of people making a decision on the value of a particular instrument. Learning how to properly analyze this psychology is key. We then have the ability to use pre-defined trading strategies to capitalize on the markets. We focus on the imbalances in price and locate the highest probability areas in which the equilibrium is off. This gives us the ability to locate supply and demand on multiple time frames. Using pre defined trading methods, we can now use pure price action to give us exact entry, stop, and targets.
