Basic economics says that when there is too much supply prices goes down, and when there is too much demand price goes up. This is true in all aspects of markets and business. Understanding supply and demand concepts is important when you are in the investing and trading business.
When there is supply we usually hear that we have more sellers, and when there is demand we usually hear that we have more buyers. At one given point we can either have the sellers in control, the buyers in control or none in control of the market (equilibrium). Wall street calls the controlling sellers bears and the controlling buyers bulls. So we hear the terms bear market or bull market.
We also get out of supply and demand the concept of support and resistance. Support is where the buyers believe price is cheap and are willing to buy. Resistance is where the sellers believe the price is expensive and is willing to sell.
I've over simplified the concept of supply and demand but you can read more professional explanations on the topic. Just go to the links below.
Economics: Supply and Demand
http://www.investopedia.com/university/economics/economics3.asp
Forbes Article on Supply and Demand
http://www.forbes.com/2006/08/23/forex-trading-education-in_swh_0823investools_inl.html
Supply and Demand
http://stocks.about.com/od/understandingstocks/a/112807supply.htm
Sam Seiden, An Online Trading Academy Instructor with 10 years of experience trading, has an interesting yet simple trading strategy involving recognizing supply and demand. Check out his articles at the link below. Also, check out the video section for links to his archived video presentation on FXSTREET.com.
http://www.samseiden.com/resources.htm
No comments:
Post a Comment