Introduction to Supply and Demand

What is Supply and Demand?

Every day stock prices change due to the result of market forces in respect to supply and demand. When more people want to buy a stock (demand) than sell it (supply), then the price moves up (Refer to the green box in the diagram below).

On the other hand, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall(Refer to the red box in the diagram below).

sti-1yearAnd when you have supply and demand been acted out on bigger time frame, you will be presented the overall trend direction. Is it trending up, down or sideway? Below is the chart for STI since 1980 till now. Within the chart, there were a lot of supply and demand (waves) going on. From the chart, it is easy to say that it’s a trending up chart. Reason been the various higher low. We can say that there more buyers than sellers, or the buying strength is more superior than the selling strength. And you as a trader, it important for you to keep a lookout and analyses the strength of each wave. One simple method will be to lookout for a higher low for up trend or lower low for down trend.

Example, look at the black box as below, you can clearly identified a series of higher low and higher high and it looks like it’s a compressed spring waiting to unleash the stored energy within it. Although the probability for a up trend is higher, but it be safer to get in any long position when there is dip and be sure to lookout for a serious supply wave that bleach the previous low.

sti-longerViewDisclaimer:
This article contained the personal views and opinions of the author and are based solely on his perspectives and/or experiences, except for articles that originated from other sites, shall bear their own disclaimer. They do not represent any form of statements made by any organizations.

This article is for information only and readers must not misconstrued them as financial advice. The author does not work in the financial industry nor is he a licensed financial adviser authorized to provide financial advisory. And purpose of article been written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

Any form of investments carry risk, so readers should engage a licensed financial adviser to assess if they are suitable to invest in such products. The author of this blog will not be liable for any form of damages that may arise from the use of information, products and services directly or indirectly featured or implied in this blog.

Fredrick Lim

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I started bigfatpillar.com to share some of my ideas, concept or thinking along the way as i'm building my own Big Fat Pillars in area like Financial, Health, Family, Spiritual of my life. In short, making our money work harder in Wealth Creation, Preserve and Improvement.

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