The Law Of Supply and Demand

THE LAW OF SUPPLY(backside) AND DEMAND(layside)

The law of supply and demand is not an actual law but it is well confirmed and understood realization that if you have a lot of one item, the price for that item should go down. At the same time you need to understand the interaction; even if you have a high supply, if the demand is also high, the price could also be high.


so as in all markets .. supply and demand are the number one reason price moves.. supply and demand can be in balance for some time and stay within a range
till we have an imbalance . ie .. supply demand outweighs the other.. and we move either down(supply is in control) or up (demand is in control) till we meet balance again.. etc..


so if demand is stronger than supply we move up

if supply is stronger than demand we move down.. its that simple ! ;)

in contradiction.. if there is lack of supply we move up till we meet at least the same amount of supply to keep demand in place.. and find balance agin
also if there is lack of demand we move down till we find demand wich keeps previntening the price going down further.. and we are in balance again...


you cant judge all the participants thoughts and intends in order to know why they buy here or why they sell there.. etc..
nut you can judge the markets by its own action , by simply observing it..

we can simply say that price takes the path of least resistance! in wich direction does price has it easier to go.. up or down?

example the path of least resistance is up when.. we have a significant change in price accompanied with high volume to the upside while on reactions (corrections) volume tends to drie out and price doesnt make a significant move down

example the path of least resistance is down when.. we have a significant change in price accompanied with high volume to the down side while on reactions (corrections) volume tends to drie out and price doesnt make a significant move up



so price moves up when demand exceeds supply (buying pressure)
and price moves down when supply exceeds demand (selling pressure)

these two examples are vital moves.

where if we have lack of supply and price moves up.. we cant speak of healthy move up.. sure we move up but on a lack of supply not on heavy buying ie strong demand .. so caution here is advised

the opposite is true for a lack of demand where price moves down.. but not because of an increase of supply but a lack of demand... caution heretoo , as price is know on the look out for fresh demand..!

stay tuned for examples!

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