Supply and demand are the only forces that determine the price of a particular asset. A lot of traders try to overcomplicate the workings of the stock market. But, the truth is that if we understand the supply and demand dynamics of the asset, then we can easily generate profits from it.
So in this video, we will learn how to use supply and demand to find good setups and trade them.
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Supply and demand trading is so powerful that it allows you to spot high probability reversals and ride the moves to the exact end. Therefore, in the recent years, it has become one of the most popular ways of trading.
But, why does supply and demand work. When we talk about supply and demand, we are essentially talking about the big institutions that buy and sell in huge quantities. We as small retail traders do not influence the market. It is the demand and supply dynamics of these big institutions that influence the market.
The problem for them is, they cannot buy a certain amount of shares in one single order. If they do so, the price of the asset would skyrocket and their orders will get filled at a very expensive price. Hence, they divide their positions into small parts and Buy when the asset comes near their desired price.
Look at this image. Let us say that a certain hedge fund wants to buy 10 million worth of shares at this price. So, they divide their position into 3 parts.
They buy 4 million worth of shares here. That pushes the price upwards. But, soon enough, the price comes back near their entry. So they buy another 3 million worth of shares here. And lastly, they buy another 3 million worth of shares on this dip.
So now, they have successfully bought 10 million worth of shares at the same price, without hampering the price action of the stock.
Our goal for this video is to learn how to identify supply and demand zones and how to trade them
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