DECISION MAKING: SUPPLY AND DEMAND ZONEMaking day-to-day investment decisions is challenging enough without the added stress of trading. Whether you are a beginner or an experienced trader, the world of finance can be challenging. It’s not always easy to know whether your trading ideas are worth pursuing or not. Even experienced traders struggle to make the right investment decisions on a regular basis. This is where decision-making and trading strategy comes in. Understanding how to make the technical analysis and right trading decisions is essential in any trading career. The share market uses the technical analysis to test or forecast the price down trend or uptrend. Knowing how to determine the supply and demand zone is the critical factor in the technical analysis.
The insights of supply and demand trading
Supply and demand zones are a popular analysis technique used in day trading and considered as key indicators in the supply and demand trading. These zones are both supply zone or distribution zone and the demand zone or accumulation zone. They present the liquidity at a specific price.
Key takeaways
Markets are driven by supply and demand zones.
Investors can use supply and demand zones to make purchases or sales decisions.
The price drop begins and starts at the distribution zone.
A bearish stock displays greater supply than demand and exhibits distribution.
Buying pressure accounts for distribution, whereas accumulation reflects selling-side
pressure.
When a stock's price stops falling and starts moving sideways for a period of time, this
signals that there is accumulation and that the stock may rise.
Three NOTES for supply and demand trading
When looking for stocks to buy, the first thing to determine is whether you're in a supply or demand zone. In a supply zone, the stock's price is above the bid price, while in a demand zone, it is below. The bid price is the amount a trader is willing to pay for a stock.
Once you find the most active market supply and demand zones, you can identify the next thing you must do. You can either buy or sell depending on whether the trend continues or reverses in that zone.
Understanding rally and drop patterns is the third aspect. When you see a pattern indicating a rally, you should buy high and sell low. When you see a pattern indicating a price drop, you should sell short.
Strategies with the Supply and demand trading
To make a bright decision and set your smart strategy in trading, a trader should definitely know what current socio-economic and political conditions are. This is paramount to being a successful trader. They should look at any economic or political disruption that could affect the trading environment, or question whether there are a lot of volatility in the markets or not. If the answer is yes, a supply and demand trading strategy might be used to make a good trading strategy with the breakout or range trading involved.
When the market is stable and not extraordinary, a trading range may be used to describe it. The breakout is a supply and demand trading strategy when market conditions are expected to change.
When markets open or close, day traders may have to watch for breakout formation of rectangular ranges when liquidity or volatility are higher.
A limit order can be used to buy or sell stock at a set price. You can use price action entry to enter a position at a certain price or zone. Candlesticks are used to enter positions with price action. Using candlesticks as a strategy is more effective.
Bottom Line
There are a lot of factors that can affect your trading success and trading strategy. You need to make sure that you’re looking at the right factors when examining your data. You also need to make sure that you’re staying away from automated trading strategies. These are the two factors that are going to make the biggest impact on your trading success. You need to know where the supply is at and the demand. You should understand the factors that are affecting the market and the future support and resistance levels. This is the only way to make the correct trading decisions.
