Supply And Demand Based Trading by Mobirao

This Book Includes:

The forces that drive price action in a market are supply and demand.

In this book, you will learn how to plot these areas of excess supply and excess demand. When you
know there is a high probability of excess supply or excess demand, you can utilize this information
to make better decisions when making Supply And Demand Based Trading.

The good news is that you will find this book useful regardless of your investing beliefs. Whether
you buy into the Random Walk Theory or believe in technical analysis, what you learn in this book
will make you a better trader or investor.

Now let us get to the core of what this book is about—supply and demand. Supply and demand are
the forces that drive price in any market.

If you have ever taken a microeconomics course, you know that supply and demand is an economic
model of price determination in a market.

It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers
(at current price) will equal the quantity supplied by producers (at the current price), resulting in an economic equilibrium for price and quantity.

The four basic laws of supply and demand are:

• 1. If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
• 2. If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
• 3. If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
• 4. If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price.

Applying this to trading, supply represents willing sellers and demand represents willing buyers.

Every time the price direction changes, the relationship between supply and demand changes. The areas marked with a red dot are points where supply became greater than demand and the areas marked with blue dots are areas where demand became stronger than supply forcing a trend reversal. When markets are trending upward, demand is greater than supply, and the opposite is true for markets trending down.

Risk Management in Trading by Mobirao

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