đTrading Fundamentals No 5 đ
đSUPPLY AND DEMAND
Supply and demand play a crucial role in trading.
đPrices in financial markets are determined by the interaction of supply and demand. When demand for a security is higher than its supply, prices tend to rise, and when supply exceeds demand, prices typically fall.
đ Traders and investors assess various factors (e.g., news, earnings reports, economic data) to estimate future supply and demand dynamics, which influence their buying and selling decisions.
đKey price levels, often based on historical supply and demand, can act as support (price floor) or resistance (price ceiling). Traders use these levels for decision-making.
đMarket orders execute immediately at the current market price, while limit orders specify a desired price. This reflects traders' expectations about future supply and demand.
đHigh liquidity indicates a robust market with many buyers and sellers, making it easier to enter and exit positions. Low liquidity can result in price volatility and slippage.
đEconomic events like interest rates, inflation, and geopolitical developments can impact supply and demand, affecting asset prices.
