To reiterate the disclaimer:
The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.
What Really Drives Prices?
Demand, Supply, Greed, Fear, Support and Resistance
These six words dictate price and make the market move. Too often many of us get caught up in over analysis and the dynamics of the market, and we lose sight of whatâs really driving the prices. All of the analyses we perform are based on these six components; regardless of what studies youâre using you must not lose touch with the fact that all of these studies are lagging indicators, Iâm going to break down each component, and then show you how they relate to one another.
Demand â the need or desire for something
Supply â the availability of something that is needed or desired
Greed â an aggressive pursuit of something
Fear â insecurity and heightened uncertainty
Support â an area marking the transition from supply to increased demand. The majority who believe the price cannot go any lower form this area.
Resistance- and area marking the transition from demand to increased supply. The majority who believe the price cannot go any higher form this area.
The relationship between supply and demand is clear, however, the ratio between the two is really formed by perception. Most traders neither know nor care about how many shares are outstanding on a particular stock or how many are actually available. We as traders, trade without regard for that information. That often times can becomes a very expensive mistake, because these two are the alpha of all prices. In everyday life we see the perception of these two change prices all the time. Where I live, snow is common in the winter months, but when a âstormâ is expected, the supermarket parking lots are jam-packed. People are rushing out to buy milk, bread and ice melt or salt. Why? The perception is that the supply of these items will drop as the event draws closer. In a macro sense we know that the supply of any stock we want to buy is very robust. We have learned that the demand is not always as robust, that is one of the primary reasons why shorting is so much more lucrative than being on the long side of the market. Using the snowstorm example, we know that the distance we are willing to travel for them only limits the supply of milk, bread and salt. With stocks, the supply is limited by the amount of capital one wish to use in acquiring them. Our demand in both situations is regulated by our perception of supply.
The emotions of greed and fear are the by-products of oneâs perception. Again, the popular subscription to these emotions forms support and resistance. Only after seasoning in the market does one really start to embrace and respect these emotions. The biggest key and challenge is letting greed and fear run their course, as they always do, and then following them until they transition into the next phase without letting your own greed and fear interrupt the internal process. Support and resistance are temporary floors and ceilings for demand, supply, greed and fear. The area between these two zones is where we find the most opportunity. The longer the price action in these areas the more potent the breakdowns and breakouts are. My understanding and respect for these areas reached new heights after I read, âSecrets of Profiting in Bull and Bear Marketsâ. The author, Stan Weinstein, wrote this book in 1988. He did such a wonderful job in explaining support and resistance, referring to these areas as a âwar between the buyers and the sellersâ. That one line summed it all up for me, I looked at charts with a brand new perspective, and then I discovered that the price action was secondary to the emotions, the emotions actually begin this chain reaction.
This may certainly seem basic to many; however, from time to time I revisit this eternal process. Go back and revisit this chain of events, and then look at the charts. Youâll see a lot more than support and resistance when you scan. I hope this helps you!
Volume 1 â âFear and the Marketâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=19559
Volume 2 â âSwitching TimeFramesâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=19881
Volume 3- âElements For Successful Tradingâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=20208
Volume 4 â âWhat Are YOU Looking At?â
http://www.elitetrader.com/vb/showthread.php?s=&threadid=20285
Volume 5 â âBuilding Your Trading Stableâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=20510
The ignorant and malicious are free to reveal themselves with replies that I will not acknowledge. The inquisitive and intellectually stimulated are invited to post constructive replies, and or questions.
What Really Drives Prices?
Demand, Supply, Greed, Fear, Support and Resistance
These six words dictate price and make the market move. Too often many of us get caught up in over analysis and the dynamics of the market, and we lose sight of whatâs really driving the prices. All of the analyses we perform are based on these six components; regardless of what studies youâre using you must not lose touch with the fact that all of these studies are lagging indicators, Iâm going to break down each component, and then show you how they relate to one another.
Demand â the need or desire for something
Supply â the availability of something that is needed or desired
Greed â an aggressive pursuit of something
Fear â insecurity and heightened uncertainty
Support â an area marking the transition from supply to increased demand. The majority who believe the price cannot go any lower form this area.
Resistance- and area marking the transition from demand to increased supply. The majority who believe the price cannot go any higher form this area.
The relationship between supply and demand is clear, however, the ratio between the two is really formed by perception. Most traders neither know nor care about how many shares are outstanding on a particular stock or how many are actually available. We as traders, trade without regard for that information. That often times can becomes a very expensive mistake, because these two are the alpha of all prices. In everyday life we see the perception of these two change prices all the time. Where I live, snow is common in the winter months, but when a âstormâ is expected, the supermarket parking lots are jam-packed. People are rushing out to buy milk, bread and ice melt or salt. Why? The perception is that the supply of these items will drop as the event draws closer. In a macro sense we know that the supply of any stock we want to buy is very robust. We have learned that the demand is not always as robust, that is one of the primary reasons why shorting is so much more lucrative than being on the long side of the market. Using the snowstorm example, we know that the distance we are willing to travel for them only limits the supply of milk, bread and salt. With stocks, the supply is limited by the amount of capital one wish to use in acquiring them. Our demand in both situations is regulated by our perception of supply.
The emotions of greed and fear are the by-products of oneâs perception. Again, the popular subscription to these emotions forms support and resistance. Only after seasoning in the market does one really start to embrace and respect these emotions. The biggest key and challenge is letting greed and fear run their course, as they always do, and then following them until they transition into the next phase without letting your own greed and fear interrupt the internal process. Support and resistance are temporary floors and ceilings for demand, supply, greed and fear. The area between these two zones is where we find the most opportunity. The longer the price action in these areas the more potent the breakdowns and breakouts are. My understanding and respect for these areas reached new heights after I read, âSecrets of Profiting in Bull and Bear Marketsâ. The author, Stan Weinstein, wrote this book in 1988. He did such a wonderful job in explaining support and resistance, referring to these areas as a âwar between the buyers and the sellersâ. That one line summed it all up for me, I looked at charts with a brand new perspective, and then I discovered that the price action was secondary to the emotions, the emotions actually begin this chain reaction.
This may certainly seem basic to many; however, from time to time I revisit this eternal process. Go back and revisit this chain of events, and then look at the charts. Youâll see a lot more than support and resistance when you scan. I hope this helps you!
Volume 1 â âFear and the Marketâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=19559
Volume 2 â âSwitching TimeFramesâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=19881
Volume 3- âElements For Successful Tradingâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=20208
Volume 4 â âWhat Are YOU Looking At?â
http://www.elitetrader.com/vb/showthread.php?s=&threadid=20285
Volume 5 â âBuilding Your Trading Stableâ
http://www.elitetrader.com/vb/showthread.php?s=&threadid=20510
- that's right, I think that possibly ole gdz 1-17 isn't so far off the mark with his "manipulators" theories. 
)