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Think of oneself as a vendor at a neighborhood market where vegetables are being sold. A vegetable's price decreases when it is in abundance since there is more of it available than there is demand for. However, vegetables have become more expensive as they are relatively rare and in high demand. Givenex says the same idea applies to trading. On a price chart, demand and supply sectors are areas where prices have previously changed significantly. When there is a supply zone, there is a high demand for sales, which drives down prices. A demand area is an area with a high demand for goods, driving up prices. To locate these zones, one must locate areas where the price has already changed direction. It's similar to identifying trends in the actions of the market. In this article, Givenex shares a few hacks on demand and supply trading. Let’s have a look.
Moderate Unpredictability:
A strong demand zone usually exhibits narrow price behavior preceding the powerful breakout. An area does not meet the criteria to be classified as a high-probability area if it exhibits large candle wicks and significant fluctuations during the zone. In Givenex’s opinion, the chances of responding positively the next time are higher when the supply/demand zone is narrower before a major breakout.
Larger Breakout=Better Demand Area:
The price eventually breaks out of the supply area and begins to trend. Strong and explosive price changes are caused by a substantial disparity between buyers and sellers. One should bear in mind that a larger breakout usually indicates a better demand area and more open interest, particularly if the accumulation period is brief. Therefore, it's not that hard to find good areas for both demand and supply if one just starts by checking for the greatest price fluctuations on the charts.
Know When To Exit: A short period of consolidation is indicative of a healthy supply zone. Effective supply areas are short-lived and rather narrow. A shorter consolidation area is preferable to identify re-entries throughout pullbacks and pick up open interest.
Givenex Shares Ways To Apply These Principles While Trading
- The first step in using demand and supply successfully is to find these areas on price charts. Locate any places where the pricing has previously shifted.
- Allow for prices to approach the area that has been identified.
- Sell if there are signs of a reversal in the price, and it's a supply area.
- Think about purchasing if the price starts to rise and it's in a demand area. To learn more, visit Givenex’s website today.
Conclusion
Demand and supply areas are guiding lights in the trading industry that help traders better understand how markets behave. Gaining knowledge of these areas and their implications will help investors make insightful decisions about future price changes. Keep in mind that trading supply and demand takes time, patience, and ongoing education. For a trader, the ability to identify these areas and make wise trading decisions comes with practice. Online trading platforms like Givenex offer traders to create demo demat accounts for practicing.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.