Begin to understand technical analysis by understanding supply and demand in the stock market
Before starting any training in technical analysis, it is necessary to know some supply and demand and the reason for price changes so that we can understand technical analysis and price chart and its changes to understand what is supply and demand and how the difference between supply and demand causes In the continuation of technical analysis, you will see that we will have points called support and resistance, the reasons for which are the same changes in the supply and demand of buying and selling a stock.
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Stock supply
“Offering” refers to the total number of shareholders who want to sell their shares at any price. For example, if we have 10 shareholders, each of whom is interested in selling their shares at certain prices:
Each of these shareholders values their shares differently. The shareholders on the left have set a lower price for their shares than the shareholders on the right. With a general look at the stock market, we will realize that with the increase in prices, the total number of offered shares will also increase. With the market price of 100 Tomans, only one stock will be offered, but with the price of 125 Tomans, 5 shares will be offered.
Demand for stocks
“Demand” refers to all potential stock buyers who want to buy stock at any price. The previous example can also be used in this case. Imagine 10 people each trying to buy a stock at a certain price:
In this case, unlike supply, as prices rise, fewer people will be willing to buy stocks. For example, if the price of each stock is 138 Tomans, only 4 people want to buy (4 people on the right) and pay 138 Tomans for each share.
Market balance
“Market equilibrium” is the point at which supply and demand are equal – all potential buyers and sellers trade until no one is left to agree on a price.
Supply and demand at the price of 127 Tomans (actually a price between 1255 and 1275 Rials) and 5 are equal to each other and the market reaches equilibrium. From a practical point of view, these are buyers and sellers who have traded with each other, and buyers who were more interested in buying stocks than others, and sellers who were more willing to sell their stocks than others; Other sellers were not willing to sell their shares at the low prices desired by other sellers. The next seller with the lowest stock price wants to sell his stock at the price of 128 Tomans, but the next buyer only wants to pay 125 Tomans, so no deal is made.
The reason for the increase and decrease of stock prices in the market
Given the explanations of supply and demand, it should now be clear to us what the mechanism of trading and supply and demand in the stock market is. The same supply and demand in the stock market causes price changes. For example, suppose that in the above example only one person Sell your shares for 138 Tomans and do not let any of the shareholders trade below this price. Now what happens is that only one buyer can buy the shares of this company and 9 buyers can not buy the shares of this company. But if people want to buy the company’s stock, they have to trade prices above 138 shares, and this will cause our stock to grow in price and trade at a higher price. In general, whenever the demand exceeds the supply at a price, it causes the equilibrium to shift and we have a growth in the share price and the share is traded at a higher price.
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