This is part 6 of the tutorial. In this video, you will learn about the supply and demand.
What makes the price of stocks or any other trading security go up and down? Debt, balance sheets, corporate profiles, job reports, oil prices, bonds and commodities? Not really. The answer is simple: supply and demand. Anything else is the effect of supply and demand, the desire of buying and selling. Supply and demand is the foundation of market economy. Supply is the quantity of a stock (or any trading securities) offered in the market place and represents the sellers. Demand is the quantity of a stock (or any other trading securities) requested in the market and represents the buyers.
When the price of a trading security drops to a certain level, it becomes attractive to the buyers. More buying means more demand, which causes the prices to soar up. As long as the supply can meet the demand, the price will keep going higher. When prices go up due to an increase in demand, or a decrease of supply, the market is in an uptrend. During an uptrend, the buyers are in control. The buyers become sellers, meaning more supply which causes the price to drop. As long as the supply exceeds the demand, the price will keep going lower. When the price goes down due to an increase of supply, or a decrease of demand, we are in a downtrend.
After some time of prices moving up and down, the sellers and buyers find some sort of equilibrium that maintain the price within a specific trading range. The price will remain within this trading range until something will disrupt the relative balance between supply and demand, causing the price to drop or soar depending on what buyers and sellers are doing. Generally, investors and traders shift from being sellers to being buyers and vice versa, depending on many factors like debt, balance sheet, oil prices, etc. sellers and buyers, supply and demand are the driving force of the market. Those other factors are simply the cause and effect of supply and demand.