Let's assume its winter season and a customer goes to an electronics retail store to buy something.
Now lets look it into simple context to better understand how supply exceeds demand.
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Now let's further details with some examples.Įxample - Supply Exceeds Demand From the above explanation, we now know that supply and demand are fundamental driver of price. Now let's go into further details with some examples.Ībove definitions, we now understand what supply, demand, imbalance of supply & demand and price equilibrium. From above definitions, we now understand what is supply, demand, imbalance of supply & demand and price equilibrium. The market price at which the supply of an item equals the quantity demanded. (II) If demand for a certain item exceeds the available supply then prices tend to rise. (I) If the available Supply of an item exceeds the demand for it then prices tend to fall. Demand is the quantity of an item which is wanted by buyers at a certain price. Supply is the quantity of an item available for buyers at a certain price.
Some folks might disagree with my point of view, but I always believe that two people might see similar thing and have completely different point of view. The information I am presenting in this article about Supply & Demand is learned and attained from numerous sources and I will try my level best to explain it in the simplest of form. Price is simply moving from one zone to another zone to fill these orders. If price is moving up it means there are more willing buyers for that currency at that point in time and if it is moving down it means there are more willing sellers for that particular currency. It did not took me long to realize that all these price movements, I see on currency charts are result of supply and demand imbalance. So I decided to dig deep and do some research and find the one idea that above all is what drives the market and is displayed on our charts. I knew that there has to be some logical explanation for all these price movements. As a result, I used to fill my charts with tons of indicators, where it was sometimes hard to even see price candles. As a novice trader, I used to scratch my head because all these different explanations were too much for me to grasp and it was hard to keep up with it. Some financial news website would say that the reason US Dollar fell against Euro because it reached a 50% fibonacci retracement, whereas another forum would state that the price fell because it hit 100 day moving average, other financial experts would argue that prices fell cause it touched a descending trend line and a bunch of experts would say that price fell cause it reached a resistance level. I used to visit different trading forums and financial news websites in search of a profitable system, where I saw different explanation of price movements. When I started trading, I did not have any clue whatsoever about forex market. Early Trading Years I entered the world of forex trading about four years ago and I came from a Management background. Most retail forex traders are not finance geek and have limited knowledge about market dynamics and how forex market operates. This article is written with the intent to explain basic supply and demand economics and how retail forex traders could benefit from this knowledge.
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