Supply and Demand Trading

Flashcards related to Supply and Demand Trading

Supply

Describes the total amount of a particular good or service available for purchase at a specific price.

Demand

Indicates the number of goods or services that buyers are willing to purchase at a certain price.

Equilibrium Price

The price where the demand quantity equals the supply quantity.

Market Imbalance

When one side exceeds the other in quantity, for example, there is more demand quantity than the supply quantity, this will result in an imbalance. This imbalance will cause prices to fluctuate until it achieves a new balance.

Balance Area

A balanced market, the number of buyers and sellers is more or less even. This balance paves the way for a quick price consensus and completion of a transaction.

Imbalance Area

Once buyers or sellers gain control of the battle, the market switch to an imbalanced state where the price goes in the direction of the stronger player.

Reversal Patterns

Formed when there is a change in the trend, either from an uptrend to a downtrend or from a downtrend to an uptrend.

Drop-Base-Rally

A reversal pattern where the price is initially in a downtrend, then forms a base before making a rally to the upside.

Rally-Base-Drop

A reversal pattern where the price starts with an uptrend before forming a base at the top area of that uptrend. From that base, the price falls, creating a new downtrend.

Continuation Patterns

Supply and demand areas that appear in a trend continuation as well. In this case, such areas play as a base for the price to test before continuing the overall trend until the strength correlation between the bulls and the bears changes.

Drop-Base-Drop

The price drops, slows for a while on a base, and then continues to fall.

Rally-Base-Rally

The price increases, slows for a while on a base, and then continues to increase.

Extended-Range Candlestick (ERC)

A strong candlesticks with short or no wick, indicates a reliable level of dominance.

Distal Line

Located at the further end of the supply and demand zone.

Proximal Line

Positioned at the nearer end of the supply and demand zone.

Fresh Zone

A supply or demand area that has not been tested yet.

Original Zone

A supply or demand area that is formed out of nowhere.

Odd Enhancer

A filter to give your trade area a higher winning probability. It stacks the odds in your favor.

Price Action

The analysis of the price’s behaviors over a certain period.

Flip Zone

An area where the price flips from support to resistance or vice versa.

Gap

A space between the close of one candlestick and the open of the following candlestick. It is caused by an abrupt price move without any trading taking place within that space.

Starting Gap

Is formed in the opposite direction of the prevailing trend

Ending Gap

Is formed in the direction of the prevailing trend.

CCI

Abbreviation of the Commodity Channel Index, measuring the price momentum in the market.

Multiple Timeframe (MTF) Analysis

The process of analyzing your assets/instruments in more than one timeframe to get a better understanding of how it is performing in the market.

Scalping

A trader who enjoys scalping, a scalper’s goal is to profit from the smallest price fluctuations in the market. It means that he must spend most of his time in front of the trading screens.

Day Trading

Day traders open and close their trades within the day. However, traders hold their trades much longer instead of exiting within minutes.

Swing Trading

They tend to hold their trades as long as the medium-trend is valid. Being a swing trader entails greater patience than a typical day trader.

Position Trading

Traders hold their trades for a long time, i.e from a few months to a few years.

Curve

Simply the area between the two proximal lines of the nearest demand zone and supply zone in control.

Risk Management

A method of managing your losses so that they won’t go beyond your tolerance. In other words, risk management is the art of keeping your trading under control.

Margin Call

Happens when your trading equity is below the minimum required amount for your trades to be taken.

Position Sizing

A technique that determines how many units of assets you will buy so that your loss will not surpass your risk exposure in case the stop-loss is hit.

Drawdown

A difference between the high and the low of your account balance.