Economy
Demand And Supply Zone Trading: A Comprehensive Overview From Experts
Traders Union (TU) experts know that supply and demand rules control all markets. When traders trade, they usually use technical signals to find out if there is more supply or demand. In this guide, the analysts will delve into the world of supply and demand zones and explore their significance in trading. But before you dive in, it’s crucial to grasp the fundamentals.
What you should know about supply and demand zones
The guidance from TU’s analysts provides insight into the crucial aspects of demand and supply zone trading. It is important to understand these zones:
- Supply Zone – this is where traders commonly opt to sell, and it typically lies above the current price. When the price reaches a well-established supply level, it triggers the completion of unsold sell orders, frequently resulting in a downward price movement.
- Demand Zone – conversely, the demand zone serves as the go-to area for traders looking to buy. It’s situated below the current price, attracting many buyers who are prepared with purchase orders at that specific level. Recognizing a demand zone is a key skill in trading.
These insights provide a solid foundation for traders to comprehend how supply and demand zones operate in the dynamic world of trading.
Advantages & disadvantages of supply and demand trading
Let’s check out the good and not-so-good sides of these approaches, according to analysts at Traders Union.
Advantages:
- Easy to understand
Supply and demand trading is simple and makes sense. It’s about how prices are set when supply and demand meet.
- Works everywhere
This idea fits any market where stuff is bought and sold, making it a useful strategy for all traders.
- Can predict future prices
Supply and demand zones often hint at where prices might go next, helping traders make predictions.
- Clear risk and reward
These zones show when to enter, exit, and set goals, which helps manage risks and rewards.
Disadvantages:
- Not always clear
Figuring out supply and demand zones can vary between traders, making it a bit unclear sometimes.
- Might miss small moves
Sometimes, small price changes in these zones can give wrong signals, making traders enter or exit trades too early.
- Looks back in time
Supply and demand zones are based on past data, so they might not always predict future prices accurately.
- Needs patience
This method often means waiting for prices to hit the right zones, which can be tough when the market is calm.
Recommendations for beginners
Supply and demand are big deals in Forex trading. TU’s experts have five tips to help beginners like you:
- Combine with technical analysis
Just knowing supply and demand isn’t enough. You should also learn technical stuff like chart patterns and indicators. This helps you understand how the market might react to supply and demand.
- Risk management
Be smart about risks. Don’t bet too much money on one trade, usually no more than 1-2% of your total. This way, you can handle losses without emptying your account and get better over time.
- Spot big differences
Look for big differences between supply and demand. These can hint at potential trades. Find places where prices have shot up or down quickly.
- Use longer time frames
If you’re starting out, use longer charts like daily or weekly. They show the market better and aren’t as noisy as shorter ones.
- Confirm with indicators
While supply and demand are important, you can use other indicators for extra certainty. Things like volume indicators, RSI, or moving averages can back up your supply and demand ideas.
Conclusion
Understanding supply and demand is essential in the world of trading, and the Traders Union has provided valuable insights into these fundamental principles. While supply and demand trading offers simplicity, universality, predictive potential, and clear risk-reward management, it does come with challenges, including subjectivity, potential for missed signals, reliance on historical data, and the need for patience.
By Dipo Olowookere
On the Nigerian Exchange (NGX) Limited last week, investors transacted 3.648 billion shares worth N220.568 billion in 251,861 deals compared with the 3.821 billion shares valued at N154.393 billion traded in 258,567 deals a week earlier.
Analysis showed that financial stocks led the activity chart with 2.899 billion units sold for N147.360 billion in 106,603 deals, accounting for 79.48 per cent and 66.81 per cent of the total trading volume and value, respectively.
Services equities recorded a turnover of 164.914 million units valued at N3.615 billion in 16,375 deals, and the consumer goods shares exchanged 157.451 million units worth N7.777 billion in 27,950 deals.
First Holdco, Zenith Bank, and Fidelity Bank were the busiest stocks for the five-day trading week, trading 1.745 billion units valued at N121.828 billion in 31,053 deals, contributing 47.85 per cent and 55.23 per cent to the total trading volume and value, respectively.
Business Post reports that 60 equities appreciated during the week versus 22 equities in the previous week, 28 shares depreciated versus 57 shares of the preceding week, and 58 stocks closed flat versus 67 stocks of the previous week.
International Breweries gained 40.00 per cent to trade at N13.30, RT Briscoe expanded by 32.02 per cent to N13.40, Livestock Feeds improved by 28.47 per cent to N9.25, First Holdco chalked up 25.82 per cent to close at N69.20, and Abbey Bank rose by 23.65 per cent to N9.15.
On the flip side, McNichols lost 28.57 per cent to finish at N5.00, Thomas Wyatt gave up 11.64 per cent to quote at N2.43, Geregu Power declined by 10.00 per cent to N825.70, CAP shed 9.99 per cent to settle at N157.60, and Guinness Nigeria also slipped by 9.99 per cent to N329.00.
Customs Street was under buying pressure last week, making the All-Share Index (ASI) and the market capitalisation close higher by 6.35 per cent to 243,798.76 points and N156.445 trillion, respectively.
In the same vein, all other indices finished higher apart from the growth and sovereign bond indices, which depreciated by 7.43 per cent and 0.02 per cent, respectively.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose by 2.30 per cent, spurring the NASD Security Index (NSI) to close higher by 96.61 points to 4,296.34 points from 4,199.73 points, and raising the market capitalisation by N57.99 billion to N2.578 trillion from N2.521 trillion.
The market was up yesterday despite a lower activity level, as the volume of securities traded slumped by 94.7 per cent to 1.3 million units from the previous 23.9 million units. The value of securities slipped by 57.2 per cent to N29.2 million from the preceding session’s N68.2 million, while the number of deals executed by market participants increased by 6.7 per cent to 32 deals from the 30 deals carried out on Thursday.
At the close of transactions, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion in trades, and Central Securities Clearing System (CSCS) Plc with 70.8 million units traded for N4.9 billion.
GNI Plc was also the most traded stock by volume on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
During the trading day, there were three price gainers and two price losers, led by Afriland Properties Plc, which shed N1.48 to sell at N15.17 per share compared with the previous session’s N16.65 per share, and Food Concepts Plc, which slid by 7 Kobo to close at N2.69 per unit versus N2.76 per unit.
Conversely, FrieslandCampina Wamco Nigeria Plc improved its value by N9.50 to trade at N150.00 per share compared with Thursday’s closing price of N140.50 per share, CSCS Plc went up by N7.95 to N89.65 per unit from N81.70 per unit, and 11 Plc soared by N6.94 to N206.95 per share from N200.01 per share.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited lost its footing by 0.07 per cent on Friday as a result of renewed profit-taking by investors.
The fall happened after Thomas Wyatt and Guinness Nigeria led other price losers group comprising 27 stocks at the market yesterday due to selling pressure.
Thomas Wyatt Nigeria shed 10.00 per cent to quote at N2.70, Guinness Nigeria drowned by 9.99 per cent to close at N329.00, Ikeja Hotel slipped by 9.96 per cent to N42.50, Zichis shed 9.94 per cent to trade at N26.37, and McNichols depreciated by 9.91 per cent to N5.00.
On the flip side, International Breweries gained 9.92 per cent to finish at N13.30, NEM Insurance appreciated by 9.61 per cent to N27.95, Jaiz Bank grew by 6.36 per cent to N9.20, UPDC expanded by 6.33 per cent to N4.20, and Livestock Feeds increased by 6.32 per cent to N9.25.
Business Post reports that investor sentiment remained bullish despite the loss recorded during the session, as there were 27 price decliners and 30 price advancers, representing a positive market breadth index.
Yesterday, market participants transacted 441.3 million equities for N19.4 billion in 44,938 deals compared with the 1.7 billion equities worth N112.0 billion traded in 44,780 deals a day earlier. This showed that the trading volume contracted by 74.04 per cent, the trading value declined by 82.68 per cent, and an uptick in the number of deals by 0.35 per cent.
Access Holdings led the activity chart on Friday after selling 40.2 million shares valued at N1.0 billion, Sterling Holdco traded 30.3 million stocks worth N228.8 million, Fidelity Bank sold 26.3 million equities for N505.6 million, Zenith Bank transacted 22.3 million shares valued at N2.5 billion, and First Holdco exchanged 19.0 million stocks worth N1.3 billion.
During the last trading session of the week, the consumer goods sector rose by 0.49 per cent, the insurance counter increased by 0.06 per cent, and the industrial goods index closed flat, while the banking and energy indices lost 0.78 per cent and 0.52 per cent, respectively.
As a result, the All-Share Index (ASI) shrank by 159.97 points to 243,798.76 points from 243,958.73 points, and the market capitalisation moderated by N103 billion to N156.445 trillion from N156.548 trillion.
