Supply and Demand: Big Volume Demand at Key Points – In Detail 1. What is Supply and Demand in the Stock Market? At its core: Supply = Sellers (people who want to sell a stock) Demand = Buyers (people who want to buy a stock) The interaction between supply and demand determines price movement: If demand > supply → price goes up (buyers compete, pushing prices higher). If supply > demand → price goes down (sellers undercut each other, lowering prices). 2. Supply and Demand Zones These zones are areas on a chart where the price had a strong reaction in the past, indicating high supply or demand. Demand Zone (Support) A price area where buying pressure exceeded selling pressure. Price drops into this area and bounces upward. Often seen with long wicks, strong green candles, or volume spikes. Example: A stock falls to $100, then suddenly reverses to $120. The $95–$100 zone is a demand zone. Supply Zone (Resistance) A price area where selling pressure exceeded buying pressure. Price r...
A DAY TRADING STRATEGY THAT ACTUALLY WORKS
D ay trading refers to any trading strategy that involves buying and selling a stock on the same day. Strictly speaking, a day trader will never hold a position overnight. Lots of people try day trading and end up failing. That's why I want to give you a simple strategy that has worked well for me over the years.
This strategy takes advantage of a basic fact of market structure that it takes time for big players to enter and exit their positions. If a mutual fund or hedge fund is holding millions of shares of the stock XYZ, it cannot simply press a button to exit its position. If XYZ has just reported some very bad news in their latest earnings report, the fund is in a tough spot. It will take hours, days, or maybe even weeks for the mutual fund to exit its position, depending on how liquid the stock is.
And the same holds true for a stock that has just reported very good news in its latest earnings report. If a fund wants to open a new position in that stock, or to add to an position, it may take hours, days, or weeks. existing
The good news is that small traders like you and I can take advantage of these slow, lumbering giants. Once we see their footprints in a stock's price behavior, we can step in front of them and quickly execute our small order. Our small order will not push the stock in any direction. But the giant mutual fund's or hedge fund's large order will cause the stock to continue to move.
By jumping in front of a large institutional player, we can come along for the ride as the mutual fund or hedge fund continues to push the stock up with its buying, or down with its selling.
example On 26 February 2019, the gaming company Sea Limited closed at 16.20. In the after-market hours, the company reported much better than expected earnings. How do we know that the earnings were better than expected? Because the next morning the stock opened 15% higher at 18.64. The stock continued to move higher for the rest of the day, closing at 21.99. In other words, after gapping up, the stock still moved up another 18% during the day.
Here's a day trading strategy that works to capture moves like this
1. Find a stock that is gapping up on good news (like a better than expected earnings report).
2. Wait 15 minutes after the market's open, and note the stock's price at that time.
3. Put in a limit order to buy the stock at that price.
4. If your order is not executed in the next 15 minutes, cancel your order and walk away.
5. If your order is filled, hold on to the stock for the rest of the trading day, and then take profits a couple of minutes before the market closes that day.
6. Exit the stock early if it trades below the lowest price of that first 15 minutes of morning trading.
It's that simple. This strategy takes advantage of a stock's tendency to keep moving in the same direction of its morning gap, as large institutional players like mutual funds and hedge funds adjust their positions
What is a gap?
It's simply when a stock moves up or down sharply, leaving a "gap" or empty space on the chart that sepa-rates it from its previous trading range. Here's a video about how I made $757 day trading Netflix using this strategy:
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