Encyclopedia Classification
Category: Market Structure • Institutional Trading • Price Action
Discipline: Supply/Demand • Order Blocks • Liquidity • Institutional Execution
Prerequisites
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Article 191 — Wyckoff Method: Accumulation, Distribution, Smart Money Behavior, and Market Cycles
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Article 190 — Market Profile: Auction Theory, Value Migration, and Institutional Market Structure
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Article 187 — Order Flow Analysis: Understanding Market Pressure Through Buyers, Sellers, and Real-Time Execution
Related Articles
Smart Money Concepts • Order Blocks • Liquidity Zones • Support and Resistance • Price Action • Market Structure
Definition
Supply and demand trading is a market analysis framework that identifies areas where significant buying or selling pressure previously entered the market.
These areas are believed to represent locations where:
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Large orders were executed.
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Institutions built positions.
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Market imbalance occurred.
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Price reacted aggressively.
The central idea:
Price moves away from areas where supply and demand become imbalanced and often returns to those areas to test remaining orders.
Beginner Explanation
Imagine a store selling a popular product.
The price is:
\$100.
Thousands of customers want it.
Demand is high.
The store raises price:
\$120.
Eventually:
Demand decreases.
Markets work similarly.
When buyers overwhelm sellers:
Price rises.
When sellers overwhelm buyers:
Price falls.
Supply and demand analysis attempts to identify where those imbalances began.
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