The Basics: Supply and Demand

In one way or another, everything that happens in the stock market is a result of supply and demand reacting to one another.

There are a limited number of stocks, so if a stock is in demand and more people want to buy it compared to those who want to sell, then the price goes up.

The opposite happens when more people want to sell, and fewer people want to buy.

Think of it this way:

A 1-pc Chickenjoy costs P89 right now.

But what if that 1-pc Chickenjoy was the last one on earth and everyone wanted to eat it? How much would people be willing to pay for that?

On the other hand, if there were mountains of Chickenjoy everywhere you look, would you still pay P89 for it? Probably not.

It sounds funny, but the entire stock market functions on basically the same principle.

People want to buy and sell stocks for many reasons.

Whatever those reasons are, they will cause either a stronger demand or supply.

This will be reflected as an increase or decrease in price.

So how does this help you see into the future?

Simple.

You just need to be able to identify the signals and triggers that indicate when a rise in supply or demand will come.

All stock trading strategies, from the simplest to the most complex, are based on this idea.