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Price:
Everywhere I read "Price Action". "Price Action in S/R zone". etc
What does exactly it mean? Could anyone exaplain me with example?
Supply/Demand:
When I see a S/R zone being penetrated with high volume (not ultra high), then how to judge whether it is really a demand coming or supply coming?
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PRICE ACTION:
For me, price action is just that-the action of price and the price bars (candles). How wide is the range of the bar? Is price up from the prior interval? Is price making higher highs or Lower Lows? Is the spread of this bar wider than the spread of the previous bar? Is the close on or near the high of the range of the bar? Are we closing higher than the open more than closing lower than the open? These are the types of things that PRICE ACTION encompasses.
A much more esoteric understanding of price action involves CANDLE FORMATION. Not candle formations, but the formation of an individual candle line. Does the candle end the period with price on the high, but actual only traded to the high in the last 10 seconds of the 3 minute bar. Did price trade down to the low of the bar and remain there the entire interval? If price immediately trades down to the low (not known till close of period) and stays there, the was more selling pressure than buying pressure (leaving volume aside for the moment). Does price move up and down through out the bar's range and then close in the middle and equal to the open? Well the action shows indecision. Note that this is a Doji, but no knowledge of candlesticks could tell you that the bar is a bar of indecision.
These are the elements of
PRICE ACTION for me.
SUPPLY/DEMAND:
1. First my perspective is from
VSA
2. Read selling (supply) and buying (demand).
Before you do 2, however, it is best to understand supply and demand via the stock market. Supply means the actual stock being placed into the market. Like anything, too much tends to lead to falling prices. Demand means stock being taken out of the market. If there are many people chasing few goods price will tend to rise. That is just basic Econ 101.
Now in futures and currencies we can substitute supply with selling and demand with buying. Contracts are created by both a buyer and a seller so there is always a contract created. In stocks the amount of stock is "finite".
VSA teaches that strength comes in on down bars and weakness comes in on up bars. Strength is buying (demand) and weakness is selling (supply).
One needs to look at where the close is in relation to the size of the spread, the volume on the bar, the close in relation to the prior bar and the close of the next bar. All of these need to be looked at to determine if the high volume is associated with supply or demand.
Check out Tradeguider.com if you want to learn more about
VSA and the CBOT has a few webinars. Continue to read this thread and others for more understanding.