How Does the Law of Supply and Demand Affect the Stock Market?

Large institutions such as Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) control the stock market, as is well known. We used to call ourselves retailers when we were active stock market traders. When major institutions make purchases and sales, they have a far greater ability to influence the market than do retailers. The market then experiences supply and demand as a result.

Demand - We are all aware of the times when a given commodity has more buyers than producers. Then we announced that prices had increased due to market demand. The stock market exhibits the same tendency. when large institutions make market purchases. The market gains ground. Simply put, we refer to it as the "buy zone.

" A price range where there is a sizable amount of buying interest or demand for a specific stock or asset is referred to as a "Demand Zone" in the stock market. On price charts, traders and technical analysts frequently see demand zones where the price has previously found support. This indicates that when the price hits that level once more, buyers are probably going to jump in and push the price back up. Consider examining a price chart where a stock's price has been steadily growing until it has a fall or pullback. When the price begins to decline, buyers eventually intervene and repurchase the shares, turning the market around so that the price rises once more. A demand zone is defined as this area where purchasers are entering.

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Supply - We are all aware of the times when a given commodity has more producers and fewer buyers. Then, we announced that there was an increase in supply, which caused prices to rise. The stock market exhibits the same tendency. When large institutions sell in the market. The market declines. In layman's terms, we refer to it as the Sell Zone.

Supply zones are often found utilizing different technical analysis tools, such as resistance levels, trend lines, or chart patterns, just as demand zones. Because they think there will be selling pressure at these areas, which will drive the price down, traders utilize supply zones to identify possible departure points for selling stocks or other assets.

Visualize a price chart where the price of a stock has been trending upwards, but then encounters a resistance level where selling pressure increases, causing the price to reverse and start declining. This level where sellers are stepping in can be identified as a supply zone.

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