Wednesday, June 18, 2014

The Three Laws Of Price Movement

Entry and exit points in market are one of the most important factors influencing our trading performance. Sometimes, traders should relax and muse over the theory governing price action. Here is a brief analysis of why price moves.

         There are few basic factors which can define the price action and help to improve the enter and exit points. The laws of price action are:-

1. Price movement, in any free market, is a function of an ongoing supply and demand relationship within that market.

2. Any and all influences on price are reflected in price.

3. The origin of motion/change in price is an equation where one of two competing forces (buyers and sellers) becomes zero at a specific price.

          A sharp increase or decrease in price can indicate easily either supply is more or demand. The price itself gathers all the information about what is going on within it. And a break out or breakdown from a narrow or range bound market could indicate an imbalance of supply and demand equation, hence a probable up or down is coming in near future. Using these basic parameters with your trading setup could improve your trading.

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