For the new trader, or intending trader, an understanding of the basic of what drives price is a fundamental understanding needed to be successful.
Quick reminder ..
The Law of Supply and Demand When there is an excess amount of something (supply) the value of that item is reduced to draw in the demand needed to absorb that supply. Or, if there is a scarcity of something, then the value of that item will increase to create the supply that will meet that demand.
The Law of Cause and Effect In order for there to be an effect (change in price), there needs to be a cause. The effect will be in direct proportion to that cause. Best price moves occur when there has been enough time to allow for a period of accumulation or distribution (or in other words a cause).
The Law of Effort vs Results Simply state, if there is an effort, the result must be in proportion to that effort and can not be separated from it. If it is not, it is an indication of other principles in action. Think of effort as the volume on a move, and the result is the corresponding price action. These two should be in harmony. If you have a lot of volume, you should see a lot of move, if you don’t…why? What is happening? This is where we become the detective, use our tools, evaluate that price action (result), with the corresponding volume (effort), and make some deductions based on the “balance of probabilities”.
If there is force there should be a motion: a) If there is high volume and price move is good then this is equal force to equal motion: If bullish then this means buyers out number sellers and prices are being marked up. If bearish then this means sellers out number buyers and prices are being marked down. In both cases while there is good volume supporting the direction of the move the price move can be expected to continue. b) If there is low volume and price move is poor then this is equal force to equal motion: If bullish then this means there is no demand, if bearish this means there is no supply. In both cases a price move is in a temporary flux awaiting force to show its hand in either direction. c) If there is high volume and price move is poor then this unequal force to motion: If bullish then this means buyers may not out number sellers and prices may be marked up poorly or move sideways as the mark up process has been hindered by distribution. If bearish then this means sellers may not out number buyers and prices may be marked down poorly or move sideways as the mark down process has been hindered by accumulation. In both cases the price move is subject to expected reversal. d) If there is low volume and price move is good then this unequal force to motion: If bullish then this means buyers out number sellers while prices are being marked up, but the level of buying interest is poor or without conviction. If bearish then this means sellers out number buyers while prices are being marked down, but the level of selling interest is poor or without conviction. In both cases the price move is subject to expected reversal." ..........................................................
an example is provide at the site.
Now if one can get his head about the basic of price movement, the one should be able to understand which direction their education should come from. Its all about understanding the basics, then venturing out to make the trades.
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