Hi @Hereshoping, I like the boiling water in a saucepan analogy...

Hi @Hereshoping, I like the boiling water in a saucepan analogy and I'll steal it and potentially butcher it with some comments for not just yourself but anyone interested!

First though so we're all clear, there is the hard data that the chart records and displays, and then there's the TA or charting that is applied to it which as we all know can take many forms depending on what the goal of the analysis is. It could be something fairly uncontroversial like trend analysis, which really only gets disputed when people are not precise with explaining the time-frame or period they are talking about, or it could be used to gauge the relative strength between different stocks, sectors or markets. Or for trading and risk management on whatever time-frame. Or for crystal balling which always prompts some robust discussion! Some of these endeavors are heavily data/science driven and some are, let's say, a mixture of science, art and subjective interpretation! I comment on this because the value and validity of charting will depend on the information that is being sought.

So is shorting external to the chart? No, every sell and buy order and the volume traded is recorded and displayed on the chart (apart from dark pools and other off-market activities but let's keep it simple). This includes all the short selling and covering, but the chart can't tell you directly what proportion of the selling is specifically short sales- you have to look to another source of information to evaluate that. External manipulation is more like planted news stories or social media campaigns that hope to influence more buying or selling- which then will then in turn show up in the chart.

It's also pretty uncontroversial that if supply and demand are in equilibrium, then the price will not change- this could be your saucepan at room temperature for example. You could think of demand/buyers as the flame and sellers/supply as the ice cubes, and the total "energy" of the flame plus the ice cubes is the volume traded- but you can't measure the flame and ice cubes individually, all you can see is the total energy. If you notice the water temperature start to rise and bubble, then obviously the flame has been turned up. More keen buyers enter the market, the price rises and you have a supply and demand imbalance in favour of demand. But let's say you notice the total energy/volume has increased but the temperature/price does not rise- the flame has been turned up but obviously there are also enough ice cubes being added to keep the water at equilibrium. Another analogy could be you notice the temperature/price rising rapidly at a pretty high total energy, but then the temperature rise starts to slow down but still at the high energy- so obviously more ice cubes are being added to dampen the effect of the flame. On a chart you would note this as Supply Appearing and a potential Sign Of Weakness which could result eventually with the price stopping or dropping. So while you can't immediately tell where the selling is coming from, you can identify that selling/supply has increased relative to demand.

There are a multitude of indicators that attempt to mathematically measure and display this supply vs demand imbalance like OBV and RSI for example, but the best technique by far for this specific purpose in my opinion is Volume Spread Analysis (VSA) which uses observations similar to the saucepan analogy to get a read on the supply versus demand "background" to the chart. Sometimes it is very clear what is happening, and sometimes it is not immediately obvious and requires a few extra bars/candles to play out to get a good read. There is more nuance to VSA than the simple examples above and can take a while to learn to read a chart in this way with confidence, but well worth the effort.

Apologies for rabbiting on but it's a fun topic.

Good luck all, Rooster.