Supply and Demand Trading for Beginner on Crypto Asset
Supply and demand trading is a strategy that tries to take advantage of this imbalance to make a profit. Areas of supply and demand can be said an areas when they occur an imbalance of price in financial assets which is like crypto. Term supply and demand itself means there is supply and demand due to buying and selling. Just like a traditional market, crypto is also a market where people buy and sell. For an easier understanding, supply is like an inventory of goods, while demand is like a lot of desired goods. When the price is still in negotiation, which is called the equilibrium point or sideway condition, then the price breaks down, so the area that has been penetrated earlier is called supply. Otherwise, when the price breaks up from equilibrium area, then the area that has been penetrated earlier is called demand.
Supply and demand are one of the most basic concepts in trading. It refers to the number of buyers and sellers in the market for a particular asset. If there are more buyers than sellers, the price of the asset will rise. If there are more sellers than buyers, the price will fall. So, Traders will buy when there is more demand than supply and sell when there is more supply than demand. They are expected to be able to buy low and sell high, making a profit in the process.
Supply zones can be found by looking for significant price drops away from a cluster of small candlesticks where prices are consolidated for a short period. So before the price hit this zone you have to sell your asset. Check the chart below for example in BNB asset.
Conversely, demand zones can be found by looking for a significant price rally away from a cluster of small candlesticks where the price consolidated for a short period. Of course, in this case, we know that chance to buy an asset for making a profit. As shown in this chart below
If you’re a crypto trader, understanding and trading on the principles of supply and demand are crucial to your success. Determining where the supply and demand areas are is a simple process. All you need to do is to find price zones from where the price had a strong reaction in the past, either up or down. When the price revisits the supply and demand zones, we’re more likely to get a similar reaction from these price zones because that’s where the buying and selling took place initially. This strategy works better if the trade is also taken in the direction of the overall market trend. Do your own research before trading.
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