When traders look at a stock chart they see a wealth of information and its true, stock charts do provide an abundance of information that can be used by those scalp trading the market or by futures traders. However, the one fundamental element which provides this information is often overlooked as traders focus more on patterns, indicators and oscillators. Supply and demand is the foundation of any stock chart, index futures chart or currency chart. Individuals stocks increase in share price as the demand for it goes up and inventory is reduced by frenzied buyers.
Stocks out of favor will experience a lower share price as sellers run for the doors for any number of reasons. As more shares become available, the stock price continues to tumble. Supply and demand is the building block of stock charts thereby making volume and price the most important elements of any trading system. Volume and price reveal possible trade setups when viewed in the confines of a stock chart. A stock trader can learn a great deal about individual stocks by watching the supply and demand indicators of volume and price which can translate into successful trading.
