What is Supply and Demand?

The supply and demand concept posits that an excess of a commodity is produced when the supply is high, and the demand is low, resulting in a decrease in its price.

Scarcity is caused by a low supply of a commodity and a high demand, which in turn drives the price upward.

In the Forex market, prices will decrease when the supply of a currency pair is high and the demand is low. If the demand for a currency pair is high and the supply is low, the excess demand will result in a rise in prices.

For instance, investors reduce their equity market exposure and begin purchasing safe-haven currencies to safeguard their investments during periods of uncertainty and dread. The Japanese yen’s value will increase due to the substantial demand from investors who wish to own it.

An additional illustration is when the Federal Reserve (Federal Reserve) determines to elevate interest rates. This will render the US dollar more appealing to investors due to the interest yield. This is also referred to as the carry trade, in which merchants acquire currencies with high interest rates and offer them for sale at low interest rates.

Supply and demand is a general concept that applies to any commodity that can be transacted.
We must establish supply and demand zones and comprehend the movement of prices on the chart before proceeding to the core strategy.

Supply Zones

Located above the present price, a supply zone is characterized by a significant amount of selling interest. Sellers surpass purchasers at the supply level, resulting in a decrease in price as unfulfilled orders are absorbed.

Demand Zones

A Demand Zone is a price range that is significantly lower than the current price and is characterized by a high level of purchasing interest. Buyers surpass vendors at the demand level, resulting in an increase in price as unfulfilled orders are absorbed.