Supply and Demand Price Spikes

Spikes in Price

This type of PA is common and happens for a number of reasons. When price leaves a demand level where there is a strong supply and demand imbalance price will often rise sharply creating what I call a spike in price. The opposite is true for supply. Where price leaves a supply level where there is a strong supply and demand imbalance, price will often drop away sharply creating a spike.

 Spike away from Demand

 Spike away from Supply

Spike into Supply

When price arrives at a Supply level it can also arrive due to a spike. As those who trade supply and demand know, this is often due to novice buyers buyer after a rally, but it can also be pro money pushing price higher to trick novice traders into buying into supply so that they can fill their bigger short orders.

Spike into Demand

The same is true for demand levels. Where price spikes into demand, it is often novice sellers, or it can be pro money pushing price into demand to trick the novice traders into selling.

Happy Trading