Supply and Demand model is a price action model that to determine stock trading entry and exit points.
When supply (sellers) exceeds demand (buyers) there is a turn in price action. Price is driven down due to the quantity of goods being produced and the lack of demand for those particular goods. The logic dictates that there are more willing sellers and less willing buyers and this becomes an area for traders to take advantage of the movement in price to the downside.
When demand (buyers) exceeds supply (sellers) there is a turn in price action. Price is driven up due to the quantity of goods being demanded and the lack of supply for those particular goods. The logic dictates there are more willing buyers and less willing sellers and this becomes an area for traders to take advantage of the movement in price to the upside.
Support and Resistance
There are key price movements in the market formed by sellers and buyers which can support a given trade. These areas do not always hold and they are often broken. A break above or below support or resistance signals strength or weakness depending on the direction of price. A decline below support indicates there are not enough buyers to push prices higher and the bears are in control. A break above resistance indicates there are not enough sellers to push prices lower and the bulls are in control.