Support/Resistance & Supply/Demand. Have I got it?

I would be ver grateful if someone could tell me I've understood this correctly (and put me right if not):

I read that 'price is everything' and nothing else on a chart really matters. So I felt I had to have a good fundamental understanding of how price works. Bear with me while I have a go at explaining (at my current very new level of understanding )

For every seller there has to be a buyer and vice versa

So hypothetically, if buyers are happy to pay say 1.00 for a share and sellers are happy to receive that price then the market for that share is in equilibrium.

However this is rarely the case because sellers will want to get the best price they can for a share (say 1.20) and buyers will want to pay as little as possible for a share (say 0.80).

So let's say the price falls to 0.80. Now the buyers are happy but the sellers are unhappy and buying volume increases. Demand now exceeds supply.

Inevitably then, prices will rise, which will please the people who bought at a lower price! Traders see the prices rising and jump on the band-wagon. Buying pressure forces the price higher still. I think this is what is meant by 'buyers are in control' but I'm not 100% sure.

So the price rises past the 1.00 mark and approaches 1.20. Now nobody wants to buy because the cost is too high. In fact those who bought at 0.80 are selling like mad trying to make as much profit as possible.

Supply now exceeds demand, so inevitably the prices will fall. The spate of selling forces the price lower. 'Sellers are in control'.

Support is at 0.80 and resistance is at 1.20.

So, please tell me I've understood this correctly and if not, where I've gone wrong.

Many thanks, G.

p.s. I know this is a very simplistic model, but I need to know that it's correct before I can build on it to look at trend lines and other more complex tech analysis methodologies.

Simplistic! id say you may be thinking to hard! .

Support:- A place where there will more likely be people wanting to buy it.
Resistance:- A place where there will more likely be people wanting to sell it.

Supply:- more sellers than buyers.
Demand:- More buyers than sellers.

Reasons to buy and sell:- Not enough room on this page! Hope and fear if i had a gun to my head for the 2 top reasons!

The market will exploit the typical human condition, creating supply and demand conditions which will give us the minima and maxima price points as a result of this crazy game of bluff and con.

"See this Porcelain here Rodders? well its your finest Ming Porcelain innit me ol china, only its from Taiwan Harry down the chinky.. Come on Rodney down the market son and drive up the prices then leg it, and this time next year will be millionaires........"

Don't forget that there will also be people who have gone Short at, say in your example 100. So even if there is no genuine demand at 80to100 the pit traders will artificially run up the demand so as to knock out the Stop Losses of all the shorts. This short covering in turn temporarily adds fuel to the rise until exhausted, then the pros will step in and short the market down until they hunt out the Stop Losses of the mugs who went Long at 100. This in turns adds fuel to the fall until exhausted.

Then, even if there is no genuine demand the pit traders will artificially run up the demand so as to knock out the Stop Losses of all the new Shorts. This short covering in turn temporarily adds fuel to the rise until exhausted, then the pros will step in and short the market down until they hunt out the Stop Losses of the mugs who went Long at 100. This in turns adds fuel to the fall until exhausted. Then the pros step in and artifically create demand so as to knock out the Stop Losses of all the new Shorts.This short covering in turn temporarily adds fuel to the rise until exhausted, then the pros will step in and short the market down until they hunt out the Stop Losses of the mugs who went Long at 100. This in turns adds fuel to the fall until exhausted. Then the pros step in and artifically create demand so as to knock out the Stop Losses of all the new Shorts
This short covering in turn temporarily adds fuel to the rise until exhausted, then the pros will step in and short the market down until they hunt out the Stop Losses of the mugs who went Long at 100. This in turns adds fuel to the fall until exhausted. Then the pros step in and artifically create demand so as to knock out the Stop Losses of all the new Shorts.

ad infinitum......

and how, you may ask, do the pros know where the traders' Stop Losses will be ?

"cos they know where the juicy lines of historical support & resistance are, they know where the "magic" numbers (-00, -50 etc) are. And they know that that's where most traders will focus their Stops !

So, while never, ever ever trade without a Stop as a newbie, try to think a little differently from the crowd and be a little creative where you put your stops.

Then eventually when you get enough experience from observing this endless cycle, you can start to position yourself alongside the pros - ie figure out where the majority of mug punter Stops are likely to be and fade the move back to hunt them out, along with the pros.

make sense ? It's much harder than it sounds, but not impossible....

Harder than it SOUNDS!! OMG I'm in trouble...

one step at a time.
just be aware that professional pit traders will regularly hunt out retail traders' stops.
as long as you're aware of it, it helps in a couple of ways -
1. you can be creative in where you place your own stops, and
2. even if you do get stopped out, you can feel confident, all things being equal, of re-entering your trade, knowing that the pendulum is likely to swing the other way soon and you can participate in the move at the second opportunity while the pros go hunting for stops on the other side of the price channel

sound easier ?