As is known, the interaction of supply and demand directly affects price fluctuations. Market dynamics constitute this very interaction. That’s why it’s essential for a StockBattle entrant to understand how they work in order to anticipate price movements.
What Are Market Dynamics?
Market dynamics are the forces that are responsible for the changes in prices and the behavior of producers and customers. These forces generate price signals which occur when a shift in supply or demand results in a proportional shift in the other.
How Market Dynamics Work?
As the factors upon which the demand or supply changes, market dynamics drive the difference in the order or quantity of a product. For example, suppose Apple issues a new cutting-edge Macbook that doesn’t require charging, at all (exciting, right?). This will definitely send demand reaching unprecedented levels.
The ensuing increase in demand will entail the price growth that will encourage Apple to pump output to meet the new level of demand. New Macbook’s market price will consequently return to its previous level once the supply increase stabilizes demand and the next Macbook model hits the market.
Why Do Market Dynamics Matter?
Market dynamics are the product of collective market resources and preferences. That is why they are impervious to the actions of one individual or a company. It works the other way around – individuals act in response to market dynamics instead of inducing them.
Market dynamics are fluctuating, so it is important to always reassess them before making your portfolio drafts. How do you do that? Read charts and follow the price movements in order to spot the signals and anticipate the following price change.
By adding on more skills and fields of knowledge, you become a more powerful force. Showcase your high potential in a StockBattle contest!