Supply?

In the past few months we saw unprecedented levels of disruption in the simplest of aspects of our lives. Schools, colleges, offices, malls, theaters, you name it; everything was shut. We couldn’t order our favorite biryani, we couldn’t take a train to go see our friends, we couldn’t take a stroll on the Marine Drive.

Us city dwellers also realized how long the supply chain for the most basic of our necessities is. Something as simple as Dettol which was available at every departmental store before was now impossible to find. Maggie, which for some people is just as vital as their PUBG rank, was out of stock and people hoarded it as if Nestle was going under soon. There was a line to buy milk, there was a line to buy rice, and there was a line to buy tobacco. There was a lot of demand, but the supply, which was very reliable earlier, thanks to the truck drivers and the network of garages, truck stops, public restrooms and breakdown services, was suddenly brought to a stop. Although very few, there were cases of shopkeepers beefing up the price of goods in high demand like masks and sanitizers. Supply to meet the demand is very important.

When I started looking at trading as a serious activity, I realized that getting into stocks which have both supply and demand is paramount. I traded a stock once with a quantity which wouldn’t even be noticed in the tape of one of the larger scrips. But this wasn’t a very liquid stock. I bought in and tried to exit at 1% profit since this was supposed to be a small intraday trade. I punched in a market order and I was taken out at 0.1% instead of 1%. There was no demand for the stock where I wanted to supply.

The opposite was true when I looked at the charts of some of the stocks constantly hitting upper circuit. A few of my friends asked me if they should take a position in them. Generally getting into such trades is extremely risky. Its almost as if entire market makes its mind at once about such stocks. Where it was once difficult to buy the stock because of the extreme demand, now it is difficult to sell the stock because of the extreme supply.

Nobody I know is stuck in a stock position where you are unable to sell. Hope you are not too…

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