The underlying principles the drive the Stock Market are not that difficult to understand.

But you must in the first place understand that it is supply and demand that controls the markets. But you must also accept that markets can move on no supply and no demand.

No supply and no demand is a mystery to most people but once pointed out it is markedly obvious.

It is this fact that will give you an edge over all the other players.

Most people have trouble reading the bars that make up a chart. It's a skill that you must develop if you are to interpret the likely direction of the markets - both short-term and long-term. You need to clear your mind of all the mis-information you have absorbed over the years.

The majority of people look at a chart and see very little. All markets work on the principles of supply and demand but Stock Market charts are special - they give you a mass of incoming data that you can analyze.

Input all this data into your computer and voila! You have a photo-fit of what supply and demand looks like.

Each bar of your "bar chart" represents a snap-shot of what is going on. Bars can have different time frames ranging from a few minutes to days or even weeks. It doesn't matter, the principles of supply and demand are the same.

Each bar will be comprised of a high and a low. A closing value (or price). And the associated volume.

Four vital pieces of information. Each one telling a story and collectively, building a picture.

What you will be looking for are signs of strength (ready to rise) or signs of weakness (ready to fall) - these are the forces that drive the Stock Markets.

These signals will give you a position in the Markets. Once in, you will need to monitor your position closely. Trade using stops and be disciplined to close out any position that is not working for you. Not all your interpretations will be winners, but by using stops you will win a lot more than you lose.

Any poor trade can be seen in hindsight of exactly where you went wong - so it must have been there in the first place - you just interpreted it wrongly. Learn by that and move on.

For you to fully understand "the big picture." You have to believe (because it's true) that there is an army of professional traders out there. Traders who are in business to buy at one price and sell at a profit. Or they wouldn't stay in business, right? They can see the markets too and trade for their own accounts. You will need great concentration to make sure that their trading is not at a loss to you.

Believe that surges in volume, lack of volume, and small and large price spreads are caused by professional activity.

Do not be influenced by newspapers, radio, television, and well-meaning friends - none of them look at a chart like a professional does. But you should.

Realise also, that the markets have to have losers to keep it going. To make sure you're not one of them get to understand how the markets really work. Then you will be able to take advantage of shakeouts, buying and selling climaxes etc.

So in conclusion, it is the activity of professional taders that you must be interested in. Are they showing interest in this move or that move? Or are they showing no interest?

A couple of examples of no supply and no demand would be:

If the market is trending up but starts to have a few down bars, and lack of supply is seen on down bars with low volume, narrow price spreads closing in the middle, or high.

Result: expect the market to continue its up-trend.

If the market is trending down but starts to have a few bars up, and lack of demand is seen on up bars on low volume, closing in the middle of the price spread or low.

Result: expect the market to continue its down-trend.

Such sudden, and temporary, moves away from the true value are caused by the professionals going for stops and to encourage traders (the herd) to panic and go the wrong way, or at least cover a good position to better their accounts.

No supply and no demand is just one principle taken from Tom Williams' book: "The Undeclared Secrets That Drive The Stock Market."