SUPPLY AND DEMAND TRADING CONCEPT FROM RETAIL TRADERS` PERSPECTIVE:
Retail traders define or understand S&D as observable zones or areas on a forex chart, where price has approached several times previously. The main issue is S&D based on retail trading is based on zones or an area, not a specific price level while institutional trading defines S&D as a specific price level to either sell(supply) or buy(demand).
ELEMENTS TO A TRADE SETUP WITH SUPPLY AND DEMAND:
1.Identify the trend [down/up trend]2.In an uptrend look for demand zones only3.In a downtrend look for supply zones only4.Look for price imbalance5. Note how price approach and how price reacts when it reaches your supply or demand zone
1.Identify the trend[up trend or down trend]
The main reason is that in an uptrend price will take out previous highs, therefore, it’s more reliable to look for demand instead of supply levels. in a downtrend look for supply levels as the price will be taking out previous lows.
2.IN UPTREND LOOK FOR DEMAND ZONES BECAUSE
the market seeks liquidity on previous highs based on order flow taking out previous high. This mean in an uptrend the market takes out previous highs and in doing so this mean supply levels will fail therefore avoid looking for supply levels in an uptrend instead look for demand levels
3.INADOWNTREND LOOK FOR SUPPLY ZONES
because the price will seek liquidity on previous lows based on order flow taking out previous lows. This means in a downtrend price most likely take out the previous low therefore avoid looking for demand levels instead go for supply levels. This will assist you to reduce unnecessary loss.
4.PRICE IMBALANCE IS AN AREA WHERE THERES LESS TRADING ACTIVITY IT CAN BE USED WITH YOUR SUPPLY AND DEMAND
sharp runs or an area where there`s less trading activity price just form this long candles ,these our price imbalance area we expect price to trade to that level latter than change direction after balancing everything .our main goal is to look for anything that price will use as a point of reference to change direction after filling the gap
4.Note how to price approach and how price reacts when it reaches your supply or demand zone:
Price should move away quickly instead of consolidating because the supply and demand concept is simply looking for potential areas where institutional traders have left their pending orders, so when the price gets to our supply or demand zones we expect to see institutional sponsorship by observing price quickly approaching and move away from your supply and demand zone. If price consolidates close the trade because it’s a clear indication that smart money or institutional traders are not behind your trading idea therefore price might violate your supply or demand.
This is one of the reasons why most of our entries are zero float entries refer to this video about institutional trading that was taken from our private session with one of our students.