DislikedQuoting It is true that some of these supply/demand levels are created by news releases in that when the actual news is released some of these big players need/want to buy or sell a particular instrument.Ignored
Another thing worth discussing here is that how old a supply/demand zone remains valid for trading. Conventional wisdom is that as long as supply/demand levels are fresh, they are valid and effective. I understand that big banks like to set limit orders at certain price levels for liquidity purpose. Sometimes they work the market to get the price moving towards their open orders. But if the price is moving away from their unfilled limit order, are they willing to sit on their limit orders for 3 months, 6 months or even 2 years? It's really hard for me to imagine that. I believe from time to time they have to move their unfilled limit orders with the market to create next supply or demand levels. That's why those newly created RBR or DBD levels can be very effective when trading with the trend. When the price eventually comes back to those old yet fresh supply/demand levels, market trend is most likely reversed. Now those levels are for counter trend trading. As we all know counter trend trading can be very risky. Most likely it's because those old yet fresh supply/demand levels don't have any open limit orders sitting there anymore. Of course when price is way high or low in the curve (extreme levels), those counter trend trading supply/demand levels can still be very effective because those levels represent value areas and big banks are likely to put their new limit orders there instead of some 2 year-old orders.
Any opinions/comments on this topic are very welcome.