Price is everything

Hello Verbal, or should I call you Mr. Kent?

Either way, you should probably not pay any attention to what I am about to say.

I see many Supply/Demand traders here doing this and it makes absolutely no sense to me. The more experienced Supply/Demand Zone traders can feel free to chime in and let me know where I am mistaken.

First off, let's start out with what defines a Supply area or a Demand area on a price chart. What price action is the manifestation of the order imbalance we seek?

For Demand we look for:

1. Rally Base Rally
2. Drop Base Rally

For Supply we look for:

1. Drop Base Drop
2. Rally Base Drop

Okay, so here's the thing. A Supply Zone can not become a Demand zone simply because price traded through it. That is to say, ZONES CAN NOT FLIP. Our definitions state that in order to have a Demand Zone, we need to see either a Drop Base Rally or a Rally Base Rally. The act of simply trading through a Supply Zone does not satisfy either of those.

When you look at your chart the question becomes, would you have called that area a Supply Zone if it had not first "engulfed" Demand? I believe you would not have seen this area a Supply Zone in the first place. Hence, it would be in error to see it as such in this case.

Obviously, if a Demand Zone is breached to the down side and in the process we see a Drop Base Drop, then we can conclude that a new Supply Zone has been created where there once was Demand. But this is completely distinct from simply saying a Demand Zone once broken is now Supply.

Help me out here fellas, what don't I get?

@verbal

im new to this but the way i see it is that price just hit a massive demand zone/res level. you have it marked off on your chart as the orange vertical line. price rose from there, went through the supply level that you have marked within the green box, rechecked the broken supply level, then continued upwards.

People just mix up S & D zone, S & R, and WRB gaps. All are areas to look for PA signals. A demand zone that has been breached and price falls down below it, could very well act as resistance when it comes back to it, that doesn't mean it's a supply zone now, it means its an area of PA interest and something is more than likely going to change and price will move either direction but not stick around. That 5m chart had the classic rising 3 methods (candlestick patterns DO help and work, if they are at areas of key interest) with WRB as result and then a clear test for supply and confirmation, all after the upthrust like candle. You just have to pay attention to the PA when price enters any of said areas, and if you can't read PA, there is no real point to paying attention to any of these zones.
Edit: I like this thread. You all are very ambitious trying to read PA without volume, I'd never be able to!

I've never known this to happen actually. It's not really possible for volume to disagree with PA imo, is there any examples someone has to show this? Volume is just telling one how much activity was in a specific interval, and the results of any said interval will help you deduce what kind of activity was involved, supply or demand. Maybe I'm taking this statement out of context.
When it comes to tick volume vs. actual traded volume, there is no real debate, it works. It may be a bit more ambiguous but it works. A aggregate feed like Esignals or realtimedata can help overcome relying on one specific brokers tick feed, or if there is a futures contract for the item (and it's liquid enough), just use that volume data.

[quote=HiddenGap;8267449]{quote} Hello Verbal, or should I call you Mr. Kent? Either way, you should probably not pay any attention to what I am about to say. I see many Supply/Demand traders here doing this and it makes absolutely no sense to me. The more experienced Supply/Demand Zone traders can feel free to chime in and let me know where I am mistaken. First off, let's start out with what defines a Supply area or a Demand area on a price chart. What price action is the manifestation of the order imbalance we seek? For Demand we look for: 1. Rally Base Rally 2. Drop Base Rally For Supply we look for: 1. Drop Base Drop 2. Rally Base Drop Okay, so here's the thing. A Supply Zone can not become a Demand zone simply because price traded through it. That is to say, ZONES CAN NOT FLIP. Our definitions state that in order to have a Demand Zone, we need to see either a Drop Base Rally or a Rally Base Rally. The act of simply trading through a Supply Zone does not satisfy either of those. When you look at your chart the question becomes, would you have called that area a Supply Zone if it had not first "engulfed" Demand? I believe you would not have seen this area a Supply Zone in the first place. Hence, it would be in error to see it as such in this case. Obviously, if a Demand Zone is breached to the down side and in the process we see a Drop Base Drop, then we can conclude that a new Supply Zone has been created where there once was Demand. But this is completely distinct from simply saying a Demand Zone once broken is now Supply. Help me out here fellas, what don't I get?[/quote

Since I am very much a price centric traders, I would like to challenge my own trading thought by adding that as to the best of my knowledge in Currency Trading, besides the world reserve currencies Supply and Demand of a certain said currency is strictly and only managed/regulated by all the individual respective Central Bank or National Monetary Board/Agency. Would like to hear from anybody here who disagree and help me to debunk my own belief.....TQ

GS>

I'll add to this another idea. With some zones, I'm not looking for a reversal pattern ever (above the zone yes, but not on or in (unless such a zone that was demand has proven to become resistance)), like a WRB gap area (I'm looking for volume based continuation trades), and some zones like S&R, I'm not looking for anything but a reversal pattern. S&D zones are sometimes in the middle (or neither, if I touch trade anything it would be big S&D zones) and WRB candle zones, gap or the whole range, sometimes fall into both camps, it depends on background. This may make no sense, considering its a tiny paragraph and I have pages written on this. I'll post a few charts to show what I mean if anyone's interested.

[quote Since I am very much a price centric traders, I would like to challenge my own trading thought by adding that as to the best of my knowledge in Currency Trading, besides the world reserve currencies Supply and Demand of a certain said currency is strictly and only managed/regulated by all the individual respective Central Bank or National Monetary Board/Agency. Would like to hear from anybody here who disagree and help me to debunk my own belief.....TQ GS>[/quote]

There is always supply and demand governing all price fluctuations in every security. If a giant mutual fund decided to take a position on the EUR/USD or even on some foreign stock, thereby affecting whatever currency they will have to deal with, they would be very much making the S&D of the EUR/USD fluctuate, with no Central Bank involvement etc. Maybe I'm missing your point completely, but there is innumerable ways in which the S&D of a currency fluctuates, including CB involvement. Take Soros and the Black Friday incident as an example of both happening at the same time.

"Obviously, if a Demand Zone is breached to the down side and in the process we see a Drop Base Drop, then we can conclude that a new Supply Zone has been created where there once was Demand. But this is completely distinct from simply saying a Demand Zone once broken is now Supply."

Certainly a fair degree of analysis needs to occur to accept "broken demand" as "potential supply". I certainly need to see evidence that supply has been created. The character of PA that breaches the demand area is absolutely crucial.

Having said that I will say the crux of my own trading absolutely relies on this concept.

1. Price enters HTF zone, let's say a demand zone.

2. As it approaches this HTF demand zone one will often observe smaller supply zones being created. These can manifest as LHs and LLs.

3. Once in the demand zone I must see new smaller demand created to prove to me that PA has the potential to move out of the demand zone. This new demand zone within the HTF demand is an area I will consider to trade upon price returning However to have even more confidence....see 4.

4. Once it creates new demand and makes a move north it will encounter the smaller supply zones I spoke of above in 2. When price breaches a supply zone then I WILL consider as an are of demand as the mere fact that the supply was overcome suggests buyers are now controlling.

5. So now we have 2 potential areas from which to consider buying a. The new demand within the HTF demand and the new demand created by the mere breach of supply as price moved down towards the HTF demand.

How do you determine the trend if you're only drawing s/r zones? Are you guys trading multiple time frames or just trading from one chart?

Seeing I have a bit of experience please let me say a few words. In supply demand trading the tend is the difference between a supply and demand zone. The problem many people get into is buying after a move away from a demand or supply zone or support/resistance zone into the next supply demand zone. This is why when you go long sometime it will reverse on you right away after a run in price. For supply demand traders they/we look for the extremes of price and how to exploit these PRICE points by analyzing pa near these areas. Sometimes people can spot these zones in advance after many hours trading and watching different levels on different vehicles. More could be said but I am away from keyboard.

Am I missing something?

I am not quite a story teller as Roger Kint

Would you treat it differently if the HTF demand was breached initially?

Yes. If my plan was to buy after price touched or entered a HTF demand zone but price "engulfs" or breaches the HTF demand zone then my plan changes.

Did you have any SL on this one? I see after execution the price goes down and engulfs the LTF supply zone which I thought would be the SL (+ 3 pips?).

Would you get in where it's marked? Yes/No and why? It would interesting to know your SL and TP.

Hey Verbal,

Check out my thread "PIE chat room -rebooted". I hope to answer some of your recent questions. Thanks.

Looks like this is what BIGWAL was trying to say for all those months, posts, and charts. http://www.latimes.com/business/la-f...520-story.html