Back To Basics

Hi guys.I just want to share my basic understanding about supply and demand in economy and how i use it for Forex trading.Hope can share and learn from all of u as i learn from others.This is just beginning of price action understanding.If u want more can view RED n TRADE PRICE thread.

Back to basic
Perhaps you remember the two people whose names figure often mentioned in the discipline of economics and physical. The first was Adam Smith, the pioneer of modern economics and a pioneer of economic system of capitalism. He has stated hundreds of years ago that if supply exceeds demand at a certain price level, prices will fall, and vice versa. While the second is Sir Isaac Newton's law of motion states that an object will remain in action motion (motion) to obtain reaction force (force) is equal to or greater. More often called the Action and Reaction only. Both examples are simple but wise of all time-tested and directly was a major factor in price movements in the market that we are trading and engaging in it at this time. The focus of this paper is on what is called the conventional technical analysis as a support (demand) and resistance (supply). We will examine more in what support and resistance are, how we identify and quantification on the chart, and how to use them in making objective decisions so as to produce profitable trading.

A trader should understand that the market mechanism is no more and no with other market we know. We have seen how the law of supply demand to work with human factors involved. This is the main staple driving prices, and opportunities arise when these simple relationships become unbalanced. If only we are willing to observe the interaction of supply and demand is always there every time, should the identification process will reverse the direction the price is not too difficult.

You know i think the best thing to do is just stare at the damn thing and practice. Maybe, and i say maybe, you will be aided by an indicator, but probably not. The EAs that wall street and JP Morgan and Goldmans sachs use is not trading per se, they are frontrunners and automated countertraders, taxing positions of their and other clients.

A lot of people starting to trade think there are a simple calculation such as a RSI or whatnot and you just do what it tells yah, buy, sell, close, sell, buy close and whatnot. Soon those illusions are dispelled.

I know a few people hwo trade baskets of EAs, but i think its more efficient to just trade PA yourself and not dabble with EAs.

And i know A LOT of people hwo dabbled with EAs and lost it all, martingaling EAs and whatnot. I think the dream of EAs is the dream to just set and forget, get a shoot where wads of cash just dump into your lap. Dont get me wrong, i think there are quite simple EAs and ways to trade that work, but im saying as a general rule. And i can honestly say i dont know of a single EA i would entrust even ten bucks. If i did know a good programmer i would want to do a few things, but i am very uncertain they would work sufficiently.

That supply and demand is a very simple and nice idea. And i guess you can use it as a term and say that when supply does this and that and demand is bla bla... You gotta trade if you gonna trade. Talk you can do later and its all a explanations afterwards, its hindsight.

Im interested in seeing when people enter and when they close, thats it. I think this should be the goal of people who wants to trade. I could write 500 pages about one trade, how supply affected demand and the reverse or however people think it works and another 500 pages about the fundamentals of what happend.

I mean price is the weird fact we deal with, talking about it wont make many trades. I cant say i really understand the market, and i dont believe anyone hwo claims otherwise, there are too many variables, approaching infinity in numbers, from the shoe size of the CEOs to what weather there is in Canberra to who got assasinated by hwo and whatnot. Some people get good at guessing the market based on a small set of chosen variables that matter the most. That doesnt mean they understand it, they understand a tiny little fraction of it.

Here let me show you what i mean. These trades was some of the most kickass ones i ever made. Most days looks a lot worse then this, but this is the quality im working on, and im getting better and better for each day. Why did i take em? I have no idea. It looked nice, what kind of answer is that, i cant answer that either, doesnt make things any the more clear. Does a hockeyplayer know why his team won the game? Does a fly know why its buzzing around? Does the thunder know why it is the thunder and why its making that noise? We can try to answer but we dont "know". To know something is to "know" that the fork is on the table, that we can "know".

I WISH i knew why i took those trades so i could tell you, i bet you are a good person, but i dont, id be bullshiting you if i told you something different. And id be REALLY bullshiting you if i told you i know why they worked out like they did. Mostly i suck a lot more then that, mostly i get annoyed by something, i feel lonely, i didnt drink enough water, i didnt sleep enough, life feels pointless and boring and i havent been outside enough lately. And i get really angry about what im doing with my life and why im chasing some make believe pretend money! Then im NOT trading well, i DONT hear a slight wisper tingling feeling of when to get out, because im only human. And it sometimes it works BECAUSE i am only human.

[quote=yaed;4480035]You know i think the best thing to do is just stare at the damn thing and practice. Maybe, and i say maybe, you will be aided by an indicator, but probably not. The EAs that wall street and JP Morgan and Goldmans sachs use is not trading per se, they are frontrunners and automated countertraders, taxing positions of their and other clients.

I have not used the substance on the use of indicators, not at all. In fact, this is a form of creativity in the main limitations for retail traders. But I was reminded that these indicators are only a tool, not affected by the tool. Come the source of price and volume. I'm sure a lot of beginners are more than the price of observing the indicator itself, so often influenced or even excited at their indicators. Because the title of this post back to basic, let's try again to understand the market mechanism itself.

any comment are welcome.will continue....

[quote=budak baru;4480394] Well i think the so called "market" cannot be reduced to a description such as: "Its only psychology." Or "Its supply and demand, learn supply and demand." Or even something esoteric like "Its the flow of price action." All descriptions in this way is limited. It does not help to write one or 95 books about it, it still does not desribe it.

I think there is no point in trying to understand one or seven or 86 different market mechanisms as something separate from eachother. And for the most part its utterly pointless in trying to ascertain which individually diffrentiated mechanisms is the cause of a price change. A theory of such things must be possible to be proven false under some cirumstances, and for the most part when i hear people talk about such things, thats not possible, as Karl Popper would agree.

For my part the market is the universe, is the human, is animal, is all of us and every little bit over everything and everything that ever existed. Thats basic. I see very little logically justifiable behaviour and thinking regarding currencies, the stock market, derivates, banking in general and civilisation as it is. I am very critical of most things going on in the so called civilised world. The inventions and technical apparatus of the civilised world is great and wonderous, how its applied in civilised society today is absolute madness. The activities we calle science, philosophy, art, poetry, music and the general sense of belonging and togetherness that we humans have amongst eachother is great and wonderous. How these things are applied in civilised society today is absolute madness. The world market is a great deal of all this madness, things noone needs are being bought and sold, numbers are being shifted around in databases and people are doing the most superflous and meaningless tasks that we could make machines to do instead so we could do something smart and worthwhile like talk about physics, play instruments, make art or debate about the existence of correctional facilities and punishment in general.

The basis for the markets are to a large extent madness. Somewhere, somehow and before rather then later there where some kind of basic human needs that needed to be satisfied: Water, food, warmth, clothing, tools, animals, houses and such. Things like that is not complete and utter madness, they are pretty cool to have. I dont think we should have those things under the control of a few hwo print currency at their own whim. I think everybody can and should have those things and that there is no need to force anyone to accept anything. Thats basic.

Demand and Supply(Support And Resistance)

(Demand) is the level at which more buyers than sellers are willing to buy at a certain price level. Resistance (supply) is where the available supply more than buyers are willing to buy supplies at a certain price level. Note the chart below for the identification of what is meant by Demand and vice versa.

Areas A show at the level where there is equilibrium relative or equilibrium between Demand and supply. Every person you want to sell and buy at the price level is still within the bounds of balance, and prices were relatively stable. At the closing candle (B), the relationship of supply and Demand has shifted and is no longer balanced. Now we know that more Demand at a price level compared to the available supply. From which we know is true? The only thing that causes prices to move up as who exemplified the shift in the relationship because supply / Demand. Candle B In closing, we can also conclude that there are buyers willing-buyer who bought at the A level, but left because the price has moved up. Area A is now to what we call in the objective Demand (support) area. Label C shows the decrease in the price level back to this Demand. And here we have the opportunity of low risk high reward trade as prices return to areas that previously showed the dominance of the buyer. Later we discuss how to take advantage of this opportunity.
Then we can identify the supply (resistance) by turning the logic of the example below.

Example of Resistance/Supply.

Best thing I have heard on here in a long time.

In a previous post that I could touch the "identification of the true price level of demand (support) and supply (resistance) is probably the most complex trading decisions (complicated). In particular, where the calculation of prices may be behind the (turning point) and why the reverse direction .

How to identify the entry area of ​​low risk / high opportunity as simple as possible? we are trying to do the following simple steps:
1. Go to chart what the time frame and should be Daily or Hourly second lowest. Look at the left side of the chart, and find whether there are areas where there is a row of candle / bar, the more closely cluster. This shows a balance / equilibrium relative to the price movement seen in the distance is limited.
2. Put a horizontal line between the distance before, you should use only candle body.
3. Observe if there is a candle / bar closing his reply through this area, the higher the better of his body. Area between two lines is a reference we will use as a base (base) to the results of buy / sell if the price back in / near this area again. Laying horizontal lines just do not have 100% perfect, as your accuracy will be trained over time and trading hours. With practice and repetition to continue, you will be more easy identification. The example I present will be repeated and the repetition of the other senior trader. Examples of image S / D area below:

Selling Setup

We use a chart like the one below, where the Daily chart shows that price increases to move into the area and supply (resistance).

Simple Strategies:
1. S / D areas are identified on the daily TF (H1 minimal).
2. When candle making high (A) on the daily chart, moving to the intra-day time frame (M15 or M5) to seek opportunities for Sell / Short entry.
3. In a small TF is looking up the last candle is followed by a down candle. (picture below)
4. Entry is on the candle down, and do not have to wait for her close (picture below)
5. SL better placement on the horizontal line area S / D daily, if your typical day at the intra-hourly horizontal lines.
6. TP stationed in the area of ​​demand (support) the next, or the use of at least 2:1 reward risk ratio

What caused the reversal candle? certainly not the work of professional traders.

First offense: Action buying a beginner trader is generally done after the price moves up far enough, at high risk.

Second offense: buy at a level close to the supply area where more sellers willing to sell, as the TF is shown on the daily, which means less opportunity for success. As a trader, we are not looking for certainty, but just looking for a better probability.

Note that the closing candle (A) on the daily chart is a reversal candle to invite more traders to go short the next day.

Confirmation of reversal is usually daily-awaited by most traders to be valid, and generally they will feel comfortable short / sell at this point. This is what we want, and has shown at the candle (B) indicates that they are in full force (full force). In other words, we are part of the Invitee to go, not as an invited guest. Moreover, the entry that we did a lower risk than those who are short the next day (B). In conclusion, we use the trading action short / sell at point B to confirm that the decisions we make are true. Even if one, we exit with a small risk of loss.

Rule for intra-day trading

Intra-day traders should have a pattern of trading rules to make decisions. Because usually emotional factors can influence the results of the analysis and trade. Do not believe? attempts to use trade tick charts or 1 minute time frame, so the tension is not it? feel how your adrenaline driven per minute. Failure to control the emotional cause of the failure of trade. So by following the rules already in the set, you can manage with a good trade.

Simple rule for day traders:
1. Every day, the identification of areas of supply and demand in one area H1 time frame. Watch price position compared with the larger time frame (D1)
2. Entry is only done if the prices go / reach support (demand) or resistance (supply)
3. There are two types of entry, breakout and pullback (see picture)
4. Pre-plan: entry, stop loss and target
5. OP made ​​only if there is enough space width between the area of supply and demand areas, so the profit zone is interesting.

Only two types of entry are just what we need. The first entry on the pullback offers lower risk / high reward, although to some people it is still considered high risk. While the breakout is the most popular as an entry. But more important is the profit zone, calculate how much space to move prices after entry are made.

Nice thread budak baru
We are often overcomplicated thing, and indicators are made to make things over-complicated and the novice traders therefore love it.. Over the short course of my trading, I find that simplicity is the best.
I'll be watching the thread closely. Keeping us update Budak
Regards

If we have to identify the area S / D and place horizontal lines in the area, do we still use the area for the times to come, until the area is not valid any longer? Area of ​​supply and demand therefore, remain valid as a true support resistance, especially if the time frame is monthly, weekly, daily, the more significant. So if it is identified, use this information as current and future reference. Means we have a basis for decision making, both present and the future, if prices go back to this area. For example, if the base (base) is the area earlier this supply as prices move down from this area, then the prices in / near the area of ​​supply, ceteris paribus, of course, short / sell the first ops. What after the close / entering this area may prices continue to rise? Okay, why not? But it would require even greater demand, but remember we are never 100% accurate means there are opportunities for error. Your reply will be more clear picture of where the chart in zoom out, and always refer to the left of the chart as the first step.

theory is finished.lets trade.....

thanks duyk.sold ej at seller territory.sl is at 116 above the supply zone.My target is at 110 demand zone but will go slowly.i think will target for 2:1 reward risk first.Good luck to me.

EDIT-closed for 50 pips.very slow market.See u all next week.happy weekend.

a nice way to trade, there are also skewed S/D levels, like in triangles, flags, forks & trendlines, a trendline ( ... etc.) breakout is basically the same, you want a strong breakout and a retest for a low risk entry

Nice charts.
Hope you don't mind this, I think it falls reasonably close to what you have:

alright, lets have some charts

here the yen retest

cable entering supply area

already leaving? wouldn't want to hold it over the weekend though

Thanks guys.Waiting to reach daily supply zone for selling opportunity.