Supply and demand in a nutshell by Alfonso Moreno | Page 12 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Supply and Demand Zones 57 replies

Price movement as a function of Supply and Demand 43 replies

Supply and demand zones and EW principles 1 reply

How Markets Work, in a Nutshell! 32 replies

Demand and Supply 1 reply

Attachments: Supply and demand in a nutshell by Alfonso Moreno
Exit Attachments

Supply and demand in a nutshell by Alfonso Moreno

  • #221
  • Jun 19, 2013 1:27am Jun 19, 2013 1:27am
Another clear example, on GBPUSD this time, of what would happen if you try to short a speedbump supply (continuation pattern) when demand is in control (D1 demand has been hit). A H1 speedbump supply which is diddle in the middle. Price hit the D1 demand proximal line and demand was in control.

The speedump supply would be trying to short the markets when the buyers are supposedly in control, we'd be selling after a big decline in price. That's why the level is in purply stating "too low". It would be diddle in the middle. See how the supply was absorbed and now it's formed a demand area.

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 138 KB


A new H1 demand area is being formed (not yet until it makes a higher high), but I'm waiting for price action to make a higher high and absorb that little supply zone in order to validate my long entry.

I will cancel the long idea if the upper supply is hit though.

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 133 KB
Set and Forget supply and demand trading community
  • #222
  • Jun 19, 2013 2:13am Jun 19, 2013 2:13am
That new 1H demand area in blue (1.56302) did make a higher high, and is now in the process of pulling back to that fresh level. would you buy this for a short trade? I understand that price is reacting to that D1 demand; however, in the larger time frame S/D we are higher in the curve, so would you buy it at that new little demand level?
Also, That supply area at 1.5685 is a fresh level, would you short there for 23 pip risk?
Attached Image (click to enlarge)
Click to Enlarge Name: gbpusd 14.png Size: 109 KB
  • #223
  • Jun 19, 2013 2:45am Jun 19, 2013 2:45am
Hi Derek!

Buying at the area I said "makes sense" but it's closer to D1 supply than to D1 demand zone, so not higher odds. It'd be a more aggressive buy, it's also diddle in the middle. My alert kicked off so I've cancelled my aggressive long at 1.5628. My long order is at the origin of the move up, the H1 demand level at the D1 distal line. Creating a brand new H1 demand level at the D1 demand gives me permission to go long there, strong departure and imbalance. I've drilled it to aobut 25 pips. 31 pips + wiggle room is too much for such an area.

The idea behind the long at the 11 pips demand is the H1 trendline, price is making higher highs, markets dynamics seemed to have changed since price hit the D1 demand area, and buyers are in control for now. Pulling back to the 11 pips demand would not violate the trendline with conviction, so it could be an entry. The thing is that there is no profit margin, so another reason not to take it, but these trades based on trenlines conversing with SD levels have higher odds. Watch it.

There will be news in 1 hour for the pound, related to interest rates, it could move the market either side. The 23 pips supply area has a nice departure and it's right at the WK proximal line, it could be a short opportunity as well. $index is also at D1 demand trying to react, but I guess the markets will not move much until later in the day with the FOMC and US Federal fund rate.

Quoting Sdprice
That new 1H demand area in blue (1.56302) did make a higher high, and is now in the process of pulling back to that fresh level. would you buy this for a short trade? I understand that price is reacting to that D1 demand; however, in the larger time frame S/D we are higher in the curve, so would you buy it at that new little demand level? Also, That supply area at 1.5685 is a fresh level, would you short there for 23 pip risk? {image}
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 160 KB
Set and Forget supply and demand trading community
  • #224
  • Jun 19, 2013 2:55am Jun 19, 2013 2:55am
Hi Alfonso, first of all great thread! Thanks a lot for all your contribution (indicator, videos, detailed charts etc). Your explanation is very detailed and easy to understand.

With regards to Sdprice's question, this is exactly something that bothers me all the time - What do we do when price is in between zones? So in GBPUSD's scenario, it is in weekly supply and has broken some demand zones, that gives a valid reason to short at supply. However, it has also bounced off daily demand and has now broken a supply zone, meaning we should long at demand zones.

As you can see my dilemma is that I get too many conflicting stories when I look at it from different time frames. I could even say that GBPUSD is coming off monthly demand now and so we should look for longs. How do you resolve this analysis paralysis?
  • #225
  • Jun 19, 2013 3:04am Jun 19, 2013 3:04am
Quoting panoramia
Hi Derek! Buying at the area I said "makes sense" but it's closer to D1 supply than to D1 demand zone, so not higher odds. It'd be a more aggressive buy, it's also diddle in the middle. My alert kicked off so I've cancelled my aggressive long at 1.5628. My long order is at the origin of the move up, the H1 demand level at the D1 distal line. Creating a brand new H1 demand level at the D1 demand gives me permission to go long there, strong departure and imbalance. I've drilled it to aobut 25 pips. 31 pips + wiggle room is too much for such an area....

Thanks for the input. So the demand area of 1.5596(proximal) and Distal(1.5565). I believe this level is Original. IS that demand level Original. Was this the level that you drilled down to 25 pips (31 pips + wiggle room). When you drilled this down, did you do it on the 30m. When you said, "My long order is at the origin of the move up, the H1 demand level at the D1 distal line. Creating a brand new H1 demand level at the D1 demand gives me permission to go long there, strong departure and imbalance." were you talking about H1 proximal line NOT the distal line? Also, that supply level of 1.5685 and 1.5708, what was your reasoning for not shorting there. i understand about looking to the left of it, but it is still a fresh level?
Thanks Alfonso
  • #226
  • Jun 19, 2013 3:13am Jun 19, 2013 3:13am
Planning a short on EURAUD H1 speedbump supply after the H1 trendline has been solidly broken as well as the previous demand. We're high on the curve, so selling is higher odds.

Look at how the upslope H1 trendline is now broken with conviction, my short at the top on D1 proximal line on that H1 supply didn't trigger by few pips, no price is dropping and absorbed some previous demand and forming a new trendline to the sell side. Speedbumps are continuation patterns and good at breakout spots for a retest, like this one.

Lower we have a H1 speedbump demand (purple), I'm not worried about it because it would go against the new established H1 downtrend.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 154 KB


Look where we're on the Weekly chart, supply area. It's been touched a few times (4th time now), but price action is telling us now that price might be dropping for a while.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot3.png Size: 125 KB
Set and Forget supply and demand trading community
  • #227
  • Jun 19, 2013 3:21am Jun 19, 2013 3:21am
Yes Derek, both H1 demand levels are original, the aggressive one is as well, no reaction to anything else. It's aggressive since it's diddle in the middle, but I've seen many of these levels work. I drilled the lower demand level on the M30 chart yes.

If I'm not sure about a level or I don't find a nice area to set & forget, I will wait for a brand new H1 SD level to be formed that gives me profit margin and confirm me that there are willing Supply or Demand. In the GBPUSD case, there are willing buyers on the area, otherwise price wouldn't have rallied so strong from that area, but there was not a nice are to lean on, so I waited for brand new H1 demand to be formed. That's the reason for my long entry.

Look at the chart for my reasoning.

Quoting Sdprice
{quote} Thanks for the input. So the demand area of 1.5596(proximal) and Distal(1.5565). I believe this level is Original. IS that demand level Original. Was this the level that you drilled down to 25 pips (31 pips + wiggle room). When you drilled this down, did you do it on the 30m. When you said, "My long order is at the origin of the move up, the H1 demand level at the D1 distal line. Creating a brand new H1 demand level at the D1 demand gives me permission to go long there, strong departure and imbalance." were you talking about H1 proximal...
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 163 KB
Set and Forget supply and demand trading community
  • #228
  • Edited 4:12am Jun 19, 2013 3:29am | Edited 4:12am
Myst, it's simpler than you think. We're the ones who are making it more difficult that it's. Trade what the market is telling you, not what you want to see.

- If you don't know what to do, DO NOTHING
- If you have conflicting signals, DO NOTHING

If you look at the monthly, the weekly, the D1, the H1, and M30 charts. What do you think your mind will do? It will have a shortcircuit, too much information and decisions to make based on so many charts. Add to that the fact that you are not watching just one pair but multiple, and soon you'll be needed prozac

So, do this:
1. Choose a timeframe for your curve
2. Choose a timeframe for your entries based on strict rules
3. Trade what the market is telling you to do, not what you want it to do
4. Choose 2 charts, maximum 3 charts, add some rules and STICK to them

Now the pound is making higher highs, so go long... Until where? Until you hit good supply area. We're definitely high on the curve on the pound, so selling is good at fresh levels of supply, going with the higher timeframe direction, you can swing trade based on that. BUT, if you want to do some intraday, these H1 levels of demand would be fine until you reach fresh supply.

Trade the now moment, don't look at so many charts, choose 2 charts, maximum 3 charts, and STICK to them


Quoting Myst1z
Hi Alfonso, first of all great thread! Thanks a lot for all your contribution (indicator, videos, detailed charts etc). Your explanation is very detailed and easy to understand. With regards to Sdprice's question, this is exactly something that bothers me all the time - What do we do when price is in between zones? So in GBPUSD's scenario, it is in weekly supply and has broken some demand zones, that gives a valid reason to short at supply. However, it has also bounced off daily demand and has now broken a supply zone, meaning we should long...
Set and Forget supply and demand trading community
  • #229
  • Jun 19, 2013 3:58am Jun 19, 2013 3:58am
That's great advice! Indeed I have a tendency to over analyze and confuse myself, will try to keep it simple! Thanx!
  • #230
  • Jun 19, 2013 4:56am Jun 19, 2013 4:56am
Does this statement make sense? "In an up-trend, demand zones have higher chance of being respected and in a down-trend, supply zones have higher chance of being respected"
I want more brain power!
  • #231
  • Jun 19, 2013 4:58am Jun 19, 2013 4:58am
Yes, it makes sense, it's the way it normally works.

When we are in an up-trend, demand is respected and supply violated. Opposite for a down-trend, supply is respected and demand violated... on any timeframe you use for your direction.

Quoting cfdtaleong
Does this statement make sense? "In an up-trend, demand zones have higher chance of being respected and in a down-trend, supply zones have higher chance of being respected"
Set and Forget supply and demand trading community
  • #232
  • Edited 10:19am Jun 19, 2013 5:12am | Edited 10:19am
I have analyzed GBPUSD again... We're too high in the curve, coming from a WK supply zone, selling is higher odds. On H1 supply is being respected and demand being absorbed. The big impulses are to the down side.

Buying where I wanted to buy is just too aggressive. The lower demand level at 1.5596 could be a nice long, but I prefer to look for shorts. There is a brand new supply level formed at 1.5652, I'm planning that short instead. H1 Trendline is being respected for a third time.

If I took the long I'd be breaking the higher timeframe rule, we're just too high on the WK curve. The demand level could work, because it's a brand new level of demand at the D1 proximal line. I will watch it and learn from this situation for next times.

Looking to short the gbpusd though... We'll see
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 120 KB


UPDATE:
The short was a loss, I had to try. Price was bouncing off the D1 demand, demand was stronger. We are also bouncing off WK supply, we were in the middle. Waiting for higher areas in the curve it's better when we're bouncing off a D1 demand. A loss = a lesson
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 24 KB
Set and Forget supply and demand trading community
  • #233
  • Jun 19, 2013 8:01am Jun 19, 2013 8:01am
Thankyou! Was trying to explain what I'm learning and the trading logic behind it to somebody
I want more brain power!
  • #234
  • Edited 10:18am Jun 19, 2013 9:37am | Edited 10:18am
My GBPUSD short was a loss today, but the EURAUD short I planned here this monring as well is going really well, 70 pips as of now. Stops at BE.
There is an ugly speedbump on my way, my TP is a bit lower, even though this trade would drop lower. Won't be too greedy. Take a look at the screenshots in previous posts so that you know my analysis.

I try to post the trades before they are triggered, it's easier to post the trades once they are at Breakeven or they are winners, it helps me do it like this. When I plan an order, I will post it over here (I plan many more, can't post all of them). It helps me work on my emotional side, because everybody knows what I am expecting and if I lose or win, that helps a lot. Some are losers, others are winners! That's the way it's! It's also good to talke about the losses, in fact, it's better than talking about how well one has done
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 120 KB
Set and Forget supply and demand trading community
  • #235
  • Jun 19, 2013 10:48am Jun 19, 2013 10:48am
Planning a short on EURNZD after H4 demand has been absorbed. It has created an original speedbump supply that has been the decision point to absorb all demand left in the area. Lots of free room to drop to previous demand
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 139 KB


Now the H1 Trendline is downwards, supply being respected, demand being absorbed, that's the definition for a downtrend for me.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 125 KB
Set and Forget supply and demand trading community
  • #236
  • Jun 19, 2013 11:11am Jun 19, 2013 11:11am
Planning a short trade on H4 chart for USDSEK. D1 demand was absorbed and solidly broken, lots of room to drop. H4 supply is being respected, deamnd is being absorbed. See the H4 down trendline being respected as well.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 117 KB
Click to Enlarge Name: Screenshot2.png Size: 128 KB
Set and Forget supply and demand trading community
  • #237
  • Jun 19, 2013 12:47pm Jun 19, 2013 12:47pm
Have an order to short the AUD/CAD right at the proximal line (.9719) which also happens to be a fresh Level on the 4h and the 1h charts.
1st chart is 4h
2nd chart is 1h
Let me know if anyone see's anything potentially wrong on this trade; helps to have another fresh pair of eyes
Attached Image(s) (click to enlarge)
Click to Enlarge Name: audcad 16.png Size: 70 KB
Click to Enlarge Name: audcad 1h 15.png Size: 74 KB
  • #238
  • Jun 19, 2013 1:46pm Jun 19, 2013 1:46pm
my most humble point of view, it's to much trading in the zone, level top levels, maybe, maybe... it works better the upper one.

Cheers
  • #239
  • Jun 19, 2013 2:17pm Jun 19, 2013 2:17pm
forgot about the news. This is why i never should trade news. even though my trades worked in my favor because of the dollar went long with the release of the FED's news, it could of been the opposite if news was bad. Probably not smart to trade around news that can really effect markets, actually only the type of news that can move markets.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd17.png Size: 106 KB
  • #240
  • Jun 19, 2013 2:24pm Jun 19, 2013 2:24pm
Quoting jaceves7
my most humble point of view, it's to much trading in the zone, level top levels, maybe, maybe... it works better the upper one. Cheers

thanks for the input, however, If you look at the 4h chart there is not that much trading in the level. But i am kinda leaning towards your view because the 1h does make since. The reason is because a majority of those supply orders are already filled. however, the news that just came out pushed price way down creating a new supply level right under the proximal D1 supply level. My only question is, should fresh levels that were created by news be traded. Chart below shows the new supply level proximal (.97118).????
Attached Image (click to enlarge)
Click to Enlarge Name: audcad 18.png Size: 71 KB
2 traders viewing now, 1 is registered:
juliushb