Supply and demand in a nutshell by Alfonso Moreno

Hello Lakis
I hope the pictorial below helps make things clearer for you

best wishes

Just saying 'Hi' to all on the thread and thanks to Alfonso for starting it... took me over 4 days to get through page 1 and now moving slowly through the pages... should get to the end by end of year

Cheers,

Rob

http://www.forexfactory.com/attachme...1&d=1454068113

This is the AUDJPY not the AUDUSD conom

The most recent analysis was for AUDUSD.

Not to worry. For this chart, If i recall, i took a number 2 entry in this trade, meaning, i entered inside the zone so as to minimize my risk. A number 2 entry allows me to enter at a price closer to my stop so position size can be bigger since position size is a function of the stop. I think I entered one position at the proximal line on the daily and the second position on the 4hr when I drilled the zone down. U will see in the post on the chart that it is an "average entry" of 85.617
Entering using the number 2 entry also allowed me to have a 2.5:1 R:R

I hope this helps

best wishes

And I didn't write that it is AUDUSD too, AKT )))

my mistake

Hello everyone.
Another lengthy post I am afraid.
Please forgive me.

I hope it helps someone
Comments and contradictory views more than welcome. It is good for open discussion

Best wishes

A DISCUSSION ABOUT TRENDS

I would like to address this age old discussion and issues around the idea of the Trend. My view is from my time as a trader and my experience with trading or trying to trade trends. It is just my view, nothing else.

It is a topic that divides most traders.

There are countless ways traders define trend – moving averages, ADX, price action, etc.

For us as SAD traders, we use the inter-relationship between supply and demand zones to define trends.

Supply zones being created and respected = Downtrend
Demand zones being created and respected = Uptrend

A definition of trend that has totally changed how I look at them is this:
Trends are only the movement of price between higher timeframe supply and demand levels.

If price is moving from higher timeframe supply to higher timeframe demand we are in a downtrend.
If price is moving from higher timeframe demand to higher timeframe supply then we are in an uptrend.

By this definition, once I have identified the Curve SZ and the curve DZ I simply go to the second chart, the trend chart, to determine the trend on that chart (please note that it is not the curve timeframe chart that I determine the trend on, it is the middle chart of my sequence of 3, the intermediate chart (more on this later).

By its very definition, a trend is something that has already happened. It is only recognised after the fact.

Now, what causes the most confusion is deciding on a trade direction once the trend direction is determined. We have all heard the age-old trading phrase, “The trend is your friend” and others like “Don’t fight the trend”, “Don’t try to catch a falling knife” etc.

Well, to start with, Ed Seykota, the legendary trader made a little addition to the phrase “the trend is your friend”. He said, “The trend is your friend, UNTIL THE BEND AT THE END”.

To add to Ed Seykota’s point, another legendary and extremely wealthy trader, Paul Tudor Jones said the following about trends in general, “I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms”.

Allow me to use the Newton’s fundamental laws of motion to explain trends and what happens to them. These laws are easily found on Google. I just picked the first link on a google search

Newton’s first law of motion:
Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.

Newton’s first law of motion adapted to Trends:
Every Trend in a state of uniform motion tends to remain in that state of motion until an external force (An opposing larger timeframe zone) is applied to it.

The reason a lot of traders say trade in the direction of the trend is because trends do obey this first law – a trend will continue in its current direction hence the view that the trend is a friend.
A trend will continue in its current direction UNTIL “the bend at the end” comes when this trend reaches an opposing LARGER timeframe zone, for example, a downtrend on a weekly chart reaching a monthly demand zone; or a daily uptrend reaching a weekly supply zone.

So it is for this reason that it is critical that we know where we are on the CURVE before we go ahead to follow any trend and not just follow the trend blindly.

In the supply demand methodology it is at this point that the concept of “Zone in control” comes in.

If price is at an extreme i.e. at either curve timeframe supply or curve timeframe demand then that zone is said to be in control (if at curve supply zone then that zone is in control; if at curve timeframe demand then demand is in control)

Newton’s second law of motion:
The relationship between an object's mass m, its acceleration a, and the applied force F is F = ma

Newton’s second law of motion adapted to Trends:
The force needed to stop and change a trend must be larger than the force available on the timeframe the trend is identified on. That force by definition can only come from a higher timeframe

To stop an uptrend, you need a “mass” of sellers and for there to be no more buyers (a loss of buying momentum).
We can only find enough of a mass of sellers on a timeframe higher than the one we are looking at the trend on
We assess momentum or acceleration using trend lines as taught by Alfonso
The combination of finding enough of a mass of sellers (arriving at the larger timeframe supply zone), the lack of more buyers and the loss of momentum shown by a trend line break tells us that the trend is no longer up and may soon become down.

Newton’s third law of motion:

For every action there is an equal and opposite reaction.

Newton’s third law of motion adapted to trends: This is how sideways markets are born
For every wave of buying that there is an equal and opposite wave of selling for, we will have no overall movement, resulting in a sideways market

Welcome to the thread Rob, glad to have you over here. Hope it won't take you that long to go through all the posts, but if it takes you that much it will be fine. Have a great weekend!

Cheers,
Alfonso

Very helpful pic on audusd weekly chart on how supply and demand imbalances have been taken out and how a new uptrend develops.
Cheers,
Alfonso

Very well said and clear! I liked it much, thanks a lot for sharing your views on the trend. It's funny because I've used Newtom, Thermodynamics and Quantum mechanics to define trend in the community in a similar way you've described. Glad to read your point of view, which is very logical and common sense.

Have a great weekend!
Cheers,
Alfonso

Well done on that EURGBP Daily supply short, many took that one in the community. It had a lot of confluences, price is bouncing off of a fresh 3 months supply zone and 3 months is in a downtrend. If you can find a 3 months chart and post it, you will see what I mean.

Cheers,
Alfonso

Thank you Alfonso. Much appreciated

Here is the picture

Hi, guys!

I dont want to disturb the conversation, but many times i hear the 2 to 1 zone, but didnt found it on the first page. Can someone exlain me the 2:1 rule? Or just point me where i can found it?

Regards
Andras B.

Hello projectaha.
if i may please,


best wishes

Hello everyone.
My thoughts on gold
looking at bigger picture position trade

best wishes

Thank you! I read about it, just dont realized, what i red!

Thanks for your analysis on Gold, great analysis my friend. Quick question, can you please contact me in private through set and forget's contact form at http://www.set-and-forget.com/contact-us ? I need to ask you something.

Looking forward to hearing from you.
Have a great weekend,
Alfonso

Thank you Alfonso. Much appreciated
I have sent a contact

Hello Alfonso!
It's very difficult for me to find flip zones. Am I right with this USDJPY MN flip zone or not?
Thanks in advance!

Does Alfonso trade flip zones?