Trading Institutional Order Flow

USDMXN shorts looking good!

Aussie update. Moved stop loss higher and still looking to get out higher up in the curb.

Yen Long.

Good morning everyone

I hope you are all well and keeping you and your families safe the best you can in these desperate times.

I was recently asked by a friend of mine about the traders that have influenced me over the years, specifically, things I have read and studied in my journey in trading that I have found useful.

Following that conversation, I got to thinking more about it and decided that given the time many now have, staying at home in Lockdown, I would try to distil down in writing something I have for a long time subconsciously looked at for many years, whenever I do my analysis. I incorporate it into my multi-timeframe analysis as second nature for me now, as I have done it for so long and with so many charts, so many markets.

So, I would like to talk to you a little bit about an aspect of chart analysis that I think of as the “position” of the market. What I am referring to is a concept that has been given different names by different traders over the years, going as far back as the 1800s.
It has been called phase analysis, stage analysis, market structure, etc. It is a view of the market that I would encourage traders to consider in addition to any other analysis you may use. You know I use supply and demand but it doesn’t have to be that type of analysis although it is clear to me that stage/phase analysis is based on the concepts of supply and demand.

The concept of stage analysis is based on the assumption that the markets moves in waves/cycles.
Traders like Richard D Wyckoff, Stan Weinstein, Charles Dow and more recently, Brian Shannon have done a lot of work on these phases over the years and just in case you have not read any of their work, I would urge you to. See if any of it resonates with what you know and do already and find any parts that may be worth looking at for your trading.

To a brief description of the stages:
The 4 stages are primarily identified usually although some traders historically identified just three. The stages are given names or numbers depending on the research you look at. The trader can decide for himself/herself what nomenclature he/she wishes to use.
Accummulation (a sideways range following a big picture drop in prices)– Mark up(known in modern times as an uptrend) – Distribution(a sideways volatile range following a big picture rise in prices) – Mark down (known in modern times as a downtrend)

The supply-demand dynamics in each stage:

When demand exceeds supply the market structure of higher highs and higher lows shows up on the chart and prices go up.
When supply exceeds demand, the market structure of lower highs and lower lows appears on the charts and prices decline.
When supply approximates demand prices move sideways and are broadly flat, with little or no direction to be discerned.
Traders can use price action alone, swing chart analysis, moving averages or a combination of these to filter price action which of all indicators can at times be the most challenging to read especially when just starting out.

A useful rule for example could be that the supply and demand trader will only trade supply zones when prices are below a declining moving average or only buy when prices are above a rising moving average.

What moving average that is used for example is the trader’s choice and that choice should be guided by the length of trend the trader wishes to catch, how aggressive a personality the trader has, etc. In general terms, anything from an 18 period average to a 50 period average should suffice. Note that the smaller the average the move volatile it will be, except in strong momentum moves

What such a rule as the one above will do/does is keep the trader out of some trades that would be against the prevailing trend for the sequence the trader uses. Bear in mind such a rule applies to the big picture timeframe mainly.

I hope this helps get the little grey cells in the brains of traders tingling and results in action, doing the work of researching and practising in the time most are spending in their homes/working from home etc.

Stay sane and safe in the lockdown in your various countries…

Best wishes

Thank you for this information, Akt.
Stay safe.

D.B

How do you trade supply and demand zones? What are your rules for entering?

Quoting Sami1990

Disliked

How do you trade supply and demand zones? What are your rules for entering?

Ignored

Good day Sami,

Assuming you know how to identify and draw these S/D zones already, the zones can be traded two different ways:

 

1. Set and Forget trades - This trade is carried out by placing a limit order at the respective zone you expect price to react to and then leaving it to play out. Hence you set the trade and forget about it.
2. Confirmation trades - On the other hand, confirmation trades are performed by, firstly, waiting for price to reach the desired zone; secondly, waiting for visible "confirmation" which indicates price will go in the opposite direction, and then entering the trade either as a Market Execution order or by placing a Sell/Buy Limit.

Types of confirmation you can look for are breaks of trendlines/momentum lines, the removal of opposing zones (and creation of new zones), and price action as well (if you trade time frames lower than the 1hr.) In general, for confirmation, you are looking for signs that the market is losing momentum and getting ready to change direction.

Rules for entering trades are dependent on each individual trader but some general rules are:

1. Only trade valid zones which have achieved something. (Removal of a momentum line or an opposing zone)
2. The trade setup must align with the trend. (Counter-trend trades are fine but one must understand it is riskier)
3. Do not take short positions near higher timeframe Demand Zones and do not take long positions near higher timeframe Supply Zones.
4. Only trade zones which are fresh or which have not been retested more than twice.
5. Ensure the trade setup has a favorable Risk to Reward (RR). This is dependent on your Risk Management plan. A good risk to reward is also trader dependent but a RR of 2:1 and higher are safe with 3:1 being an overall good RR for trades in general (3:1 being a better RR is my opinion though, risk management is a detailed topic and each trader has a different "appetite" for risk)

This is some general information, hope it helps.

Anyone else, please feel free to correct me or add more.

D.B

Hi All. I got a quick question about the Multiple Time Frame analysis using Supply and Demand. I am getting a little confused with the time frame combinations.

I read the articles written by Alfonso Moreno where he says that to day trade you need to look at the Daily Curve, then 4 hour needs to be aligned with the daily, 1 hour with the 4 hour chart and then you can take scalps on the 15 minute if all is in the correct order. Following the rules: if 15 minute is out of alignment you need to jump on the 1 hour chart as that's the last chart in the sequence that is in line with the 4 hour and daily and so on. The trendline need to be respected in all the scenarios.

On the other hand I see people trading only 4 or 1 hour charts for example. They are looking at the trend on the 4 hour chart (they are not looking at the daily curve) then they take trades from the 30m or 15m once the price hits the 4 hour zone. Same applies to 1 hour, they look at the trend on that time frame and then they take the trade of the 1 hour SD levels using 5 or 1m candles.

What is the correct way of looking at it?

Do you always look at the Daily curve even when trading the hourly or you can trade the hourly as a standalone timeframe?

Thanks in advance.

i trade the 4hr tf these days as set and forget after confirmation.
i look at monthly weekly and daily charts to find my setups and use 1hr for trailing stops or entries some times

when i was scalping the 5m although it was much more profitable it was also very exhausting what i cared about was 4hr and 1hr tf's mainly 4r. for quick scalps of 1.5rr i used the 30m charts

best intra-day trades for me have been on a 15m zomed out timeframe

for example this is my gu short http://prntscr.com/s3eg39 on 15m zoomed out. my overall bias was sort so i sorted it as an intraday, took partial trade out at the bottom of the range and left the other part running as a swing trade

you alwys need to have a bias in any case for the daily and trade to its direction (safety first)

Thank you for clearing things up..I will try to post some of my trades and please correct me if I have done something wrong with order..I accept any correction and criticism

These are screenshots of my order. Did I marked the right zone and place the right order?

Hello AKT,

Thanks for this thread, it has really been helpful to me these past few weeks in my trading. Though I'm still trading Demo, I really have been seeing some interesting things on how Institutions move the market. Also your videos have been really insightful.
I hope to learn a lot. Thanks again.

If you price goes back up some more, you got in at a good price, but keep in mind the 4 hour is in downtrend. Someone else want to chip in , im all ears as well.

Aussie short From 5 min supply formed at 1 hour supply.

I see you use very LTFs
What is your curve TF?
On which TF you asses the trend?
Cheers

Thank You for your reply. Am I right in saying that if I want to scalp (not holding the trades for longer than a day) I can look at the 4 Hour chart to see the trend and SD levels (I will only mark the daily levels so I am not trading against it), after I see a good trend I will trade fresh 4HR zones (with th trend). If the 4 HR zone is already playing out I can look for the zones on the hourly and enter i.e. on the 5m (confirmation) within the hourly is that correct?

Scenario 2, if I would like to trade from the 1H zones, I will look for the pairs with a nice trend, after I found one I will mark 4 hour levels to make sure that I am not trading right into them. I will go back to my hourly and mark the levels, then I can wait for the price to either hit one of the hourly zones and trade from those levels. If the 1 hour zone is already playing out I can look at the 15m levels to jump on the trend after it hit the hourly.

Am I saying this correctly? I want to have 2 timeframes that I can use for trading as I don't want to have 5 timeframes that I am looking at every day for every pair. It will just confuse me. Thanks

I use 4hr and 1 hour for direction towards the next daily zones, and the 5 min and 15 for entries.

Hey Sami,

Your zone looks good to me.
How did you determine your stop loss placement though?
Also, the profit margin on that trade does not look be the best as price will have to remove a lot of oppozing zones (to the left) in order to hit your TP and you never know what may happen.

Just my 2 cents,

D.B

I agree with your thoughts on that also, and to add, the zone the trade is being taken from is a fresh zone but it didn't accomplish anything (removal of a trend line or an opposing zone. Looks to me that the zone a bit lower and to the left may be stronger.

Will see how this plays out.

D.B

buddy you just got very lucky. 4hr is indeed in a downtrend and it just so happened for you to get a spike on sl hunt

those kind of spikes are really common on aussie these days but i wouldnt trade to catch them, i do trade them to the opposite direction sometimes if it so happenes to be online at the time. your zones were indeed correct the bias was wrong.