Trade with Logic: Supply & Demand Zone Trading

Starting up my old thread and will post my trades again for accountability. Been awhile, life got busy but it would be nice to share again.

I'll be making some updates to the zones and adding a few other smart money levels to bring this system up to date with my current knowledge and style.

1. Here's my original 2011 post if you're curious.

2023 Version of Supply & Demand Zone Trading

My Logic for Entering Trades with Supply & Demand Zones

1. Switch to Weekly and Mark off Supply/Demand Zones.
   1. These Supply/Demand Zones include but are not limited to Value Lines, Fair Value Gaps, Pivots, Previous Highs/Lows, Round Numbers, Order Blocks, etc.
   2. These are zones or areas where Smart Money Sells at a Premium, Buys at Value OR Establishes Value (Value Line).

2. Switch to Daily, what is the slope of the 200 SMA, determines whether you will be a buyer or seller. Look for lower highs or higher lows to give a bias.
   1. You can use whatever indicator you feel gives you a good feel for current trend. Don't over complicate this one.
   2. The important thing is to know where the Value Line in relation to current price.
   3. Short:
      Price Above Value
      Bearish Bias (Lower Highs)
      Sell At A Premium
   4. Long:
      Price Below Value
      Bullish Bias (Higher Lows)
      Buy At A Bargain

3. Switch to your entry time-frame of choice, I will use the 5m chart for entries.
   1. I now use 5m chart for getting better entries but if I don't have time then H1 is where I default.

4. If you are going long on your chosen Entry Time-frame into a weekly supply zone then that is a no trade.
   1. You want to Sell at a Premium here and wait for a sniper opportunity which will give you very little risk and great reward.

5. If you are going short on your chosen Entry Time-frame into a weekly demand zone then that is a no trade.
   1. You want to Buy at Value and wait for a sniper opportunity which will give you very little risk and great reward.

6. If you are clear and nothing is in the way then enter a limit order on your chosen Entry Time-frame for the zone.
   1. If I'm trading the 5m chart, I generally use a market order as setting limits feels cumbersome and takes too much time.
   2. If I'm trading H1, a limit is totally fine.

7. Make sure you have at least 3:1 reward to risk ratio available.
8. Target 2/3 of the move between the next Supply/Demand Zone from you entry.

My Supply Demand Zone Chart

1. 200 SMA + Manual Drawn Trendlines
   1. Only used for visual indication of current market structure and to set your Trading Bias (direction of trade you are looking for).
   2. Higher Highs and Higher Lows = Bullish Bias.
   3. Lower Lows + Lower Highs = Bearish Bias.
   4. Pay attention to trendline breaks and look for Order Blocks and Value Lines to be established.

   
   

2. Supply Demand Indicators (TradingView)
   1. FOREX MASTER PATTERN Value Lines by nnam
      This indicator looks for a sustained contraction in price initially indicated by TWO contraction bars in a row, thus detecting a contraction point and a potential new master pattern origin point. This point is the value line.
      1. If overextended above or below, the more supply or demand drive prices back towards the direction of the mean. Mean reversion back to the Value Line.
      2. When price rallies and becomes overextended, Smart Money comes in and Sells at a Premium back and below the mean. Mean reversion back to the Value Line.
      3. When price declines and becomes overextended, Smart Money comes in and Buy at Value back and above the mean. Mean reversion back to the Value Line.

   2. MTF S&D - Orderblock by @JP7FX
      Would love to get an open source version but this will draw Order Blocks.
   3. Pivots HL
      Shows the previous swing high and lows. Important levels. Helps determine areas where bounces, reversals and trend confirmations can happen.

   
   

3. Caveats
   1. Use this only for identifying possible zones where logically buyers or sellers will be waiting.
   2. Although it will mark the levels, you still need to go through the logic process to qualify a trade but it does help point areas out that you may not have considered.
   3. I don't own these indicators, they are freely available on TradingView.

   
   

My Thoughts On Lower Time-frames

1. My entry time-frame of choice is M5 (when I have time during the day) & H1 (when I don't have time during the day).
2. To filter out false trades, don't chase the zones on the lower time-frames, use the H1 & Daily zones.
3. If going below H1, then view it as a way to get a more precision entry.
4. Set your limit order or market order when price is at the peak of enthusiasm or panic and move back to H1 for setting targets.
5. Most importantly stay in H1 while waiting for the trade to keep psychologically in context of the logic that was used to validate the trade.
6. Keep context of the daily trend and where you are in reference to the weekly supply and demand zones.

As time and opportunity allow, I will place my trades and thoughts here.

Trade with logic.

Post #2 reserved for concepts.

Value Line (Efficient Markets and Origin of Trends)


Fair Value Gaps (Market Structure)



Order Blocks (Banks & Big Players)



Smart Money
Pivots HHLL
OHLC Pivots
Psychological Numbers

GBPUSD
D1 Bias: Bullish (Higher Lows)
H4 Bias: Bearish (Lower Highs)

1. You can see that a bearish correction here will allow us to get long on the daily bullish trend.

H1 Bias: Bearish (Lower Highs + Lower Lows)

1. Again a bearish correction here allows us to Buy At A Bargain.

Now we just have to wait for price, of course you can set a limit order but it's Friday here in Asia so I'll just watch price when I have time and set an alert.

Trade Setup 01
Here's the setup I want.

GBPUSD Long When I can Buy At A Bargain.
Targets Order Blocks and Value Lines Above.
SL: Swing Low under Order Block.

Update #1
Accumulated a Long. 27:1 RR


Update #2
Smart Money accumulating and absorbing supply at great prices.

Update #3
Stopped out. Still looking to buy but not in this dead zone. Will wait til we get to the order block below but then again I might call it a day.

This reminds me of redsword11

welcome back dear

Noted