Supply and demand in a nutshell by Alfonso Moreno | Page 9 | 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

  • #161
  • Jun 13, 2013 2:09pm Jun 13, 2013 2:09pm
Has price revisited the area since it dropped? NO, it didn't. So it's fresh. that simple
On counter trend (it would be counter when price reaches that area, we want to lean only on FRESH and ORIGINAL levels, as the video explains. This one matches both definitions

You always need to look RIGHT above current price for supply to assess if a level is fresh or not.

Is it fresh? YES, IT'S, ever since the level was formed, price has not reveisited it. Lot of profit margin potentially on that short trade, but far from current price. There will be long opportunities on the way up.

That H4 supply level looks like being at the WK proximal line, it's fresh and authentic. I'll place an order at it, will see if I have it on my charts or not. Price will probably react from the D1 supply lower, but there are 3 levels on top of levels there, will wait from price to hit the area and form brand new supply areas on lower timeframes, since I can't lean on such a big zone. My MT is off now, it's sleeping and incubating some pips hopefully

It's a pity that the H4 demand was 49 pips wide, too much risk for me so I was not in. It's working fine! Next one!

Alfonso


Quoting Sdprice
IS this supply level fresh. it made a new high; broke higher than the supply level before it, so would this be considered fresh if it breaks supply level to the left and before it. Thanks {image}
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 375 KB
Set and Forget supply and demand trading community
  • #162
  • Jun 13, 2013 4:16pm Jun 13, 2013 4:16pm
Quoting panoramia
Has price revisited the area since it dropped? NO, it didn't. So it's fresh. that simple On counter trend (it would be counter when price reaches that area, we want to lean only on FRESH and ORIGINAL levels, as the video explains. This one matches both definitions You always need to look RIGHT above current price for supply to assess if a level is fresh or not. Is it fresh? YES, IT'S, ever since the level was formed, price has not reveisited it. Lot of profit margin potentially on that short trade, but far from current price. There will be long...

Okay i see, however, when a speedbump is retraced back into supply it is no longer fresh. As you can see where i placed my supply level THERE is a level before that that was formed which i marked in purple. is my new supply level fresh and orginal because it made a higher high and rallied strong out of that level. In other words, the level before it does not really matter because my new supply level broke that previous purple level?
Thanks
Attached Image (click to enlarge)
Click to Enlarge Name: nzdusd 7.png Size: 71 KB
  • #163
  • Jun 13, 2013 4:40pm Jun 13, 2013 4:40pm
You sais "Level in purple was violated by demand", that's not correct. That level was violated by price action making a higher high, it was supply that was violated.

Price made a higher high and removed previous supply from that speedbump. Then price based and dropped creating a brand new supply.

Draw a horizontal line from the highest price of the new basing formed, is it a reaction to a previous supply? No, it's not. Supply is further up at 0.8515ish. The level circled in purple has been absorbed already, it's no longer valid. Up and left for new supply, is there any? No, it's higher, a bit higher, but higher.

Hope that's clear, it's always the same, over and over and over! We need to be consistent and robotic at the way of looking at the markets. A robot or EA would not doubt about it, why? Because previous speedbump supply would no longer be there for it, so it's for me.

Alfonso

Quoting Sdprice
{quote} Okay i see, however, when a speedbump is retraced back into supply it is no longer fresh. As you can see where i placed my supply level THERE is a level before that that was formed which i marked in purple. is my new supply level fresh and orginal because it made a higher high and rallied strong out of that level. In other words, the level before it does not really matter because my new supply level broke that previous purple level? Thanks {image}
Set and Forget supply and demand trading community
  • #164
  • Jun 13, 2013 10:13pm Jun 13, 2013 10:13pm
Which chart label are fresh (yellow label)
Attached Image(s) (click to enlarge)
Click to Enlarge Name: eurjpyh4.png2.png Size: 50 KB
Click to Enlarge Name: eurjpyh4.png1.png Size: 50 KB
  • #165
  • Jun 13, 2013 11:32pm Jun 13, 2013 11:32pm
The lower yellow level is fresh, the upper one is not. Price had already pulled back to the upper one!

Quoting ochinkumar
Which chart label are fresh (yellow label) {image} {image}
Set and Forget supply and demand trading community
  • #166
  • Jun 13, 2013 11:58pm Jun 13, 2013 11:58pm
This EURCAD long at a H1 demand level right above the D1 demand area is a clear example of why Breakevens need to be bigger, 2:1 your risk or much more. If the level is good, it should hold it.

My Breakeven was 30 pips, mistake, I always have 2:1. Price retested my entry level and rallied to my TP.

I got a breakeven, but I would have got a nice 100 pips runner.

The H4 chart looked like that, we were with the trend, that's why I took, respecting trendlines as well. There was a fresh H4 demand level right below but that would be breaking market dynamics breaking the trend. the upper H4 level was fresh as well. So I drilled it down to H1 demand entry and it worked, but BE unluckily.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 121 KB
Click to Enlarge Name: Screenshot2.png Size: 142 KB
Set and Forget supply and demand trading community
  • #167
  • Jun 14, 2013 12:14am Jun 14, 2013 12:14am
This USDJPY H4 speedbump is a clear example of why speedbumps (continuation pattern) should not be taken counter trend, formation is good but USDJPY was in a downtrend when it got there. Buying on a buy continuation pattern is not a good idea in a down trend, not higher odds. Valleys and peaks (swings) are best in this scenario.

I drilled the H4 supply level because it was too wide. Planned that entry because it was at the D1 supply zone, otherwise I wouldn't because WK demand is too close. Missed my entry and now price is dropping.

This is another good examle of why not trade at levels against WK/D1 demand which is too close or has been hit (WK demand is --- green line). Price bounced a bit on the purple level and was easily absorbed because WK demand is trying to control.

This level is at the D1 distal supply but it's already tested, non-fresh, too much time at the level at the origin. We want fresh levels, original levels when counter trend ALWAYS. On H4 chart I say "short here, drill", but I won't short, why? Because when I looked at H1 to see how level was formed, I see it's a reaction to a previous level, so if anything I would drill it to the upper wicks, but not doing it. It's a clear non-fresh, non-original level.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 175 KB
Click to Enlarge Name: Screenshot2.png Size: 166 KB
Set and Forget supply and demand trading community
  • #168
  • Edited 12:49am Jun 14, 2013 12:30am | Edited 12:49am
See where we are at the DOLLAR INDEX is today, price hit D1 demand area. What normally happens is that the majors react to it. If the EURUSD is at opposite supply it's a nice confluence.

EURUSD, GBPUSD, etc, they are now dropping since the $index is reacting to its D1 demand zone. It's higher odds if both the majors and $index are at opposing S/D areas.

SEE DOLLAR INDEX CHART:
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 148 KB


Since $ index is at D1 demand area, I am not going to go long at that H4 speedbump demand on GBPUSD.

2 reasons why not to go long on GBPUSD

1. It's a non-fresh speedbump demand. that's the VERY first reason, I will only take fresh levels, that one is not fresh and it would clearly breaking my H4 trendline
2. $index is bouncing off nice D1 demand area. I would go against the index at a higher timeframe demand area.
NOTE: if H4 demand is absorbed, then we can have a short opportiny on H4/H1. H1 is forming a nice H1 supply level. Market dynamics are "changing", $index at D1 demand and H1 trendline is being violated, sign of weakness

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 130 KB


See where we are in the WK for the pound, WK fresh suppy area, a WK supply speedbump
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot5.png Size: 124 KB
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot3.png Size: 119 KB
Set and Forget supply and demand trading community
  • #169
  • Edited 1:28am Jun 14, 2013 1:02am | Edited 1:28am
Planning these 2 trades on EURUSD.

LONG at H4 distal line, fresh H4 demand area. Upper purple level is too close to D1 supply zone and it's not fresh. Lower it's but too wide, so I drilled it to H1.

SHORT: at a 20 pips fresh/original H4 supply level at D1 distal line as you can see (see my posts on rectangle extender indicator to understand what each line means.

There is new level "being formed" on H1, could be a good short opportunity. All levels underneath are used up, good room to drop to distal D1 demand area. H1 trendine would be broken solidly.

As you can see, it's a very strict and rule-based type of trading if you have a trading plan with very strict rules. These are part of my rules, I try to obey them all the time, but many times my emotions take over and that's something I have to control. This thread helps me keep my emotions more in control, because I put things down visually, so thanks!!!
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 154 KB
Click to Enlarge Name: Screenshot2.png Size: 146 KB
Set and Forget supply and demand trading community
  • #170
  • Jun 14, 2013 1:42am Jun 14, 2013 1:42am
Quoting panoramia
Planning these 2 trades on EURUSD. LONG at H4 distal line, fresh H4 demand area. Upper purple level is too close to D1 supply zone and it's not fresh. Lower it's but too wide, so I drilled it to H1. SHORT: at a 20 pips fresh/original H4 supply level at D1 distal line as you can see (see my posts on rectangle extender indicator to understand what each line means. There is new level "being formed" on H1, could be a good short opportunity. All levels underneath are used up, good room to drop to distal D1 demand area. H1 trendine would be broken solidly....

Looking at your H1 demand level or distal level about 1.3177. I understand this is in a D1 demand zone, however, that level on the H1 does not look fresh. Is that a reaction to the previous level before it on the H1? or do you have a demand level there on the H1 because it is at the Distal line of the D1? Meaning even though that level is a reaction to the previous on the H1; It is at the D1 distal line, so it has more weight or controll for demand?
Thanks for showing your set ups. It helps me to see other people's set ups and compare them to mine. Most of mine are set up exactly like yours. It is really helping me, and i am starting to understand how to spot these fresh levels using the rectangles. Thanks a lot
  • #171
  • Jun 14, 2013 1:46am Jun 14, 2013 1:46am
Yes, that H1 is at the D1 demand distal line. It was a previous demand area, then price retested it and created a NEW demand area that has not been retested yet, so it's a fresh area at the D1 distal demand line. That's my reasoning Derek, maybe I will be wrong, but that's the way I look at it and it follows my rules, so I should trade it! We'll see

Quoting Sdprice
{quote} Looking at your H1 demand level or distal level about 1.3177. I understand this is in a D1 demand zone, however, that level on the H1 does not look fresh. Is that a reaction to the previous level before it on the H1? or do you have a demand level there on the H1 because it is at the Distal line of the D1? Meaning even though that level is a reaction to the previous on the H1; It is at the D1 distal line, so it has more weight or controll for demand? Thanks for showing your set ups. It helps me to see other people's set ups and compare them...
Set and Forget supply and demand trading community
  • #172
  • Jun 14, 2013 1:50am Jun 14, 2013 1:50am
GBPUSD is doing what I described 2 posts above, the new H1 supply area is formed after fresh WK supply level has been hit. H1 uptrend Trenline has been broken with conviction and the H4 demand area has been broken as expected, read my post above regarding the $index and the majors.

Since H4 has been absorbed, I have permission to go short, because now I have 3:1 profit margin.

So now I have a short order at 1.5695 with stops a few pips above H1 distal.

A similar situation might be happening on EURUSD as explained above, but still no 3:1 profit margin.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 142 KB
Set and Forget supply and demand trading community
  • #173
  • Jun 14, 2013 2:23am Jun 14, 2013 2:23am
Planning a H4 short swing trade on AUDCHF, near the upper D1 supply zone.

Price has reached a fresh WK demand zone, penetrated it 100%. On the way we might get some buying opportunities.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 140 KB


The D1 supply has been broken today. There is a H4 level at 0.8660 but it's not fresh, I will not use non-fresh levels on my setups, so this one is not for me, unless price reacts from it and drops forming new supply levels.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 134 KB


My H4 entry is right below the D1 supply area, within the D1 I don't see any fresh/original areas to go short, so this is the first quality one I see, so I have to try this one. I drilled it down a bit so that I could cover part of the small speedbump right above, let's see.

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot3.png Size: 137 KB
Set and Forget supply and demand trading community
  • #174
  • Jun 14, 2013 8:15am Jun 14, 2013 8:15am
I had my limit sell triggered on GBPUSD. I had planned it this morning, I posted the charts and mentioned that if the demand was absorbed, that could be a nice H1 speedbump supply to lean on for shorts... It happened like that and my limit sell triggered. Still not at BE, because my BE is 2:1 of my risk.. We'll see what happens, it's Friday, so I don't think too much is gonna happen.

Read my post about $index and the pound a few posts above and you will see my full analysis. Here is the entry:
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 136 KB
Set and Forget supply and demand trading community
  • #175
  • Edited 11:02am Jun 14, 2013 10:47am | Edited 11:02am
I had a question about fresh levels?
A fresh level is when price has not returned to that level. However, when looking at some charts we can see levels on top of levels, so my question is when we see levels on top of levels ( kinda like stair step looking chart). so when these levels are on top of one another are the still fresh even though they are reaction to previous levels. The chart below show a FRESH level in blue because price has never been there, however it a reaction to the purple level before it, so my question is, Is this level still fresh even though it is a reaction to previous.
2nd chart is Eur/Usd, the purple levels are reactions to previous levels, So my question is: even thought the levels are stacked on top of one another, they are only fresh when price has not come back to either one of those single levels ( which in this case this did, but just an example)?????
Attached Image(s) (click to enlarge)
Click to Enlarge Name: gbpusd 8.png Size: 107 KB
Click to Enlarge Name: eurusd 9.png Size: 108 KB
  • #176
  • Jun 14, 2013 11:58am Jun 14, 2013 11:58am
The answer is simple and complex at the same time. You have to analyze the chart you are looking at and decide if it's in an uptrend or in a downtrend. The trend will finnish when higher timeframe sd levels have been reached, like in the case of the eurusd and gbpusd.

What do you do when markets are trending? You lean on fresh levels, theose that formed evene if they are reaction to a previous onee must be an obvious pile of orders in shape of speedbump or valley/peak. Draw a trendline if you want as a guidance and trade levels until higher tf sd levels have been reached.

What is a fresh level? A level to which price has not yet pulled back to
When do we trade fresh levels? When we are trending
When will we stop leaning on fresh levels? When the trend has changed, like on gpbusd and eursud

Once the trend has reached an opposite sd level on higher tfs, you will only lean on original levels (not fresh levels) but if ose are low in the curve, or it will not be as higher odds.

Hope that's clearer
Alfonso


Quoting Sdprice
I had a question about fresh levels? A fresh level is when price has not returned to that level. However, when looking at some charts we can see levels on top of levels, so my question is when we see levels on top of levels ( kinda like stair step looking chart). so when these levels are on top of one another are the still fresh even though they are reaction to previous levels. The chart below show a FRESH level in blue because price has never been there, however it a reaction to the purple level before it, so my question is, Is this level still...
Set and Forget supply and demand trading community
  • #177
  • Edited 1:50pm Jun 14, 2013 12:38pm | Edited 1:50pm
Quoting panoramia
The answer is simple and complex at the same time. You have to analyze the chart you are looking at and decide if it's in an uptrend or in a downtrend. The trend will finnish when higher timeframe sd levels have been reached, like in the case of the eurusd and gbpusd. What do you do when markets are trending? You lean on fresh levels, theose that formed evene if they are reaction to a previous onee must be an obvious pile of orders in shape of speedbump or valley/peak. Draw a trendline if you want as a guidance and trade levels until higher tf sd...
Thankyou, trade fresh levels in trending markets expect for when the chart is in higher time frame supply or demand. Which in that case i would only rely on Original levels for turning points. However, i remember in your video for levels you would use a horizontal line at the high for supply or low for demand and move to the left to see if that high or low hit a previous level. QUESTION? Were you doing that in the video for turning points ( OR I mean orginal levels) or were you doing that for fresh levels. I cant remember?
Thankyou


>>2nd question. The chart below is a stock, but is just an example. The 2nd purple level was a pullback to the 1st purple fresh level. My question, is this 2nd purple level which was a pullback to the 1st pruple level a fresh level for a buy entry.

>>OR, was that 2nd level a turning point from the 1st purple level which is no longer fresh any more??
Attached Image (click to enlarge)
Click to Enlarge Name: jpmrgn-9.png Size: 109 KB
  • #178
  • Jun 14, 2013 3:55pm Jun 14, 2013 3:55pm
Simple answers, since it's always the same:

1. Fresh levels: LOOK RIGHT. See if price has revisited the levels since it was first created
1. Original levels: LOOK LEFT. See if highest high or lowest low of the rectangle is a reaction to a previous level

Regarding the chart attacched, see my attachment as well.

The H1 timeframe is not in an uptrend any more, consolidation if anything, but it's not trending, so we can't trade the fresh levels, we need original levels to trade against current trend. Remember, trade fresh levels when we're trending, NEVER AGAINST the trend.

This is not a fresh level, because it didn't make a higher high and absorbed upper supply. That's another rule, a fresh level has to absorb previous supply/demand

Quoting Sdprice
{quote} Thankyou, trade fresh levels in trending markets expect for when the chart is in higher time frame supply or demand. Which in that case i would only rely on Original levels for turning points. However, i remember in your video for levels you would use a horizontal line at the high for supply or low for demand and move to the left to see if that high or low hit a previous level. QUESTION? Were you doing that in the video for turning points ( OR I mean orginal levels) or were you doing that for fresh levels. I cant remember? Thankyou >>2nd...
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 455 KB
Set and Forget supply and demand trading community
  • #179
  • Jun 14, 2013 9:57pm Jun 14, 2013 9:57pm
Hi Panoramia

In post #175, there are 2 charts, the EUR/USD and GBP/USD.
At the top left hand side of both charts there are the labels which read:
ADR 45.5%, Today 52, 1 Day 125, 5 day 116, 10 day 119, 20 day 110.
Is this the Average daily Range?
Why are the figures the same for both EUR/USD and GBP/USD?

Thanks
  • #180
  • Edited 2:08pm Jun 15, 2013 12:10am | Edited 2:08pm
Hi CowLee,


Yes, it's the ADR. The only reason I can think of is that he has not installed the ADR2 indicator that can be downloaded from the indicators.zip file in first post. I remember the first time I uploaded the .zip file I had forgotten to add some libraries, so maybe he does not have the last version. That's the only reason I can think ok.

Alfonso

Quoting CowLee
Hi Panoramia In post #175, there are 2 charts, the EUR/USD and GBP/USD. At the top left hand side of both charts there are the labels which read: ADR 45.5%, Today 52, 1 Day 125, 5 day 116, 10 day 119, 20 day 110. Is this the Average daily Range? Why are the figures the same for both EUR/USD and GBP/USD? Thanks
Set and Forget supply and demand trading community
9 traders viewing now