Supply and demand in a nutshell by Alfonso Moreno | Page 14 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #261
  • Edited 4:21pm Jun 24, 2013 9:14am | Edited 4:21pm
Planning a short trade on USDJPY based on a H4 supply zone within a D1 supply area.

Are has proved there are willing sellers by forming a brand new H4 supply area, so I am taking it. I drilled it down to 30 pips, which matches a H1 supply level within that H4 supply.

I didn't want to lean the upper non-fresh H4 (green) supply area, because it was not an original level. Now D1 has been hit and a brand new H1 supply has been formed. Time to go for a short.
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Set and Forget supply and demand trading community
  • #262
  • Jun 24, 2013 1:19pm Jun 24, 2013 1:19pm
Alfonso

I'm a lurker on a number of trading sites but this is my first post on any of them. I'm an avid reader of your thread and wanted to thank you for your efforts to date (and I hope you are also getting some benefit from the exercise).

I started my trading journey just over a year and a half ago and quite quickly jettisoned the indicators I at one time played around with in favour of naked price action and trying to understanding the psychology and aims of market participants. Trading with supply and demand is a method I find to be logical and I appreciate your time detailing your approach.

You may have touched upon this in previous posts but I would be interested to know a bit more about your trading day, such as:

  1. How many instruments you follow?
  2. Are they all FX or, for example, do you trade the indices as well?
  3. Typically how many orders do you have in the market at a given time and how many of them convert to actual trades vs how many are cancelled at a later point?
  4. You mentioned you are at the screen for three hours: is this all trade analysis? How do you follow active trades or monitor price in relation to orders?
  5. Looking at a typical month, how many trades will you have made and roughly what is your win rate and expectancy?
  6. Have you found your equity curve to grow in a fairly steady manner over time or have you experienced runs of success or large drawdowns?

If I've been too intrusive, please feel free to not answer any questions!

On another note, I recall that you have mentioned in posts that you move to break-even during trades at some point. Would you mind discussing this aspect of trade management? Regarding my own experience, I feel that setting & forgetting the trade and letting it run to the TP or SL avoids the trader (well, me at least, at this point in my trading experience) from adversely interfering with the trade. With your greater experience I imagine you have some insights to what you think works better on average. For instance once a demand zone is hit for a long and you are in the trade and price has made a move up, do you move your stop to sit below the lowest penetration into the demand zone?

Thanks for your time.

Huk

  • #263
  • Jun 24, 2013 4:37pm Jun 24, 2013 4:37pm
Quoting panoramia
Planning a short trade on USDJPY based on a H4 supply zone within a D1 supply area. Are has proved there are willing sellers by forming a brand new H4 supply area, so I am taking it. I drilled it down to 30 pips, which matches a H1 supply level within that H4 supply. I didn't want to lean the upper non-fresh H4 (green) supply area, because it was not an original level. Now D1 has been hit and a brand new H1 supply has been formed. Time to go for a short. {image} {image}

Hi alfonso, i was looking at your short trade for the USD/JPY. you said it was creating a new Original supply level and you did not want lean on the upper 4h supply level because that one was not Original. Is that new 4h supply level original, because i put a line on the high of that new supply level and it is a reaction to the that previous level in purple i have in the chart below.
IS that new 4h supply level ORIGINAL??
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  • #264
  • Jun 24, 2013 4:46pm Jun 24, 2013 4:46pm
Thanks for your first post Huk, I appreciate that. Lurking is also fine, contributing is even better The exercise of posting some of my trades and what I do in order to look for my trades is going nicely, I'm glad I'm able to help others and eventually those helping others as well.

Let me reply to your questions...



Quote
How many instruments you follow?
About 22 pairs. They are all FX for now, which is more than enough. I don't have the equity to do futures, indexes or anything else. FX is more than enough for me, at least for now
Quote
Typically how many orders do you have in the market at a given time and how many of them convert to actual trades vs how many are cancelled at a later point?
I guess you expect my answer. It is all very relative. I don't log such information like how many are converted in actual trades, how many cancelled. If the conditions have changed, I will cancel them. In the future, I will log that information, but I am not doing it right now. I sometimes have like 20-35 limit orders, others 10, it all depends on the market conditions. I used to have like 2-4 per pair, but now I'm trading with the trend so I have less trades. I will counter trend under certain circumstances, which are explained in my thread and videos I believe
Quote
You mentioned you are at the screen for three hours: is this all trade analysis? How do you follow active trades or monitor price in relation to orders?
Ideally 3 hours, or even less, is more than enough to go through 22 pairs and place set&forget swing trades. If you are doing intraday and waiting for H1 or lower timeframe pullbacks and dips, 3 hours might not be too much I guess. I never manage to stay only 3 hours, I have to do other things and then I break that rule, but working on that with some exercises. 2-3 hours should be enough if taken H4 SD levels at clear areas.
Quote
Looking at a typical month, how many trades will you have made and roughly what is your win rate and expectancy?
Typically almost every day I will have at least 1 trade or more triggered because I'm also doing some H1 intraday. A couple per day is the average I guess
Quote
Have you found your equity curve to grow in a fairly steady manner over time or have you experienced runs of success or large drawdowns?
It has had drawdowns but not large drawdowns. News has affected me a few times, even tough my levels were quite far, so I've now changed my trading rules around news. But drawdonws have not been big. We all chase for trades, and when we do we are impatient and trade weaker signals. I guess we'll have to learn that lesson after all.

As far as breakeven is concerned, this is the way I do it most of the times:

  1. My SL will be moved to BE after 2:1 à la classical OTA style. If my risk was 35 pips, then my BE will be at 35 pips
  2. My BE will be more than 2:1 when the SD level is at an extreme and I expect it to become a runner. So 4 or 5:1 minimum for those trades

It's all relative to how comfortable you feel about it, how greedy or how scared you are about your positions. It's easier said than done, the emotional side pops in frequently and wants to bring you around into moving it earlier than specified in one's trading plan.

Hope that helps. Remember I'm also learning, I've only been trading for 2 years only, so not that much either, but working hard!
Alfonso

Set and Forget supply and demand trading community
  • #265
  • Jun 24, 2013 4:50pm Jun 24, 2013 4:50pm
Hi there again!

That one is not original. What I meant was that the level above was not original, it was the reaction to a previous speedbump supply. Look at the attachment.

Since there was no original level to lean on for my short, I had to wait for a brand new level of supply to form and show me there were willing sellers in the area. There was a new level formed and that's why I'm now waiting for that trade there.

Quoting Sdprice
{quote} Hi alfonso, i was looking at your short trade for the USD/JPY. you said it was creating a new Original supply level and you did not want lean on the upper 4h supply level because that one was not Original. Is that new 4h supply level original, because i put a line on the high of that new supply level and it is a reaction to the that previous level in purple i have in the chart below. IS that new 4h supply level ORIGINAL?? {image}
Attached Image (click to enlarge)
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Set and Forget supply and demand trading community
  • #266
  • Jun 24, 2013 4:57pm Jun 24, 2013 4:57pm
Quoting panoramia
Hi there again! That one is not original. What I meant was that the level above was not original, it was the reaction to a previous speedbump supply. Look at the attachment. Since there was no original level to lean on for my short, I had to wait for a brand new level of supply to form and show me there were willing sellers in the area. There was a new level formed and that's why I'm now waiting for that trade there. {quote} {image}

Thanks alfonso, Just want to make sure i understand what you mean by formed new level. SO that new level that formed showing you were new sellers are; are you saying that is a ORiginial level, or just a new fresh level. The supply area i am talking about is 98.28 proximal and 98.70 distal area; is this a original level?
Thanks
  • #267
  • Jun 24, 2013 5:02pm Jun 24, 2013 5:02pm
It's not an original level of supply, none of them... but...

  1. We're high on the curve
  2. We're within a D1 supply level, bouncing from it
  3. Created a brand new fresh level of supply within the D1 supply
  4. There was an engulf pattern

All that tells me that I have to give it a try at the level and go short.

When a new D1 supply level is reached and there are no original levels to lean on:

  1. I will wait for a brand new H1/H4 supply area to be formed, it will normally be fresh, it does not have to be original, but it could
  2. Wait for the pullback and trade it
  3. If previous demand has been absorbed, it will be higher odds

Look at some D1 SD areas and look for this pattern, double top, 123, inverse 123, etc, it's just that with a SD level

Alfonso

Quoting Sdprice
{quote} Thanks alfonso, Just want to make sure i understand what you mean by formed new level. SO that new level that formed showing you were new sellers are; are you saying that is a ORiginial level, or just a new fresh level. The supply area i am talking about is 98.28 proximal and 98.70 distal area; is this a original level? Thanks
Set and Forget supply and demand trading community
  • #268
  • Jun 24, 2013 5:07pm Jun 24, 2013 5:07pm
Quoting panoramia
It's not an original level of supply, none of them... but... We're high on the curve We're within a D1 supply level, bouncing from it Created a brand new fresh level of supply within the D1 supply There was an engulf pattern All that tells me that I have to give it a try at the level and go short. When a new D1 supply level is reached and there are no original levels to lean on: I will wait for a brand new H1/H4 supply area to be formed, it will normally be fresh, it does not have to be original, but it could Wait for the pullback and trade it If...

Thankyou alfonso, yea i was thinking exactly what you were thinking; that even though it is not an original level it is a fresh level, but the reason we can take that for reversal trade is that it is within the D1 supply zone.
thankyou for clearing that up for me
  • #269
  • Jun 25, 2013 3:15am Jun 25, 2013 3:15am
Quoting panoramia
Planning a short trade on USDJPY based on a H4 supply zone within a D1 supply area. Are has proved there are willing sellers by forming a brand new H4 supply area, so I am taking it. I drilled it down to 30 pips, which matches a H1 supply level within that H4 supply. I didn't want to lean the upper non-fresh H4 (green) supply area, because it was not an original level. Now D1 has been hit and a brand new H1 supply has been formed. Time to go for a short. {image} {image}

is this brand new supply ?
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  • #270
  • Jun 25, 2013 7:28am Jun 25, 2013 7:28am
Quoting mosah
Hi all, Here is my trade for today. Yesterday, i analyzed from Weekly, daily and H4 chart and i placed a sell limit. It was hit at 06:00 Until now, it's going in the good direction. {image}
Hi all,
here is the result of the trade USDJPY i took yesterday.
TP was hit.
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  • #271
  • Edited 8:28am Jun 25, 2013 7:36am | Edited 8:28am
Hi all,
Here is another trade AUDNZD. The sell limit just triggered.
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  • #272
  • Jun 25, 2013 8:56am Jun 25, 2013 8:56am
Congratulations on your trade Mosah! Nice job! We want more like those
Alfonso
Quoting mosah
{quote} Hi all, here is the result of the trade USDJPY i took yesterday. TP was hit. {image}
Set and Forget supply and demand trading community
  • #273
  • Edited 10:40am Jun 25, 2013 10:20am | Edited 10:40am
Quoting panoramia
Congratulations on your trade Mosah! Nice job! We want more like those Alfonso {quote}
Thanks a lot Alfonso.
How can i read only your posts in this thread?
  • #274
  • Jun 25, 2013 11:38pm Jun 25, 2013 11:38pm
thats a public thread - or write him a pm

Quoting mosah
{quote} Thanks a lot Alfonso. How can i read only your posts in this thread?
  • #275
  • Jun 26, 2013 1:37am Jun 26, 2013 1:37am
Looks like supply area got hit on the USD/JPY 4h chart; if the order was placed few pips below proximal. curious to see what happens, and if it makes a lower low.
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  • #276
  • Jun 26, 2013 1:51am Jun 26, 2013 1:51am
Yes, it looks like the USDJPY is reacting to H4 supply zone at the last week high (see the blue beads right at the H4 supply area, it's an indicator I provided in the zip file, you don't have it installed). It's a very useful indicator since it shows historical and recent last week/month highs/lows.

My entry is still there but I drilled the H4 level down for lower risk, 41 pips + spread + wiggle room, was too much. Let's see what it does. Demand has been touched twice, so it looks like it might be easily absorbed when price goes there again. Will it do it? We don't know, it's better not to assume anything until it's has happened.


Quoting Sdprice
Looks like supply area got hit on the USD/JPY 4h chart; if the order was placed few pips below proximal. curious to see what happens, and if it makes a lower low. {image}
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Set and Forget supply and demand trading community
  • #277
  • Jun 26, 2013 2:19am Jun 26, 2013 2:19am
Planned a short and a long on USDNOK, it's an exotic pair which I like a lot. I've planned 2 opposite trades for these reasons. Spread is big on this pair, around 25-30 pips on my broker, but it moves a lot, 900 pips average in the last 10 days. Pip value is 1.25 euros, so a 200 pips zone is similar to 25-30 pips in normal pairs. I always take the same risk, 1%, so my lots are adapted to the number of pips and trade only set up if risk/reward >= 3:1

LONG:
We've a really nice H4 demand level right at the breakout area 1 day after last week Bernanke's speech. It's an original and fresh level. We need only a fresh level to go with a trending market, this one is also original. A quite nice pullback will be needed for price to go there. So my rules allow me to go long there, whatever happens happens.
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SHORT:
- We're really high in the curve, at the very extreme. In fact, I do not have more data on my broker, it's the highest high on my broker
- There has been rejection that proves there are willing sellers in the area
- Price It's over-extended
- My entry is on H1, had to drill down the area


Maybe price won't reach the short area and hold lower, but I prefer the extreme since it didn't absorb the previous supply at 6.0750

See the weekly chart, I have no more history but nice rejection from that area.
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Set and Forget supply and demand trading community
  • #278
  • Jun 26, 2013 2:31am Jun 26, 2013 2:31am
Planning a long entry on USDCAD. Previous H4 demand area planned on the thread worked for a 3:1 or Breakeven, it would depend on how you managed your breakeven.

The demand level at 1.0460 has already been touched, no new fresh demand level was formed afterwards, so that are is not tradeable as per my rules. I have to go lower.


My long long entry is sitting right at a H4 speedbump that finally absorbed the D1 supply area. It's a a fresh and original demand area
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Set and Forget supply and demand trading community
  • #279
  • Jun 26, 2013 2:49am Jun 26, 2013 2:49am
Planning a short entry on NZDUSD, H4 supply level.

Odds enhancers for the level:
- Strong departure, big imbalance
- Little time at the level, one candle at the base and dropped like a rock
- Fresh and original level
- Big profit margin, more than 8:1 till previous demand area
- Big picture is with the level, NZDUSD is bearish in higher timeframes

For all these reasons, I'm taking this level. This level was created after last week Bernanke's speech

On the way up, if 0.7815-ish area is broken solidly, we will be able to buy on fresh H1 demand areas.

Why can I go long if area is broken?
- Because the path of least resistance is up once that area is broken.
- Those long ERC red candles are buy orders
- Why buy orders if they are red bearish candles? Because a sell order's stop loss is a buy order. Those candles are full of emotion, of breakout traders and traders that sell after a strong drop in price. Stop Losses are placed all the way down in different places by those traders. So, on the way up, all these stop losses (buy orders when we sell), will be triggered and will make the price go higher into the supply area at the top
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Set and Forget supply and demand trading community
  • #280
  • Jun 26, 2013 3:09am Jun 26, 2013 3:09am
Planning both a Short and a Long on GBPUSD H4 levels.

LONG:
Original and fresh H4 level right at fresh D1 demand speedbump.
There is a H4 demand level right underneath. Level on top of level. My entry could fail and the lower level might be the one that works. We can wait for confirmation on the area, a brand new demand level formed that proves there are willing buyers in the area

SHORT:
Fresh and original supply area. My short has been sitting there for some time. Last pullback almost made it to the D1 proximal line. H4 level has 36 pips risk, which is higher than my default 30 pips risk. I need to add spread and wiggle room, so it'd become like 45 pips. So I drilled it down to a H1 supply level

Take a look at the H4 entries on my H4 chart:
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Entry drilled to H1 supply area:
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Look at the D1 chart so that you can see my SD levels.
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