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ReadtheMarket - Supply and Demand with Price Action

  • #161
  • Jun 25, 2013 3:26pm Jun 25, 2013 3:26pm
I have been trying to find out the reason for price movement and it lead me to order flow and market structure which I now understand to a certain level but knowing how price moves, (market orders consuming liquidity).

I don't understand why a trade(limit order to buy or sell) would be placed at a previous supply or demand level? Orders could be stacked there all day but limit orders don't cause price to move in any direction, market orders do?

So shouldn't a trader be looking to jump on a momentum candle to ride it to the next stop of liquidity?


Can someone shed light on this for me?
  • #162
  • Jun 25, 2013 9:45pm Jun 25, 2013 9:45pm
Quoting bumapatria
If could've DEFINITELY sold all his knowledge for a price but he's doing it for free; and that's a true blooded-aquarian instinct; to help others genuinely. That's something to look upon and highly respect. Once more; best wishes and regards old buddy, Best, Your distant aquarian pal, Buma (No i'm not commercial <it's a free blog for me to rant> FF is just ... doh)

You guys are aquarius? Aquarius are special people. I know, I am one. January 21st is my birthday. I feel like Im apart of the family all ready. Unless you guys are referring to something else, then ignore this post.
  • #163
  • Jun 25, 2013 9:58pm Jun 25, 2013 9:58pm
Quoting Ifmyante
{quote} apart from pre market opens and pre news setups, I give time no importance at all (and time is a factor in candles) I rather look for decisions on price - the failure to return to a zone once broken is one of the most important

What exactly do you mean by that?
  • #164
  • Jun 25, 2013 10:16pm Jun 25, 2013 10:16pm
Quoting dappa
I have been trying to find out the reason for price movement and it lead me to order flow and market structure which I now understand to a certain level but knowing how price moves, (market orders consuming liquidity). I don't understand why a trade(limit order to buy or sell) would be placed at a previous supply or demand level? Orders could be stacked there all day but limit orders don't cause price to move in any direction, market orders do? So shouldn't a trader be looking to jump on a momentum candle to ride it to the next stop of liquidity?...
You walk down a high street-looking to buy some shoes, there are shoe shops on the left and right and all the way along the high-street.

You use the big car park because it's cheaper than a side street pay meter, so let's call that distance 0 metres. At 100m at the end of the high-street are the really cheap shops selling sandals.

As you leave your car, it's a wet day and your shoes are leaking water, so you're keen to buy some new shoes.

Shoe shops near the car park will charge more for shoes as that's where they know there's a higher foot-fall, so they can get away with higher prices knowing most people won't bother walking 100m to buy some flip-flops.

You (retail trader) walk 20m and buy some wellingtons, content you tried to 'shop-around' and yonder back to your car.

A robot (HFT algo) then exits the car park, puts on his jet-pack and blasts to the very last shop to sniff the mom 'n pop shops prices and quickly retreats back to HQ in the car-park to report back to his car-park overlord attendants (goldman sachs). The shops @ distance 0m (insider trading) pay the attendants a small premium to get this secret list of prices so they can adjust their prices accordingly, ready to fleece the next shopper.

Basically, supply & demand is price discovery but also a process of stop-hunting to liquidate the market in their favour.

Price coming back to a supply zone does two things, i) institutions pick up the next batch of buy orders to help bolster price and ii) to purge all the easy money retail buyers sitting pretty with stops @ break-even to create an imbalance of more sellers that buyers. If you want price to go up, you have to have more sellers than buyers, otherwise everyone on the high-street will be selling shoes at £1 and they'd be no need to go shopping for bargains.

Probably nothing to do with your post but i felt like posting some asinine diatribe
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  • #165
  • Jun 26, 2013 11:04am Jun 26, 2013 11:04am
Quoting FiatFap
{quote} You walk down a high street-looking to buy some shoes, there are shoe shops on the left and right and all the way along the high-street. You use the big car park because it's cheaper than a side street pay meter, so let's call that distance 0 metres. At 100m at the end of the high-street are the really cheap shops selling sandals. As you leave your car, it's a wet day and your shoes are leaking water, so you're keen to buy some new shoes. Shoe shops near the car park will charge more for shoes as that's where they know there's a higher foot-fall,...

Yeah, didn't really answer my questions, still don't know what all of that means, my man. so what software goes and finds liquidity, show me a chart of what that looks like? spikes?
  • #166
  • Jun 26, 2013 12:14pm Jun 26, 2013 12:14pm
Quoting FiatFap
{quote} You walk down a high street-looking to buy some shoes, there are shoe shops on the left and right and all the way along the high-street. You use the big car park because it's cheaper than a side street pay meter, so let's call that distance 0 metres. At 100m at the end of the high-street are the really cheap shops selling sandals. As you leave your car, it's a wet day and your shoes are leaking water, so you're keen to buy some new shoes. Shoe shops near the car park will charge more for shoes as that's where they know there's a higher foot-fall,...

You. I like you. LOL
  • #167
  • Jul 4, 2013 4:45pm Jul 4, 2013 4:45pm
Quoting dappa
I don't understand why a trade(limit order to buy or sell) would be placed at a previous supply or demand level?
This just seems to be where they lie. They may be new orders, or residual orders left unfilled

Quoting dappa
Orders could be stacked there all day but limit orders don't cause price to move in any direction, market orders do?
Orders really DO cause price to move - If you have, say, 100 sell orders in at a certain price, and there are only 20 buy orders at that price, price will fall until it picks up more buy orders lower - simple

Quoting dappa
So shouldn't a trader be looking to jump on a momentum candle to ride it to the next stop of liquidity? Can someone shed light on this for me?
You can do that if you want to drastically reduce your RR, But we know how to do it better
Attached Image (click to enlarge)
Click to Enlarge Name: ejadd.jpg Size: 63 KB
  • #168
  • Jul 4, 2013 5:12pm Jul 4, 2013 5:12pm
Quoting Ifmyante
{quote} This just seems to be where they lie. They may be new orders, or residual orders left unfilled {quote} Orders really DO cause price to move - If you have, say, 100 sell orders in at a certain price, and there are only 20 buy orders at that price, price will fall until it picks up more buy orders lower - simple {quote} You can do that if you want to drastically reduce your RR, But we know how to do it better{image}

Ahhh I have been patiently waiting for your response my man!

Now in regards to this statement
"Orders really DO cause price to move - If you have, say, 100 sell orders in at a certain price, and there are only 20 buy orders at that price, price will fall until it picks up more buy orders lower - simple"

Are you referring to market orders? can you clarify this a little bit more?
I understand what you wrote in the context of a market order coming in and consuming those 20 stacks of buy orders, yes that makes sense, of course price will drop lower to find buyers(liquidity) I get that.


But when you have a zone stacked with limit orders to buy, and the market orders coming in aren't enough to eat away all the liquidity at that stacked demand zone, what is causing the price to move upward from that demand zone?

If limit orders supply liquidity and market orders cause price to move , how could stacked limit orders cause a reversal, that's what I don't get. according to how the market works the quote should stay were it is once the supply has been satisfied with the sitting limit orders at what ever level price is at.

I hope you understand what I'm trying to ask?
  • #169
  • Jul 4, 2013 5:21pm Jul 4, 2013 5:21pm
Unless once all the sitting limit orders are consumed, market buy orders come in?

See I get why price may break a zone, I don't get why price would reverse unless it was market demand or supply at that level that cause the price to gap up or down due to lack of immediate liquidity.

Second question for you, when looking at price action, a bar with a wick, is that a representation of market orders coming in or is that a representation of supply or demand limit orders being hit and consumed?

So for instance you see a demand zone, you see spikes (wicks) at the level, pinbar or whatever, that is a representation of buy orders being consumed or market buys coming in to meet the market supply orders?

Just trying to understand fully what I see on a char and what it really means.
  • #170
  • Jul 4, 2013 5:30pm Jul 4, 2013 5:30pm
here a pick of what I was referring to with the wick
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd!h1 wick example.png Size: 33 KB
  • #171
  • Jul 5, 2013 7:29am Jul 5, 2013 7:29am
Don't try to overcomplicate market dynamics

If at a certain price there are 100 buy orders and 100 sell orders, price won't be affected at all. It's when there are more of one than the other that price moves.

Also, don't get too hung up on wicks and individual candles - what really matters are which zones are respected/broken
  • #172
  • Jul 5, 2013 7:51am Jul 5, 2013 7:51am
Reading PA is all about the zones
Know how they interact, and you'll always know when to enter and when to exit
Attached Image (click to enlarge)
Click to Enlarge Name: ej pa.png Size: 44 KB


Note: I didn't buy, as I'm off to take the kids to the seaside for the weekend

Toodles
  • #173
  • Edited 2:00am Jul 7, 2013 1:49am | Edited 2:00am
Quoting Ifmyante
Reading PA is all about the zones Know how they interact, and you'll always know when to enter and when to exit {image} Note: I didn't buy, as I'm off to take the kids to the seaside for the weekend Toodles
Orders can be seen on the chart being consumed and potential imbalance created at "key levels"
Here is an example with the exact time (June 26, 04:00 PM GMT) and price (126.60) when this happened on the EJ:

http://www.forexfactory.com/showthread.php?p=6779870#post6779870
  • #174
  • Jul 7, 2013 6:34pm Jul 7, 2013 6:34pm
Quoting dappa
Unless once all the sitting limit orders are consumed, market buy orders come in?

See I get why price may break a zone, I don't get why price would reverse unless it was market demand or supply at that level that cause the price to gap up or down due to lack of immediate liquidity.

Can this question be answered?
  • #175
  • Jul 7, 2013 6:37pm Jul 7, 2013 6:37pm
Quoting Ifmyante
Reading PA is all about the zones Know how they interact, and you'll always know when to enter and when to exit {image} Note: I didn't buy, as I'm off to take the kids to the seaside for the weekend Toodles

Can't really comprehend that, that's a vague statement
  • #176
  • Jul 7, 2013 7:03pm Jul 7, 2013 7:03pm
Quoting Ifmyante
what really matters are which zones are respected/broken
So how do you know which zones to pick that may be respected?

What price action/interaction with these zones tells you where the market will go what does that visual representation look like? the answers are vague to me.
  • #177
  • Jul 8, 2013 7:34am Jul 8, 2013 7:34am
Dappa

Have you actually read any of the material I've already provided?
  • #178
  • Jul 8, 2013 8:39am Jul 8, 2013 8:39am
Yes I have, I have been to your website. I have read about stacked orders , the zones, all of that.

Maybe there is something I missed. I saw the pivot lines , so on and so fourth.
'
It was not anything that I had not seen before.
I saw the talk of engulfing of the zone, but you see , that does not happen all the time.
I'm trying to understand the entries in reference to the zones, e.g price comes to a zone, it creates a pinbar, it seems as though there are orders there. what other price action should I be looking at in specific?

I appologize if I'm asking too many questions that you feel has been answered, but I don't get it, sorry.
  • #179
  • Jul 8, 2013 8:58am Jul 8, 2013 8:58am
Quoting dappa
I saw the talk of engulfing of the zone, but you see , that does not happen all the time.
It doesn't have to happen every time. We're not looking for a 100%, always on type of situation. But for engulfs, there is always a point on every waves bottom and top, where a bull candle over takes a bear, and vice versa.

Quoting dappa
I'm trying to understand the entries in reference to the zones, e.g price comes to a zone, it creates a pinbar, it seems as though there are orders there. what other price action should I be looking at in specific? I appologize if I'm asking too many questions that you feel has been answered, but I don't get it, sorry.

It is always important to pay attention to how price is approaching a zone. Momentum being the key. Is it speeding up? Is it slowing down? Let's say you are watching a supply zone... is every bear bar leading up to this zone basically being ignored? (indicating aggressive buying... and most likely the zone will fail). Pin bars can indicate the presence of sellers before price has fully turned.


Keep in mind, SD trading is not a 100% thing. It has never been portrayed this way. There are certain things you can do to increase your edge, but there are times when if will enter and I won't, and the other way around. There is still a level of subjectivity to it. The most important part, in my opinion, is the extremely easily identifiable r/r setups. You know exactly where your risk is, and what your targets should be.
  • #180
  • Jul 8, 2013 9:20am Jul 8, 2013 9:20am
Quoting Venice
{quote} It doesn't have to happen every time. We're not looking for a 100%, always on type of situation. But for engulfs, there is always a point on every waves bottom and top, where a bull candle over takes a bear, and vice versa. {quote} It is always important to pay attention to how price is approaching a zone. Momentum being the key. Is it speeding up? Is it slowing down? Let's say you are watching a supply zone... is every bear bar leading up to this zone basically being ignored? (indicating aggressive buying... and most likely the zone will...

Thank you sir, now those are answer's that I can digest!

So key, is momentum as price approaches a zone?
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