Supply and demand in a nutshell by Alfonso Moreno | Page 70 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #1,381
  • Aug 25, 2013 2:43pm Aug 25, 2013 2:43pm
Quoting panoramia
{quote} Well Axlz, you will see MANY situations where price holds levels that have been touched twice, 3 times, 4 times or even more. You just need to decide what you want to do and add a rule to your trading plan. It's key that you know what to do in these situations, and do always the same thing. I've personally backtested and forward tested these scenarios for a some time now, and my rule is very simple: I always trade fresh levels, the very first pullback into a level. They have the highest odds to succeed. As simple as that. You want to trade...

I completely understand what you're saying Alfonso.

But my logic and the way I think about these areas is like this:

Even though it's a reaction, if that reaction manages to have enough "power" or "demand/supply" from willing market participants/orders to take out previous supply/demand zones, then it must obviously be an area of significance.

And so I count these as "fresh" zones, unless I see price touch inside them specifically.

The zone it reacted to, would obviously not be fresh, as it has been touched, but this new area that formed as a result of that reaction, is technically "fresh", as price has not pulled back into it and tested it.

Forgive me if my explanations sound stupid. I am a newbie and you are very experienced compared to I.
  • #1,382
  • Aug 25, 2013 2:46pm Aug 25, 2013 2:46pm
Quoting panoramia
{quote} Evening Huk! I was precisely planning to record a video this week precisely on how to enter a trade: - Adding padding to the entry price - Adding wiggle room to the SL - Adding spread to SL when you short - How many pips to add on H4 or H1, depending on which pairs or cross pairs Let me record it and you will have your question answered. But I do not use any relationship to add x multiples of spread. You know how simple I am trying to do things, so it is simple! Alfonso

Alfonso, looking forward to it! Thanks as always.

Huk
  • #1,383
  • Aug 25, 2013 2:48pm Aug 25, 2013 2:48pm
Quoting panoramia
{quote} Well Axlz, you will see MANY situations where price holds levels that have been touched twice, 3 times, 4 times or even more. You just need to decide what you want to do and add a rule to your trading plan. It's key that you know what to do in these situations, and do always the same thing. I've personally backtested and forward tested these scenarios for a some time now, and my rule is very simple: I always trade fresh levels, the very first pullback into a level. They have the highest odds to succeed. As simple as that. You want to trade...
True,first pullback is allways the safest!
  • #1,384
  • Aug 25, 2013 3:38pm Aug 25, 2013 3:38pm
Quoting panoramia
{quote} Hello Caparzo! It's not easy and quick to go through your screenshot, but I took a look at it and I saw what you mean... the answer to your questions are already on some of the videos and on first post. Watch the video on fresh levels versus original levels, it's all there: http://www.youtube.com/watch?feature...&v=tCLkIY4zrJw Summing up: We will ALWAYS trade fresh levels Fresh levels will only be traded when we are in a trending market Original AND fresh levels are needed when we want to counter trendYour question:...
yes alfonso, you made it crystal clear,thanks...
but just one more question; since in counter-trend we just can use original AND fresh levels, the only exception is speedbumbs, right?
i mean we dont take speedbumbs in counter-trend even if it is original AND fresh...?
  • #1,385
  • Aug 25, 2013 4:22pm Aug 25, 2013 4:22pm
Quoting caparzo
{quote} yes alfonso, you made it crystal clear,thanks... but just one more question; since in counter-trend we just can use original AND fresh levels, the only exception is speedbumbs, right? i mean we dont take speedbumbs in counter-trend even if it is original AND fresh...?
Exactly, speedbumps are continuation patterns, so not good for counter-trend. If you still believe that area can produce a nice trade, you can wait for a confirmation trade.


Alfonso
Set and Forget supply and demand trading community
  • #1,386
  • Aug 25, 2013 4:27pm Aug 25, 2013 4:27pm
Quoting Axlz
{quote} I completely understand what you're saying Alfonso. But my logic and the way I think about these areas is like this: Even though it's a reaction, if that reaction manages to have enough "power" or "demand/supply" from willing market participants/orders to take out previous supply/demand zones, then it must obviously be an area of significance. And so I count these as "fresh" zones, unless I see price touch inside them specifically. The zone it reacted to, would obviously not be fresh, as it has been touched, but this new area that...
You don't need to excuse yourself Axlz! We're all here to learn from each other!

I will only take fresh levels, that's my rule. There are MANY trades through the month, I just keep it simple so that I don't have to add more thinking to my decision process. The first touch is the safest and has the highest odds, so that's the one I will take. Can the second or third pullback work? Yes, absolutely. But my rules is the first one, I don't care what price does on the second, I just want the first one.

That's my rule, what's yours? It will come once you get more experience with SD levels. I can almost guarantee that you will be doing the same thing I am doing, because you will have many losses on the second pullbacks and you will start thinking if it's the right thing to do, etc.... but only time will tell I went through that process myself, we all have to go through it

Alfonso
Set and Forget supply and demand trading community
  • #1,387
  • Aug 25, 2013 4:32pm Aug 25, 2013 4:32pm
Quoting Shaka_Smart
Hi Alfonso, I'm still trying to read through this whole thread, so I can get 100% up to speed, but one thing that has come to mind that I was wondering is do you bother watching levels that have already been hit several times? I'm trying to figure out if the levels on your SD spreadsheet are the same ones you trade or if I should only pay attention to levels you would trade. Say you have a demand zone on the monthly that has been hit several times but respected, but there is a fresh demand level farther below that. Will you use the first area on...
Hello Nick!
Thanks for your message and questions...

As far as non-fresh levels, I guess you must know what my views on fresh levels are. On the spreadsheet I will use the non-fresh levels as well because they are higher timeframe SD areas, as long as they are not violated (taken out), I will have them there. Why? Because they are in control and if there is a good reaction from them, even though they are not fresh, if previous SD areas are taken out, I will trade them.

On the EURUSD monthly chart you attached, there are a few zones missing. They are not fresh, but it's a monthly chart. The higher the timeframe, the bigger its reliability. Do just one thing... Watch the montly charts on a few pairs and see how price reacts to them on a second and even third pullback, you will see what I mean.

Alfonso
Set and Forget supply and demand trading community
  • #1,388
  • Aug 25, 2013 4:42pm Aug 25, 2013 4:42pm
Quoting panoramia
{quote} Exactly, speedbumps are continuation patterns, so not good for counter-trend. If you still believe that area can produce a nice trade, you can wait for a confirmation trade. Alfonso
Hi alfonso,

quick question:

since in counter-trend we can not use non-original levels to take trades, is this statement valid only for set and forget trades or also for confirmation trades?
i mean if we are in a counter-trend and if we see a fresh level (not original) , i know that we cannot take the trade, but do you mean we cannot take only set and forget trades or no trades at all (confirmation)?

thanks
  • #1,389
  • Aug 25, 2013 4:44pm Aug 25, 2013 4:44pm
Quoting pres78
{quote}I know that the auto S/D drawing indi does not do DBD or RBR continuations so this green zone would not be drawn by it but would you consider this as a fresh supply after it printed and price took off since it created a great reaction down that engulfed two lows? As we can see last week and then end of the week before we hit this level and did see some pause but no real sellers reaction and on Friday we blew up through this zone. I guess the other thing to note is that when we departed this zone it was not a clean break as the second daily...
Hi Jason

Let me tell answer this first question. That area you are referring to is a speedbump supply. Speedbumps are not good when trading counter trend, we want to use valleys and peaks (swings), the extremes. Departure was not good either. I would think of trading a speedbump on a higher timeframe if departure was really great and little time at the level and it was an area that broke an important S/R area or broke a channel, but rules does not allow me to do it under normal circumstances.


Quoting pres78
{quote}
This brings me to another question based on something else I have seen several times in the charts so far (keep in my I started the S/D journey on August 12th) where price as it did in this example rallies to the a previous supply base and bases below before breaking up through it. Still have must backtesting on this but it almost appears that this may be a clue of the impending break, although this is in hindsight as when this is forming it could well have been a base on a RBD so... What is your experience with this and is this something...
As far as basing before your entry level, it's not a good sign. Creating brand new demand right underneath supply will remove the profit margin (risk reward), negating the trade in most of the cases. The only exception is if the level has a score of 9 in the odds enhancers and it goes with the higher timeframe direction. Arrival into the level is important, so basing is not good. But if you want to set & forget, you won't be there to decide, so only set & forget on levels with a score of 9, and forget about the arrival since it will cause indecision.

Hope that makes sense to you!
Alfonso
Set and Forget supply and demand trading community
  • #1,390
  • Aug 25, 2013 4:47pm Aug 25, 2013 4:47pm
Quoting caparzo
{quote} Hi alfonso, quick question: since in counter-trend we can not use non-original levels to take trades, is this statement valid only for set and forget trades or also for confirmation trades? i mean if we are in a counter-trend and if we see a fresh level (not original) , i know that we cannot take the trade, but do you mean we cannot take only set and forget trades or no trades at all (confirmation)? thanks
You CAN take confirmation trades on non-original levels, but then wait for previous SD area to be absorbed on your entry timeframe H1 or H4, and a nice departure. In non-original or non-fresh areas, you need to make sure there still are willing sellers or buyers to take the risk, so it's advisable that you wait for previous SD are to be taken out before you take a trade.

Hope that makes sense to you!
Alfonso
Set and Forget supply and demand trading community
  • #1,391
  • Edited 7:10pm Aug 25, 2013 6:53pm | Edited 7:10pm
I don't mean to over-post, but I had another question I think may be due to a large misunderstanding I have with S/D zones. If you have a fresh demand level that aligns with a previous demand level, but that prior demand level was violated by lower lows and several new supply levels, can that zone still be original? For example, in the picture below: Is the demand level in (1) not original because of the demand level in (2)? Do the lower lows and lower highs negate that prior level?

Thank You!!
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 64 KB
  • #1,392
  • Aug 25, 2013 7:15pm Aug 25, 2013 7:15pm
Quoting panoramia
{quote} Hello Nick! Thanks for your message and questions... As far as non-fresh levels, I guess you must know what my views on fresh levels are. On the spreadsheet I will use the non-fresh levels as well because they are higher timeframe SD areas, as long as they are not violated (taken out), I will have them there. Why? Because they are in control and if there is a good reaction from them, even though they are not fresh, if previous SD areas are taken out, I will trade them. On the EURUSD monthly chart you attached, there are a few zones missing....
Thanks Alfonso, that helps IMMENSELY! Back to the drawing board. I think I've redrawn my zones like 3 or 4 times because I keep rechecking them and finding problems.
  • #1,393
  • Aug 25, 2013 7:23pm Aug 25, 2013 7:23pm
Quoting Shaka_Smart
I don't mean to over-post, but I had another question I think may be due to a large misunderstanding I have with S/D zones. If you have a fresh demand level that aligns with a previous demand level, but that prior demand level was violated by lower lows and several new supply levels, can that zone still be original? For example, in the picture below: Is the demand level in (1) not original because of the demand level in (2)? Do the lower lows and lower highs negate that prior level? Thank You!! {image}
Hi Shaka,

You probably need to go over the videos Alfonso has posted a few times as each time you view them you'll possibly see something you missed earlier. This question is covered in the video about drawing levels. When we look left we only go left until we hit price, anything before that is not considered. You could think of it like a brick wall, what's on the other side of the wall (left side of where you run into price) is not considered it's only what we can see on this side of the wall (this side of price).

I've marked you chat to try and help show you

Attached Image
If you act surprised, then you probably missed something
  • #1,394
  • Aug 25, 2013 7:48pm Aug 25, 2013 7:48pm
Quoting outapips
{quote} Hi Shaka, You probably need to go over the videos Alfonso has posted a few times as each time you view them you'll possibly see something you missed earlier. This question is covered in the video about drawing levels. When we look left we only go left until we hit price, anything before that is not considered. You could think of it like a brick wall, what's on the other side of the wall (left side of where you run into price) is not considered it's only what we can see on this side of the wall (this side of price). I've marked you chat to...
Thanks Outapips! That helps so much. I definitely missed that even having gone through all the videos. I feel relieved now, because that solves my biggest problem (at the moment ). You're awesome, thank you.
  • #1,395
  • Aug 25, 2013 10:13pm Aug 25, 2013 10:13pm
Alfonso,


I remember you said you only trade on confirmation, once two demand/supply zones have been violated. It is only then that you consider the trend changed in the opposite direction.

Do you still follow this rule? Or can I go short off the first supply area created below a fresh higher TF supply?
  • #1,396
  • Aug 25, 2013 10:58pm Aug 25, 2013 10:58pm
Alfonso,

Another question.

Do you count areas where price went down outside of the rectange, but then immediately went back up and touched it as fresh?


This current picture of silver Daily supply is what I am referring to:

Attached Image (click to enlarge)
Click to Enlarge Name: sil.png Size: 36 KB


It has extremely bad departure. But would this still be considered fresh, or touched? We can see that price went outside of it, and then immediately retraced back and touched it.

Do you count these as fresh or touched?
  • #1,397
  • Aug 25, 2013 10:58pm Aug 25, 2013 10:58pm
Hello,

I changed the color of one of my rectangles after the indicator automatically extended it and for some reason all my rectangles are that color and will not automatically change based on what type of zone they are highlighting. Not sure what to do o fix it besides reinstall MT4 . Sorry for all the posts today! Just hitting this material hard this weekend... Has anyone had a similar issue or know how to fix?

Thank you
  • #1,398
  • Edited Aug 26, 2013 12:24am Aug 25, 2013 11:39pm | Edited Aug 26, 2013 12:24am
Quoting Shaka_Smart
Hello, I changed the color of one of my rectangles after the indicator automatically extended it and for some reason all my rectangles are that color and will not automatically change based on what type of zone they are highlighting. Not sure what to do o fix it besides reinstall MT4 . Sorry for all the posts today! Just hitting this material hard this weekend... Has anyone had a similar issue or know how to fix? Thank you
Right click your chart > Indicator list > Rectangle Reader

Then scroll down and you'll see the colors it is set to use for each supply/demand zone.

Attached Image


Either set them back manually, or click reset and see what happens.
  • #1,399
  • Aug 26, 2013 12:08am Aug 26, 2013 12:08am
Quoting Axlz
{quote} Right click your chart > Indicator list > Rectangle Reader Then scroll down and you'll see the colors it is set to use for each supply zone. {image} Either set them back manually, or click reset and see what happens.
Thanks for the reply Axlz, but I actually tried doing both those things. I right clicked the object and changed the color manually, but all the rectangle settings are good. I tried clearing the chart, too. Really at a loss as to what's causing it. Maybe if I set a rectangle color back to the original color (not sure what that color was) it might starting working again? hmmm
  • #1,400
  • Aug 26, 2013 1:02am Aug 26, 2013 1:02am
Hi

aud chf long position. Price is in consolidation, let's hope that it will work .

Weekly demand confirmed on daily. Waited for opportunity on h1 to tighten my sl.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: audchfweekly.png Size: 39 KB
Click to Enlarge Name: audchfdaily.png Size: 36 KB
Click to Enlarge Name: audchfh1.png Size: 37 KB
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