Supply and demand in a nutshell by Alfonso Moreno | Page 92 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #1,821
  • Sep 2, 2013 8:56am Sep 2, 2013 8:56am
Quoting jsr
Hi, I've been quietly reading this thread and it is really useful. Thanks a lot, Alfonso and everyone involved. I'm "demo trading" this strategy and still need to improve, but so far this is the most detailed explanation that I've found about SD trading, and it is helping me a lot. I'll try to participate in this thread, but for now I'll keep reading.

I am still little confused about speed bumps.
As Alfonso said in the first post, that a demand level is valid only if the price crosses the previous supply zone (or ?high).
Is the same rule applicable to speedbump ?
I am attaching a chart?
Kindly advice whether this is a valid demand zone.
The trend is up, and is low on the curve on daily and weekly timeframe.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 48 KB
  • #1,822
  • Sep 2, 2013 9:01am Sep 2, 2013 9:01am
Quoting Axlz
{quote} Too much trading in that zone for me.
Thanks Axlz.
  • #1,823
  • Sep 2, 2013 10:12am Sep 2, 2013 10:12am
Quoting marsiwala
{quote} I am still little confused about speed bumps. As Alfonso said in the first post, that a demand level is valid only if the price crosses the previous supply zone (or ?high). Is the same rule applicable to speedbump ? I am attaching a chart? Kindly advice whether this is a valid demand zone. The trend is up, and is low on the curve on daily and weekly timeframe. {image}

Using that snapshot we can't tell, because we don't know the context. You said price is low in W1 and D1 curve, but we can't see the bigger picture. Also departure is not that strong. I see wicks in the way up.

- What is that TF?
- Where are W1 and D1 SD zones?
- Where is the previous supply in that TF? Note that the previous high didn't absorb any demand in the same TF.

Quoting Post 1:

SUPPLY AND DEMAND IN CONTROL

WHAT DEFINES AN UPTREND OR A DOWNTREND AT ANY GIVEN TIMEFRAME?
Each timeframe can have a different trend. Let me define my idea of a trend. Remember it's just my idea of a trend, it makes sense to me so I'm using it. Does it make sense to you? Use it then. Since we are primarily working with supply and demand imbalances, making a higher higher or a lower low does not necessarily mean we continue on the existing trend.

  1. UPTREND: demand areas are being respected, supply areas are being violated.
    A higher high SHOULD remove previous supply to validate the demand zone

    You must ask yourself: has the previous supply being removed?
    If previous supply is not taken out, I won't validate the origin of a higher high as demand
  2. DOWNTREND: supply areas are being respected, demand areas are being violated.
    A lower low SHOULD remove previous demand to validate the supply zone

    You must ask yourself: has the previous supply being removed?
    If previous demand is not taken out, I won't validate the origin of a lower low as supply.

End of quote

  • #1,824
  • Sep 2, 2013 10:32am Sep 2, 2013 10:32am
I took a quick pause and connected on my mobile to let you know that I will be recording a couple of new videos that will cover in detail these subjects:

- how to enter a trade, wiggle room and padding
- speedbumps. When to use them, with extensive examples on valid and non-valid speedbumps
- IF THEN scenarios

You are having es with speedbumps, so it's better to cover that on a video and clear all doubts.

Next live webinar:
I will be organizing a new live webinar this week, but I don't know which date yet. Those interested in attending send me a private message or use the form link on post 1. If u alreadyd did before, you will be automatically invited.

Alfonso
Set and Forget supply and demand trading community
  • #1,825
  • Sep 2, 2013 10:52am Sep 2, 2013 10:52am
Quoting panoramia
I took a quick pause and connected on my mobile to let you know that I will be recording a couple of new videos that will cover in detail these subjects: - how to enter a trade, wiggle room and padding - speedbumps. When to use them, with extensive examples on valid and non-valid speedbumps - IF THEN scenarios You are having es with speedbumps, so it's better to cover that on a video and clear all doubts. Next live webinar: I will be organizing a new live webinar this week, but I don't know which date yet. Those interested in attending send me a...

please Alfonso in your next video explain about your new rectangle indicator
  • #1,826
  • Sep 2, 2013 10:56am Sep 2, 2013 10:56am
Quoting panoramia
I took a quick pause and connected on my mobile to let you know that I will be recording a couple of new videos that will cover in detail these subjects: - how to enter a trade, wiggle room and padding - speedbumps. When to use them, with extensive examples on valid and non-valid speedbumps - IF THEN scenarios You are having es with speedbumps, so it's better to cover that on a video and clear all doubts. Next live webinar: I will be organizing a new live webinar this week, but I don't know which date yet. Those interested in attending send me a...
Alfonso

Looking forward to it. As well as your thinking on adding wiggle room etc, I'm interested in hearing what qualities makes a superior speedbump over one you might pass on, particularly whether the position of the speedbump formation with respect to prior price action accords them added reliability (for instance where the base in the speedbump formation corresponds to a position where supply overcomes previous demand at a prior swing low).

Huk
  • #1,827
  • Edited 11:48am Sep 2, 2013 11:33am | Edited 11:48am
From my understanding about speed bumps, they are traded in the direction of the current trend and we look for low in the HTF curve if you are buying and high in the HTF curve if you are selling.
We can rate them in the same way we rate a Supply/Demand zone.
We avoid buying too high in the curve & selling too low in the curve. All about risk - reward.

Watch this video about 17 mins:

Inserted Video
It never gets easier, you just get better
  • #1,828
  • Edited 12:14pm Sep 2, 2013 11:48am | Edited 12:14pm
CL-OIL short 4H supply at 107.88.

Weekly:

Attached Image (click to enlarge)
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4H:


Attached Image (click to enlarge)
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  • #1,829
  • Sep 2, 2013 12:29pm Sep 2, 2013 12:29pm
Quoting Axlz
CL-OIL short 4H supply at 107.88. Weekly: {image} 4H: {image}
Your WK level 106.49/110.52 has been violated, it is no longer valid.
Keep your blades sharp!
  • #1,830
  • Sep 2, 2013 12:33pm Sep 2, 2013 12:33pm
Quoting Nametaker
{quote} Your WK level 106.49/110.52 has been violated, it is no longer valid.
That's not how it works.

It may be violated, but it still caused price to reverse.

Look at gold daily supply. That's another example.

Attached Image (click to enlarge)
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  • #1,831
  • Sep 2, 2013 12:51pm Sep 2, 2013 12:51pm
Quoting Axlz
{quote} That's not how it works. It may be violated, but it still caused price to reverse. Look at gold daily supply. That's another example. {image}
Then you adjust it to the latest peak.
Keep your blades sharp!
  • #1,832
  • Sep 2, 2013 12:54pm Sep 2, 2013 12:54pm
Quoting Nametaker
{quote} Then you adjust it to the latest peak.
Oh really? Didn't know that. Thanks Nametaker.
  • #1,833
  • Sep 2, 2013 12:57pm Sep 2, 2013 12:57pm
Quoting Axlz
{quote} That's not how it works. It may be violated, but it still caused price to reverse. Look at gold daily supply. That's another example. {image}
That's exactly how it works according to Alfonso. Just read back a page for his answer on when a zone is no longer valid. A quick summary:

Quoting panoramia
{quote}The zone is no longer valid when it's been violated by as little as 1 pip. We don't wait for a close above or below the zone in order to consider a zone as a violation. We don't wait for a full OHLC candle above/below the zone.
So that spike up then reverse in price could mean the forming of a new fresh (and original?) zone once it absorsb some demand, but the previous supply zone is no longer valid for sure.
  • #1,834
  • Sep 2, 2013 12:59pm Sep 2, 2013 12:59pm
Quoting Ranagol
{quote} That's exactly how it works according to Alfonso. Just read back a page for his answer on when a zone is no longer valid. A quick summary: {quote} So that spike up then reverse in price could mean the forming of a new fresh (and original?) zone once it absorsb some demand, but the previous supply zone is no longer valid for sure.
That may be so, but price still reversed, so my entry on CL-OIL is still valid.
  • #1,835
  • Sep 2, 2013 1:24pm Sep 2, 2013 1:24pm
Quoting Axlz
{quote} That's not how it works. It may be violated, but it still caused price to reverse. Look at gold daily supply. That's another example. {image}
This is how my WK gold looks.
Attached Image (click to enlarge)
Click to Enlarge Name: gold wk.png Size: 101 KB


I like the look of that supply on H4 for a temporary short. I would look higher up, closer to the WK supply for a larger profit though.
Attached Image (click to enlarge)
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NT
Keep your blades sharp!
  • #1,836
  • Sep 2, 2013 2:02pm Sep 2, 2013 2:02pm
Quoting Axlz
{quote} That may be so, but price still reversed, so my entry on CL-OIL is still valid.

Perhaps. But it is not what is being taught in this method.

When price penetrates a supply level it will likely exhaust remaining sell orders. Market makers have to take these sell orders. However they are likely waiting at the next demand level to push price to a higher high.
  • #1,837
  • Sep 2, 2013 2:07pm Sep 2, 2013 2:07pm
Quoting Winston Reed
{quote} Perhaps. But it is not what is being taught in this method. When price penetrates a supply level it will likely exhaust remaining sell orders. Market makers have to take these sell orders. However they are likely waiting at the next demand level to push price to a higher high.
So you think that we should look for longs at the next lower TF demand zones?
  • #1,838
  • Sep 2, 2013 2:19pm Sep 2, 2013 2:19pm
Quoting Axlz
{quote} So you think that we should look for longs at the next lower TF demand zones?

I don't have an oil chart so It's difficult to make a proper evaluation. Alfonso talks about validating levels. For example if price moves into a strong supply zone for the first time then a set and forget short trade may be possible. However, until price consumes a demand level on the same time frame the level may still be in question. So looking at your short trade one might consider that demand is in control and by fully penetrating the supply level (from which you shorted) has now invalidated that level as supply. So looking for longs at demand may be more logical. This all needs to be taken in the context of higher time frames and such.
  • #1,839
  • Sep 2, 2013 3:09pm Sep 2, 2013 3:09pm
Quoting Nametaker
{quote} This is how my WK gold looks. {image} I like the look of that supply on H4 for a temporary short. I would look higher up, closer to the WK supply for a larger profit though. {image} NT
In my charts, W1 and D1 look diferent.

This is Daily:

2 levels highlighted with elipses with too much trading, so I used as D1 supply level the zone just between those 2 levels. Only 4 candles. Three last candles were within the range of the first, and then price went down.

I know this ain't look like a base with at least a candle with an opposing color, but because I have two accounts with servers in different time zones, I'm aware that SD levels don't look the same in both accounts. Above H1, patterns are different, so I managed to also consider zones with a well defined range as base.

Now, think about it: This zone absorbed previous demand, and then wasn't tested in the next candles. (second elipse).

I'm not trying to change the rules, just wanted to point that out.
Attached Image (click to enlarge)
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  • #1,840
  • Sep 2, 2013 3:45pm Sep 2, 2013 3:45pm
Quoting jsr
{quote} In my charts, W1 and D1 look diferent. This is Daily: 2 levels highlighted with elipses with too much trading, so I used as D1 supply level the zone just between those 2 levels. Only 4 candles. Three last candles were within the range of the first, and then price went down. I know this ain't look like a base with at least a candle with an opposing color, but because I have two accounts with servers in different time zones, I'm aware that SD levels don't look the same in both accounts. Above H1, patterns are different, so I managed to also...
Do whatever works for you, mate.

This is my D1 XAU/USD chart.
Attached Image (click to enlarge)
Click to Enlarge Name: gold daily.png Size: 106 KB


Nick
Keep your blades sharp!
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