Supply and demand in a nutshell by Alfonso Moreno | Page 119 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #2,361
  • Sep 13, 2013 2:37am Sep 13, 2013 2:37am
Quoting panoramia
On the EURUSD, things are not looking good, there is nothing we can do according to the rules... We need some IF scenarios in order to trade the EURUSD on H4. H4 SHORT: I would short on the H4 purple supply zone (purple because it's not valid supply yet) IF last week low (red beads and hozizontal line) are broken The trendline would be broken, but we are not in a higher timeframe D1 supply, so we'd not be allowed to short. We need those IF conditionsH4 LONGS: We would need to break higher and wait for brand new H4 FRESH demand areas We would be...
Hi Alfonso,

I'm new to this thread and haven't quite made my way fully through all of your videos yet (they are pretty awesome by the way). Hopefully the answer to this question isn't painfully obvious from previous posts in the thread that I haven't arrived at yet!

I was just looking at the chart you posted before for the EURUSD and would like to see what you think about the validity of the supply area I've shaded in (the 20 pip one). I think it's valid because the price did not linger very long at the level and moved aggressively downwards after leaving it.

The reason I ask is because (and I'm entirely open to the possibility or probability that I'm quite wrong) I feel that if that level is valid, I should be short on the EURUSD right now from the point at 1.33241. I also think that the fact that the weekly SD curve is presently sitting at around 74% (and would've been higher at the point of entry) supports the trade. You did say in that post that we shouldn't be short just yet because of the support gained from last week's low, however - does that mean you consider the EURUSD on the H4 chart to be in an uptrend at the present time?

If you could shed some light on this for me I would be very much appreciative!

- Mike
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Understanding yourself is synonymous with understanding the markets.
  • #2,362
  • Sep 13, 2013 2:38am Sep 13, 2013 2:38am
Quoting Reacto
Hi Alfonso, On the EURUSD analysis: I understand that you are saying, thanks for the explanation of your way of doing this, I'm learning a lot from this. I miss the H4 supply on your chart and the D1 supply above. I can see the H4 speed-bump would not be valid since it's against the trend, is this your reason for not drawing it? I don't see why the D1 level shout not be there {image}
Haha! It seems Reacto and I think very much alike...
Understanding yourself is synonymous with understanding the markets.
  • #2,363
  • Sep 13, 2013 2:46am Sep 13, 2013 2:46am
Welcome to the thread mjrsaunders, your at the best thread ever on trading, I'm just a bid longer here than you are, but learning a lot. I would advice you to take the weekend and start with the first post of Alfonso, so you get the information in a logical order instead of bits here and there. Than if there's time left, go through the webinar video's on Youtube.
  • #2,364
  • Sep 13, 2013 2:53am Sep 13, 2013 2:53am
Quoting Reacto
Welcome to the thread mjrsaunders, your at the best thread ever on trading, I'm just a bid longer here than you are, but learning a lot. I would advice you to take the weekend and start with the first post of Alfonso, so you get the information in a logical order instead of bits here and there. Than if there's time left, go through the webinar video's on Youtube.
Thanks mate, happy to be here

Yeah I've read through the first post but I definitely need to go over it again in more detail! Then it's the 119 page slog, bring it on
Understanding yourself is synonymous with understanding the markets.
  • #2,365
  • Sep 13, 2013 2:55am Sep 13, 2013 2:55am
Quoting Reacto
Hi Alfonso, On the EURUSD analysis: I understand that you are saying, thanks for the explanation of your way of doing this, I'm learning a lot from this. I miss the H4 supply on your chart and the D1 supply above. I can see the H4 speed-bump would not be valid since it's against the trend, is this your reason for not drawing it? I don't see why the D1 level shout not be there {image}
Quoting mjrsaunders
{quote} I was just looking at the chart you posted before for the EURUSD and would like to see what you think about the validity of the supply area I've shaded in (the 20 pip one). I think it's valid because the price did not linger very long at the level and moved aggressively downwards after leaving it. The reason I ask is because (and I'm entirely open to the possibility or probability that I'm quite wrong) I feel that if that level is valid, I should be short on the EURUSD right now from the point at 1.33241. I also think that the fact that the weekly SD curve is presently sitting at around 74% (and would've been higher at the point of entry) supports the trade. Mike {image}
Hi Robert! (I am also answering to mrjsaunders (Mike) with this post)

Let me explain why the D1 supply is not there and why the speedbump is not valid, I mean, "according to the rules" remember.

  1. Too much trading in the zone on that D1 area I've marked off on my D1 chart. Spiky
  2. I have 2 upper D1 zones for higher odds. The lower one at 1.3490ish is the retest of the original area on the left, it was a touch n go trade
  3. I am not going to draw the lower D1 "speedbump" which is just part of it when I do have an extreme which is the cause of the whole drop

The H4 speedbump supply you mention is not valid for several reasons:

  1. It goes against the current market dynamics on the H4 chart, the chart where the speedbump supply has been detected, that's one of our rules. You took that into account because you mentioned it
  2. It would not be valid either EVEN IF there was a valid D1 supply area, why? Another rule we have: Speedbumps are not good for reversals. Many will will work, but it's not higher odds. We want the extremes for reversals and turning points, not speedbump. What you can do is wait for a confirmation at the speedbump or higher. But not in this case because it's not located in a valid D1 supply zone

Hope that's clear! I am just following the rules. I know it's not easy sometimes, but it's just a matter of practice and practice and watching the charts looking for higher odds and super clear and obvious zones.

Alfonso

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Set and Forget supply and demand trading community
  • #2,366
  • Sep 13, 2013 3:07am Sep 13, 2013 3:07am
Quoting Axlz
AUDCAD 1H: Price bounced off of 4H demand zone in control and created new 1H demand. Time to go long? {image}
Remember what we talked yesterday night about negating that AUDCAD's H1 speedbump demand long you were planning Samir?
Exactly what happened! The H1 demand was taken out, no profit margin, no real departure. It was not higher odds. Could have it worked? FOR SURE. But not within the rules.

  1. The last week high (blue beads) with a H4 demand not being broken yet, was not taken out.
  2. Too high in the higher timeframe curve, bouncing off D1 supply. Buying is not even an option, as I explained yesterday
  3. Lots of room to reach opposing D1 demand
  4. Look where we are on the D1 timeframe. If the last month high (blue beads) are broken (h4 demand zone there), it's SELL TIME buddy

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H4 CHART:

  1. You could also see the last week/month high on the H1 chart, that consolidation
  2. If the 4 demand zone is broken, it's sell time. Lots of room to drop to opposing D1 zone

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Hope my analysis makes sense to you Samir and others!
Alfonso
Set and Forget supply and demand trading community
  • #2,367
  • Sep 13, 2013 3:13am Sep 13, 2013 3:13am
Thanks Alfonso, it's clear.
On my chart, an other broker, the level above was not touched by as much as 59 pips, but I did not take into account the fact that there was too much trading.

So we don't draw levels we do not want to take?
  • #2,368
  • Sep 13, 2013 3:16am Sep 13, 2013 3:16am
Quoting Reacto
Thanks Alfonso, it's clear. On my chart, an other broker, the level above was not touched by as much as 59 pips, but I did not take into account the fact that there was too much trading. So we don't draw levels we do not want to take?
Try to use the QUOTE button instead of the REPLY TO THREAD button so that ur answer is linked to the orignal post ok Robert?

If you don't want to use the area, don't draw it. If you still want to have it drawn (I do normally have those important ones), use a different color like purple. The purple color means "no zone for the curve%", you will still see the zone but won't be taken into account for the curve % calculation. That purple color can be another color by editing the Rectangle_Reader indicator properties and changing it to the color that you want or fits your template's background.

Alfonso
Set and Forget supply and demand trading community
  • #2,369
  • Sep 13, 2013 3:24am Sep 13, 2013 3:24am
Quoting panoramia
{quote} Remember what we talked yesterday night about negating that AUDCAD's H1 speedbump demand long you were planning Samir? Exactly what happened! The H1 demand was taken out, no profit margin, no real departure. It was not higher odds. Could have it worked? FOR SURE. But not within the rules. The last week high (blue beads) with a H4 demand not being broken yet, was not taken out. Too high in the higher timeframe curve, bouncing off D1 supply. Buying is not even an option, as I explained yesterday Lots of room to reach opposing D1 demand Look...

Hi Alfonso? It is that fresh h4 zone good to sell? D1 zone was hit but is not fresh, w1 its high in the curve
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  • #2,370
  • Sep 13, 2013 3:35am Sep 13, 2013 3:35am
Quoting bobyv87
{quote} Hi Alfonso? It is that fresh h4 zone good to sell? D1 zone was hit but is not fresh, w1 its high in the curve {image}
That area is not a valid H4 supply for me Boby, for one single reason: too much trading in the zone. But again, it's just my opinion based on the rules I've laid out on the thread, you can short up there, it's just that it does not follow the rules, it's a D1 used-up area and Monthly high is not taken out, there is a suppor there that needs to be taken out, price is doing nothing now.

  1. Too much basing and trading in the zone. There are H4 10 basing candles on that area, it's just too much. 5-6 are ok, 10 not in the rules
  2. The D1 supply area is used-up, 3 retests. Second didn't do much, the 3rd is playing out now
  3. The weekly supply area is MUCH higher. If you look at the weekly chart, it's just wicky candles right where we are now

In order to short, I want the last month high (blue beads) to be SOLIDLY broken in order to validate a short!
Alfonso

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Set and Forget supply and demand trading community
  • #2,371
  • Sep 13, 2013 3:39am Sep 13, 2013 3:39am
Alfonso, how do you get the text and the arrows on the uploaded screen shots?
It very handy
  • #2,372
  • Sep 13, 2013 3:42am Sep 13, 2013 3:42am
Quoting Reacto
Alfonso, how do you get the text and the arrows on the uploaded screen shots? It very handy
I use Jing, it's a free screenshot capture appication. http://www.techsmith.com/download/jing/

Download it from that link, install it, sign up with screencast.com and you will be able to capture and add those arrows and texts to your screenshots very easily. You can use the COPY button on Jing, and then use the UPLOAD SCREENSHOT at Forex Factory. No need to save any file, you use that button and CONTROL+V to paste it on your post Very handy! I use it ALL the time.

Alfonso
Set and Forget supply and demand trading community
  • #2,373
  • Sep 13, 2013 3:42am Sep 13, 2013 3:42am
Quoting panoramia
{quote} Remember what we talked yesterday night about negating that AUDCAD's H1 speedbump demand long you were planning Samir? Exactly what happened! The H1 demand was taken out, no profit margin, no real departure. It was not higher odds. Could have it worked? FOR SURE. But not within the rules. The last week high (blue beads) with a H4 demand not being broken yet, was not taken out. Too high in the higher timeframe curve, bouncing off D1 supply. Buying is not even an option, as I explained yesterday Lots of room to reach opposing D1 demand Look...
Hi i have a trade on audcad that i took yesterday after WK D1 supply touched then break of H1 TL. Can you please review and share your thoughts, thanks Wayne.
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  • #2,374
  • Sep 13, 2013 3:50am Sep 13, 2013 3:50am
Quoting wbh
{quote} Hi i have a trade on audcad that i took yesterday after WK D1 supply touched then break of H1 TL. Can you please review and share your thoughts, thanks Wayne.{image}
Hi Wayne,
Your H1 short trade on AUDCAD makes perfect sense. Congratulations!You followed the rules. On H4 there was no valid trade, and there is no valid trade now because of the basing area, it's too many candles and used up D1 supply now, as mentioned in my previous post.

The only issue about your trade is that there is no Weekly supply over there, the weekly is just wicks all over, compressed supply. The decision to short on H1 was after H1 trendline break was perfect, congratulations. The only thing is that there is no Weekly supply (trade is good with D1 supply in mind) and the H1 supply level you have drawn is not correct, you didn't cover the whole area (highs), you have to protect the highest high with some padding above the SL as explained on my video on how to pre-plan a trade.

The H1 level was bigger that the one you drew.
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Look at the weekly chart. There is no valid supply there on the Weekly chart, it's just wicks all around, compressed weekly supply, not good!
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Hope it makes sense to you!
Alfonso
Set and Forget supply and demand trading community
  • #2,375
  • Sep 13, 2013 4:00am Sep 13, 2013 4:00am
Quoting panoramia
{quote} You confirmed my suspicions with that question! You are not only over-analyzing but you want to super-over-analyze and overtrade. You told me you are like 15 hours in front of the computer. That's the biggest mistake a trader can ever make! Do not add more pairs or CFDs to your list, do just the opposite, remove them! Some days like this week, it will be slow and there won't be high odds trades. You know what you need in order to achieve 15% a month? Just a few good trades, not 200! Concentrate on clear setups! Alfonso P.S In the meantime,...

Alfonso!! I thik exactly the same. My goal is Forex trading will provide me time for travel, enjoy life and make music (I play guitar and keyboards, and do my own songs with computer), money is just a way not an end. I'm absolute fan of your plan, but I don't know if I can reach it. So many obstacles. Mainly inside my mind I guess...

Too many doubts but one thing it's on my side: I'm stubborn, allways I got what I proposed!


See you forward at the webinar. Thanks for all!!
(Regards the OTA affairs, I just remind here: "what doesn't kills you makes you better and stronger")
  • #2,376
  • Sep 13, 2013 4:01am Sep 13, 2013 4:01am
Quoting panoramia
{quote} {quote} Hi Robert! (I am also answering to mrjsaunders (Mike) with this post) Let me explain why the D1 supply is not there and why the speedbump is not valid, I mean, "according to the rules" remember. Too much trading in the zone on that D1 area I've marked off on my D1 chart. Spiky I have 2 upper D1 zones for higher odds. The lower one at 1.3490ish is the retest of the original area on the left, it was a touch n go trade I am not going to draw the lower D1 "speedbump" which is just part of it when I do have an extreme which is the...

Thanks for the speedy reply!

I think I understand... still pretty fuzzy on some of the intricacies of the rules but I'm sure I'll get the hang of it soon.
Understanding yourself is synonymous with understanding the markets.
  • #2,377
  • Sep 13, 2013 4:04am Sep 13, 2013 4:04am
Quoting forexdaist
{quote} Alfonso!! I thik exactly the same. My goal is Forex trading will provide me time for travel, enjoy life and make music (I play guitar and keyboards, and do my own songs with computer), money is just a way not an end. I'm absolute fan of your plan, but I don't know if I can reach it. So many obstacles. Mainly inside my mind I guess... Too many doubts but one thing it's on my side: I'm stubborn, allways I got what I proposed! See you forward at the webinar. Thanks for all!! (Regards the OTA affairs, I just remind here: "what doesn't kills...
Thanks for your kind words Toni.

You are absolutely right there! A trading plan is not a plan if you don't have a personal goal in your life. Money can't be and shouldn't be your goal, but a means to achieve your dreams and fullfil your passions.

The problem is that most people don't get what they want because they don't know what they want. How can you reach your goals if you don't know what your passions are? Passion is the fuel of all your actions in life!

Fill your plan with passion and goals that will help fullfil those passions. Trading should be a boring means to get there. But it's not easy! We need not to give up!
Alfonso
Set and Forget supply and demand trading community
  • #2,378
  • Sep 13, 2013 4:42am Sep 13, 2013 4:42am
Hi Alfonso,

I realized that even though rules are rules, sometimes certain scenarios still make me feel uncomfortable. USDCHF from my previous post is one example, and thankfully I didn't take it or it would have been a loss. Silver H1 now is another such scenario.

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I wonder what you'll do in the case of Silver where we have one level very close to another. My guess is that there is no right answer, because price could turn at either zone, and there are pros and cons no matter what you do.

Take only lower zone - Pros: Price turns there and we get a winner. Cons: Price decides to move higher and we get stopped out
Take only upper zone - Pros: Price moves past lower zone, turns at upper zone and we get a winner. Cons: Price turns at lower zone and we miss out
Take both zones - Pros: We're guaranteed an entry. Cons: Price shoots above both zones and we get a 2R loss.

I'm just curious to know if you have a rule for such scenarios. Personally I'm taking the upper zone only and taking the risk of missing out if price should turn at the lower zone.
  • #2,379
  • Sep 13, 2013 4:56am Sep 13, 2013 4:56am
Thanks for your posts Alfonso.

I have removed the H1 TF from my bars, and only have H4/D1/WK/MN.

For 15% return per month, I only need 3 trade of 1:5 RR per month, which should be easy If I only take clear H4/D1 setups. Perhaps I can even achieve higher returns, but I will not push it. I will just follow the rules and let it happen.

And I will only look at the charts 3 hours a day and then set my limit orders. Then I will exit MT4. I really do believe my issue is wanting to overtrade, and therefore taking suboptimal setups, and giving profits back to the market because of it.

After all, there are FAR more than 3 good, clear setups on the H4/D1 per month, and all I need is 5% on each of them (risking 1%), in order to make 15% per month.

Thanks.

EDIT: Also, do you think H4 is the most profitable TF to use? Is that why you suggest it over H1?
  • #2,380
  • Sep 13, 2013 4:59am Sep 13, 2013 4:59am
Quoting Myst1z
Hi Alfonso, I realized that even though rules are rules, sometimes certain scenarios still make me feel uncomfortable. Silver H1 now is another such scenario. {image} I wonder what you'll do in the case of Silver where we have one level very close to another. My guess is that there is no right answer, because price could turn at either zone, and there are pros and cons no matter what you do. Take only lower zone - Pros: Price turns there and we get a winner. Cons: Price decides to move higher and we get stopped out Take only upper zone - Pros: Price...
This is the scenario we have on Silver H1.

  1. We have a descending trendline. Which levels would be valid on H1? You already know the answer
  2. Rules are rules! They are there to be followed or the statistics will be broken and no odds on your side, it will be "gambling" and no trading, you know what I mean

Level on top of levels is always a problem! The top one has better odds, since the previous ones would already be taken out. But in this case, the top one won't be valid because of the TL.

Alfonso

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