Supply and demand in a nutshell by Alfonso Moreno | Page 141 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #2,801
  • Sep 23, 2013 4:04pm Sep 23, 2013 4:04pm
Quoting panoramia
{quote} Hi Greg! As far as that NZDUSD H4 long, if price reaches your entry it will most likely have a full OHCL candle closed underneath the TL. If it drops fast it could be an entry. I am using TLs in order to filter my entries. IF that H4 demand area (I didn't check NZDUSD chart today) is at D1 demand area, then the TL is no longer valid. Once a Higher TF is reached the lower timeframe's Trendlines are negated, because at those HTF is where we expect price to bounce. Hope that helps a bit! Alfonso
Thanks for your response Alfonso. As you can see by my post under your response i am still having some problems with entry TF trend lines. I know I don't have your experience, but I just don't see that many retracements that stay within the trend line direction. If trend line is too steep they don't fall in and if too shallow they are not valid levels to trade off of but I will be patient, I promise

Regards, Greg
  • #2,802
  • Sep 23, 2013 6:12pm Sep 23, 2013 6:12pm
Hey Alfonso, why is it that a break through a trend line automatically means a change in trend? For example, in your video you went over this instance in the Aus/Cad. I don't understand why we couldn't take a long from the nearest demand level since supply hasn't taken out demand when a trend line breaks. Or for any example in that matter, if there hasn't been any absorption of the opposing force, why let a trend line change the focus?

ibfx mt4.png

Price was rising on the Daily, about 50% towards the Daily Supply. As the picture shows here, you mentioned the trend line broke so longs are not valid anymore. But I don't see why you would change your focus to shorts. Does the steepness of the trend line have anything to do with things? Steep lines like the one in the picture can't be expected to rise like that without some sort of pullback, allowing us to get in long.
I was just hoping for understand the concept behind this. Thanks a lot!
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  • #2,803
  • Sep 23, 2013 6:55pm Sep 23, 2013 6:55pm
Quoting UpComerFX
Hey Alfonso, why is it that a break through a trend line automatically means a change in trend? For example, in your video you went over this instance in the Aus/Cad. I don't understand why we couldn't take a long from the nearest demand level since supply hasn't taken out demand when a trend line breaks. Or for any example in that matter, if there hasn't been any absorption of the opposing force, why let a trend line change the focus? Price was rising on the Daily, about 50% towards the Daily Supply. As the picture shows here, you mentioned the...
I'll try to answer this, anyone feel free to correct me if I'm wrong.

Breaking the trend line doesn't automatically mean a change in trend. As you've said in your example, price hasn't taken out any demand yet, so longs could still be valid. It just means a rule in the strategy has been broken, so longs are no longer higher odds, BUT they could still work. This strategy revolves around finding the best possible entries, filtering out anything that has lower odds. By breaking the trendline the picture in AUDCAD is "unclear" now, so we should stay away until we see the continuation of the current trend, or opposing zones being absorbed. In the meantime, there are a lot of opportunities on other pairs.

Or simply add another rule to your trading, but backtest and forward test it first to see if you will benefit from it long term.

I hope this helps!
  • #2,804
  • Sep 23, 2013 7:40pm Sep 23, 2013 7:40pm
Quoting UpComerFX
Hey Alfonso, why is it that a break through a trend line automatically means a change in trend? For example, in your video you went over this instance in the Aus/Cad. I don't understand why we couldn't take a long from the nearest demand level since supply hasn't taken out demand when a trend line breaks. Or for any example in that matter, if there hasn't been any absorption of the opposing force, why let a trend line change the focus? ibfx mt4.png Price...
Hi Upcomingfx, the exact same question has been bugging me for some time too! Trend lines have different gradient, and steep trend lines are almost certain to be broken even upon a small retracement. However that shouldn't mean the trend has changed, at least not until some S/D zone has been taken out. If we were to filter out trades just because a trend line has been broken, we might miss out on potentially good trades.

I guess what I'm trying to ask is: Is the trend line rule a mandatory one (meaning once up trend line is broken, no more longs even if demand has not been taken out yet), or is it an optional one (like what Ranagol mentioned, a broken trend line only lowers the odds of the trade but it is still tradable)

Hopefully Alfonso can drop some clarification on this.
  • #2,805
  • Sep 23, 2013 9:40pm Sep 23, 2013 9:40pm
Quoting bzzz
{quote} thank's for reply so if i understand your decision to sell has been made on the fact that both of monthly and weekly are in a sell mode but what i don't get is the entry level,TP,SL
Hello Bzzz,

Your entry level time frame is used as entrance.

Let's use H4/D1 combination as an example.

Price touches D1 supply and bounces off. We switch to H4, and we see price is now in a downtrend, as it has violated a H4 demand zone, and has a full candle OHLC below the trendline.

We now wait for price to retrace to valid H4 supply zones (speedbumps or peaks), and we then go short at those points. This is our entry.


Our TP would be set slightly above the next higher time frame (Daily) demand area, as this is most likely where price is going to reverse.
  • #2,806
  • Sep 23, 2013 10:08pm Sep 23, 2013 10:08pm
Quoting Tok
{quote} Hello Bzzz, Your entry level time frame is used as entrance. Let's use H4/D1 combination as an example. Price touches D1 supply and bounces off. We switch to H4, and we see price is now in a downtrend, as it has violated a H4 demand zone, and has a full candle OHLC below the trendline. We now wait for price to retrace to valid H4 supply zones (speedbumps or peaks), and we then go short at those points. This is our entry. Our TP would be set slightly above the next higher time frame (Daily) demand area, as this is most likely where price...

Hi Tok,
I want to make sure I understand this because I've been doing this wrong. I always set my TP based on the entry level TF (demand area in this example) not the next HTF. I realize that price is more likely to bounce at HTF but I also thought all valid opposing entry TF levels (except CP) were good places for price to bounce.
Greg
  • #2,807
  • Sep 23, 2013 10:25pm Sep 23, 2013 10:25pm
How significant a role have you guys seen Weekly Speedbumps play? I see how price reacted bearishly to it, however I'm not sure if my analysis should continue in favor of the supply or the demand. It is the Weekly chart so it holds power in its own. Before price double-bottomed the Weekly Demand, it was Fresh and...maybe original. I'm not quite sure on sure on that.
The US Index, according to its highly correlate Usd/Chf, has reached a Weekly Support so putting the two together could force the Aussie downwards, but this could take sometime.

EDIT: On my Usd/Chf I noted "Weekly Supply has absorbed recent low." That means the Supply came in and absorbed the Demand on the way down to the Weekly Demand.
Thanks Ranagol for the response. That sort of cleared things up a little, allowing me to analyze without the doubt. Thanks Myst1z as well, good to know I wasn't the only one stuck on trend lines.
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  • #2,808
  • Sep 24, 2013 12:08am Sep 24, 2013 12:08am
Quoting Nvrgvup
{quote} Hi Tok, I want to make sure I understand this because I've been doing this wrong. I always set my TP based on the entry level TF (demand area in this example) not the next HTF. I realize that price is more likely to bounce at HTF but I also thought all valid opposing entry TF levels (except CP) were good places for price to bounce. Greg
Hey Greg,

That's not the case. Once a HTF supply/demand is in control (Daily), we can assume with higher than 50% probability that lower TF (H4/H1) opposite zones will be violated, UNTIL you reach the opposing HTF zone.

We're essentially playing a "back-and-forth" game between the HTF extremes.
  • #2,809
  • Sep 24, 2013 1:46am Sep 24, 2013 1:46am
Hi Alfonso,

We have discussed the EURNZD short order in the webinar and later on the thread. Tomorrow the NZ Trade balance is coming out, and on Friday ANZ Business Confidence, would you based on this news:
a. cancel your order if your not in yet?
b. close the order if you are already in?
  • #2,810
  • Sep 24, 2013 1:55am Sep 24, 2013 1:55am
Quoting Tok
{quote} Hello Bzzz, Your entry level time frame is used as entrance. Let's use H4/D1 combination as an example. Price touches D1 supply and bounces off. We switch to H4, and we see price is now in a downtrend, as it has violated a H4 demand zone, and has a full candle OHLC below the trendline. We now wait for price to retrace to valid H4 supply zones (speedbumps or peaks), and we then go short at those points. This is our entry. Our TP would be set slightly above the next higher time frame (Daily) demand area, as this is most likely where price...
many many thank's Tok, theoretically it make sense now but please would you be more specific and show me what demand zone and what trendline are you talking about,and i am not sure i understand the meaning of "speedbump" thank you Tok for your patience
better be not enough salt than too much salt
  • #2,811
  • Sep 24, 2013 2:33am Sep 24, 2013 2:33am
Quoting UpComerFX
Hey Alfonso, why is it that a break through a trend line automatically means a change in trend? For example, in your video you went over this instance in the Aus/Cad. I don't understand why we couldn't take a long from the nearest demand level since supply hasn't taken out demand when a trend line breaks. Or for any example in that matter, if there hasn't been any absorption of the opposing force, why let a trend line change the focus? ibfx mt4.png Price...
A couple of things on your screenshot and your rationale:

  1. The trendline you drew is not well painted, why? Consolidation patterns (CP) are not taken into account in order to draw a trendline, it's described in a couple of videos as well as Post #1, those are the rules
  2. If you considered CP as part of a trendline then you would almost never have an entry. A CP is not part of the trend, it's not a pause or a reversion to the mean, it's just a form of extreme imbalance, price could not revert to the mean
  3. I never said on the posts that if an ascending trendline is broken you can switch to shorts There are rules for that. If an ascending TL is broken to the down side, that means that longs are temporarily not possible UNLESS 1) we reached a fresh higher timeframe demand area or 2) We break higher, taking out previous supply (highs) or resistance
  4. On the 1st post there are clear rules about that. You can't and shouldn't reverse the trade direction just because the TL is broken, I am very specific in some of the webinars as well as on Post #1

Alfonso

Set and Forget supply and demand trading community
  • #2,812
  • Sep 24, 2013 2:49am Sep 24, 2013 2:49am
Quoting Ranagol
{quote} I'll try to answer this, anyone feel free to correct me if I'm wrong. Breaking the trend line doesn't automatically mean a change in trend. As you've said in your example, price hasn't taken out any demand yet, so longs could still be valid. It just means a rule in the strategy has been broken, so longs are no longer higher odds, BUT they could still work. This strategy revolves around finding the best possible entries, filtering out anything that has lower odds. By breaking the trendline the picture in AUDCAD is "unclear" now, so we should...
That's a very clear way of explaining one of the TL rules, it's exactly like that. A trendline break might just be a bigger correction in that timeframe in the direction of a higher timeframe SD area. The break of a TL keeps you out of the trade, we use it to filter out higher probability entries as described in post #1.

Thanks for your message!
Alfonso
Set and Forget supply and demand trading community
  • #2,813
  • Edited 3:28am Sep 24, 2013 3:11am | Edited 3:28am
I am short on NZDCAD, we are high on both the D1 and WK curve.

  1. Price hit D1 supply area at the proximal like of a Weekly supply zone
  2. I was a bit late since I was not tracking this pair on my spreadsheet

Now price is breaking lower and it looks like it could give us some H1 shorts on the way down. Price might want to distribute at the zone for some days maybe, or a reaction to some NZD or CAD news. We'll see what happens.

If price retraces to the area weekly I will be looking for other shorts opportunities. I don't have good Monthly history, I just drew the MN supply I zone, but there might be some history prior to that

Alfonso

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Set and Forget supply and demand trading community
  • #2,814
  • Edited 4:45am Sep 24, 2013 3:27am | Edited 4:45am
Quoting Myst1z
{quote} Hi Upcomingfx, the exact same question has been bugging me for some time too! Trend lines have different gradient, and steep trend lines are almost certain to be broken even upon a small retracement. However that shouldn't mean the trend has changed, at least not until some S/D zone has been taken out. If we were to filter out trades just because a trend line has been broken, we might miss out on potentially good trades. I guess what I'm trying to ask is: Is the trend line rule a mandatory one (meaning once up trend line is broken, no more...
Let me reply to your question, a doubt that many of you have certainly.

A trendline break is not a MANDATORY rule. A TL break is just a way of filtering out certain zones in a mechanical way, a simple way to mechanically and consistently filtering out levels.

You can decide not to use TLs to filter out levels, it's up to each of you. I do use them because I've tested them and even though I will miss some nice opportunities, I know that it will keep me out of lots of losses.

I placed all that on a balance and I decided that I prefer to use the TLs for these 2 reasons:

  1. TLs allow me to filter out levels in a very mechanical way
  2. The use of TLs practically remove all of the emotion when picking up a level

If those reasons are not enough for you, then you can skip the use of Trendlines (there are several rules about it on Post #1 depeding on where the TL is located).

Each trader has to find what it fits him the best to his style. You can use whatever varaible or methodology to filter out SD levels. I am using TLs and the curve. But be careful with what you use or stop using. Before adding a new rule to your set of rules, you first need to test it over and over and over for a decent period of time, with a minimum of 500 samples... then make a decision!

I can't control that, so it's up to each trader out there to decide. You all know what rules I use and why I use them. You can follow them or you can add new ones, it's all up to you


Alfonso

Set and Forget supply and demand trading community
  • #2,815
  • Sep 24, 2013 3:29am Sep 24, 2013 3:29am
Quoting Reacto
Hi Alfonso, We have discussed the EURNZD short order in the webinar and later on the thread. Tomorrow the NZ Trade balance is coming out, and on Friday ANZ Business Confidence, would you based on this news: a. cancel your order if your not in yet? b. close the order if you are already in?
That EURNZD H4 short you mentioned at 1.6225 almost happened on the first pullback. When price drops from a near missed area and does not break lower it's not a good signal. My trade was removed from the zone when I saw it was missed by 4-5 pips I beleive. Tonight there will be the NZD Trade Balance news, that is not a super big impact news, but stay tuned. I have no orders on EURNZD now. Waiting for some clear setups.

Alfonso
Set and Forget supply and demand trading community
  • #2,816
  • Sep 24, 2013 3:35am Sep 24, 2013 3:35am
CADCHF has been dropping from higher timeframe supply area but it didn't give a single H4 entry, nor a H1 entry. Pity because it's been a nice drop. It was too wicky at the top as you can see on the attached chart. Still room left to opposing D1 non-fresh demand area. Let's see what CADCHF has in store for us.

Alfonso
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Set and Forget supply and demand trading community
  • #2,817
  • Sep 24, 2013 4:57am Sep 24, 2013 4:57am
Looking to short GBPUSD on H1 CP IF 1.5950, previous H1/H4 demand is taken out. The H1 CP supply will not be validated for a short UNLESS previous demand is taken out. There has been no opportunity to short the pound since it hit D1 supply area (I missed that one, a friend of mine took it, he's still holding it, lucky him).

That H1/H4 demand level where price is at now is got a great imbalance, it could work pretty well. But it's too high in the curve, so I am not allowed to go long at it. Rules!

We're too high in the Monthly curve, bouncing off Monthly supply and D1 supply, longs are not allowed.
Alfonso
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Set and Forget supply and demand trading community
  • #2,818
  • Sep 24, 2013 5:59am Sep 24, 2013 5:59am
Looking to short GBPJPY on H1 supply area.

  1. Price is bouncing off Monthly Supply. Too high in the curve for longs
  2. There was no opportunity yet on H1. I had a try the other day on first H4 supply, but it was a loss

Let's see if price pulls back into that area and I get a nice trade out of it

Alfonso

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Set and Forget supply and demand trading community
  • #2,819
  • Sep 24, 2013 7:03am Sep 24, 2013 7:03am
Quoting panoramia
Looking to short GBPJPY on H1 supply area. Price is bouncing off Monthly Supply. Too high in the curve for longs There was no opportunity yet on H1. I had a try the other day on first H4 supply, but it was a lossLet's see if price pulls back into that area and I get a nice trade out of it Alfonso {image} {image}
Good Afternoon Alfonso
Just a view and a question?
Heres the same pair you are looking at I have drawn a higher stacked zone for interest.
You say price is Bouncing off monthly, as we speak it is breaking out. How would that influence a trade ? if any different from the normal rules.
I find your multi time frame method fantastic to see the HTF zones nice and clear on LTF and even as far as m30 or M5 the htf zones can be seen producing key levels (as lines) of interest.
Thanks for the insights
Photize
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  • #2,820
  • Sep 24, 2013 7:49am Sep 24, 2013 7:49am
Quoting photize
{quote} Good Afternoon Alfonso Just a view and a question? Heres the same pair you are looking at I have drawn a higher stacked zone for interest. You say price is Bouncing off monthly, as we speak it is breaking out. How would that influence a trade ? if any different from the normal rules. I find your multi time frame method fantastic to see the HTF zones nice and clear on LTF and even as far as m30 or M5 the htf zones can be seen producing key levels (as lines) of interest. Thanks for the insights Photize {image}
Hi Photize!
I have no interest on that area you marked off on your charts for gbpjpy, there is no imbalance there. The real imbalance is at the 34 pips supply area, strong departure, nice profit margin, little time at the level; it's also the level that broke even lower. Now we have a H1 downtrend, bouncing off Monthly supply. I just want to sell, no interest at all on buying GBPJPY. Impulses are NOW to the down side... Let's see what happens.

Alfonso
Set and Forget supply and demand trading community
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