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Price Action made simple with Supply and Demand levels

  • #41
  • Oct 17, 2013 2:17pm Oct 17, 2013 2:17pm
When I first learnt about Supply & Demand I found it difficult to mark the relevant levels. These 2 indicators helped a lot. Once you have become more confident about identifying the levels just delete the indis. Hope it helps. Do not be fooled by the name of the first indi. It is a S&D indi.
Attached File(s)
File Type: mq4 SS_SupportResistance_v04b.mq4   25 KB | 2,992 downloads
File Type: ex4 II_SupDem v2.ex4   36 KB | 2,733 downloads
Cut your Losers short and let your Winners run.
  • #42
  • Oct 17, 2013 2:56pm Oct 17, 2013 2:56pm
Hi thomaas,

I am also interested in learning how you identify those setups of S&D too.

Does those indis that paint the S&D work fine? whats your comment about them? thx

IŽll eager to learn.

Thank you
  • #43
  • Oct 17, 2013 3:06pm Oct 17, 2013 3:06pm
Ok here my two cents:
I trade demo, lose most of the time so don't take me serious.

If you want GOOD SHORT videos you might want to check out this guys channel, it puts into video what thomaas writes about.
Inserted Video


Question for thomaas: Could you post before the fact, because I see skeptics coming up saying that hindsight bias for a level makes it easy to look backwards and say "oh look that was a nice level...." Most of my levels are bad, because... I don't know why, I hope your section on bad levels will help here.
In any case thank you for the good work so far. I'm in.

What do you think? Is it better to have runners from a supply level down to a demand level creating RRR of sometimes up to 1:7 or is it better to have a fixed 1:3. I heard that fixed Take-Profits perform better than runners. And besides that I am tempted to prefer your fixed TPs approach as BIG moves in the Forex market are really rare and even then it doesn't seem to be a very big one say 1:15 or more....

Out of 500 trades how much are winners and at what ratio when you look back to your record?

Could anyone elaborate on Levels like yesterday's close/high or weekly high/weekly close and how the interfere with S/D Levels?
Thank you

Take care
Demo only
  • #44
  • Oct 17, 2013 6:29pm Oct 17, 2013 6:29pm
There are a lot of questions here, I hope it's a good sign! Here's my attempt to answer them. And tomorrow I'll update the first post with information regarding "entry, take profit and stop loss".

Quoting ff2k
Hi Thomaas, Thanks for sharing this strategy and such clear explanation. Do you trade this on 1 hour TF only or also longer TFs ? ff2k
I use mostly a 1h TF. But it's always a good idea to look at higher time frames to have a better perspective of what's happening with the price.

Quoting zarkon
Hello Thomaas , thank you for this thread. I am following you. Is this the first steo on your method ? Gold 1 hour .Are this the levels we looking for? {image} i hope you can see it as i am totaly new in everything.
Welcome to this thread! The bottom level seems okay, although I don't like that there is only one strong candle, it's better when there are at least 2 or 3 of them. The upper level I don't understand it since I don't see any big price movement.

Quoting JF_Derzi
Is there a way to confirm the SD levels watching VOLUME ?
Maybe, but I don't use volume when I trade.

Quoting rtkwar
you have any page on facebook thomas or just twitter?
Just a Twitter account for now. You can follow me here: @Fx_Price_Action. I'll be posting more charts there soon.

Quoting dee50
When I first learnt about Supply & Demand I found it difficult to mark the relevant levels. These 2 indicators helped a lot. Once you have become more confident about identifying the levels just delete the indis. Hope it helps. Do not be fooled by the name of the first indi. It is a S&D indi. {file} {file}
I don't use MT4, so I can't say if these indicators are good. However I think that finding levels is quite easy, the hard part is filtering the bad ones.

Quoting bg_sunny
Question for thomaas: Could you post before the fact, because I see skeptics coming up saying that hindsight bias for a level makes it easy to look backwards and say "oh look that was a nice level...." Most of my levels are bad, because... I don't know why, I hope your section on bad levels will help here. In any case thank you for the good work so far. I'm in.
Yes, as I mentioned in the first post, I plan to talk about trade ideas. But finishing explaining my system and answering questions is more important for now I think.
  • #45
  • Oct 17, 2013 7:15pm Oct 17, 2013 7:15pm
Quoting bg_sunny
Is it better to have runners from a supply level down to a demand level creating RRR of sometimes up to 1:7 or is it better to have a fixed 1:3. I heard that fixed Take-Profits perform better than runners.
You can trail the SL at 1R behind the price ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #46
  • Edited 9:13pm Oct 17, 2013 8:52pm | Edited 9:13pm
thomas, you are on the right track.

to answer the question about S&D and hindsight, identifying these levels depends on the contract/market/pair. each move in different ways but generally all trade in a similar manner. the idea is that you anticipate large blocks of buyers or sellers as price approaches a certain level. such an anticipation would make you expect a certain reaction at said price level. if price does not react as you anticipated at that level, you should exit the trade. one can never know what will happen. there is risk involved in this business; you should think of it as cost of goods sold.

there are exceptions to the above. they depend on the actual price levels themselves. are there multiple potential entries within the same level? are there multiple levels in quick succession? which will be correct? depending on your risk tolerance and equity, you can do one, two or all at scaled stages. in any event, if you plan a trade and the plan gets FUBAR, protect your account first. do not be stubborn unless you have a tangible reason. ask yourself, what do I think it will do? but what COULD it do? example: yesterday, i thought x crude would do 0200/0205/0235. but i knew it COULD do 0320. so, i took my fills at said levels. sure enough, price ended up blowing through all of them. however, i knew that 0320 was in the cards so I saved ammo. I waited for more sellers in order flow and added 0290/0295, ready to double my position size or puke above 0320 highs. the top ended up being 0297. i positioned myself extremely well. today it did 0004, which is just less than 300 ticks in a 24 h period. there have been other examples where i was dead wrong. i was trying to call a top of NG and ended up losing a substantial amount of money when i finally called it quits. price kept steam rolling through what i thought it could do and started to approach areas that i thought it couldnt do.. trade idea totally invalidated. truthfully, i hung on way longer than I should have. bad trading, but its part of the business.

anticipate your risk in terms of margin requirements in the event that price does what it COULD do rather than what you think it will do. adapt your lot sizes accordingly. i would also add that trading S&D is a discretionary system. there are no hard and fast rules beyond initial order placement and how price feels once you are filled. all of the above are my opinions from some hard lessons over time.
Any prices quoted are futures
  • #47
  • Oct 17, 2013 10:37pm Oct 17, 2013 10:37pm
Quoting redteamgo
the idea is that you anticipate large blocks of buyers or sellers as price approaches a certain level. such an anticipation would make you expect a certain reaction at said price level. if price does not react as you anticipated at that level, you should exit the trade.
In order to avoid wrong anticipation, I would enter after price reacted at that level. In other words, I would look for a reversal pattern on the expected level then enter with momentum confirmation (break of that pattern).
MT4/MT5 EAs/Indicators/Alerts coder
  • #48
  • Oct 17, 2013 11:43pm Oct 17, 2013 11:43pm
Quoting thomaas
~~ However I think that finding levels is quite easy, the hard part is filtering the bad ones.
Yes, looking forward to your (and others) input on this one.
Good Trading
  • #49
  • Oct 17, 2013 11:47pm Oct 17, 2013 11:47pm
Quoting aud
{quote} Yes, looking forward to your (and others) input on this one.
The post just above yours (#47) may be one of the solutions to filter some bad levels.
MT4/MT5 EAs/Indicators/Alerts coder
  • #50
  • Oct 18, 2013 3:32am Oct 18, 2013 3:32am
Quoting redteamgo
that price does what it COULD do rather than what you think it will do.
Reminds me verymuch of The Black Swan Idea in which Taleb (author) is rather focusing on the consequences of the outcome rather than on predicting its (fuzzy) probabilities which is pointless (because we just can't predict complex things).

Makes me think what you just wrote.

Thank you
Demo only
  • #51
  • Edited 4:48am Oct 18, 2013 4:18am | Edited 4:48am
Quoting FerruFx
{quote} In order to avoid wrong anticipation, I would enter after price reacted at that level. In other words, I would look for a reversal pattern on the expected level then enter with momentum confirmation (break of that pattern).
definitely a valid strategy that I continue to use as well. i, personally, prefer not to use this for one main reason. if price does a major level then makes that initial favorable move only to find what is perceived to be temporary S/R and you plan entry on a retrace, you expose yourself to a less favorable entry, whether it is 5,10, or 20 ticks from that top tick level entry that could have been done. thus, if the price reversal extends beyond what you thought it would do, the likelihood of your ability to exit on a retrace in the event that you are wrong decreases. this hardly invalidates the method behind that entry, it is just a risk, which I think you are likely aware of.

this is really a function of identifying better levels for your initial entry and trusting them. yes, sometimes you are wrong but, once again, its the nature of the business.
Any prices quoted are futures
  • #52
  • Oct 18, 2013 4:21am Oct 18, 2013 4:21am
Quoting redteamgo
{quote} definitely a valid strategy that I continue to use as well. i, personally, prefer not to use this for one main reason. if price does a major level then makes that initial favorable move only to find what is perceived to be temporary S/R and you plan entry on a retrace, you expose yourself to a less favorable entry, whether it is 5,10, or 20 ticks from that top tick level entry that could have been done. thus, if the price reversal extends beyond what you thought it would do, the likelihood of your ability to exit on a retrace in the event...
Great point.
MT4/MT5 EAs/Indicators/Alerts coder
  • #53
  • Oct 18, 2013 4:22am Oct 18, 2013 4:22am
It sound to be a good trading system , im in already.
  • #54
  • Oct 18, 2013 5:56am Oct 18, 2013 5:56am
Count me in, am learning about these zones , need to practice more to pick the good ones
I Have Learned to Take Some Losses to Make Profits
  • #55
  • Oct 18, 2013 7:03am Oct 18, 2013 7:03am
just because price moved down or up rapidly does not mean the price will retrace back to the same level. it may not happen. in fact more often than not price keeps on going the same way. so bare that in mind.
  • #56
  • Oct 18, 2013 7:05am Oct 18, 2013 7:05am
Quoting whatfx
just because price moved down or up rapidly does not mean the price will retrace back to the same level. it may not happen. in fact more often than not price keeps on going the same way. so bare that in mind.
Yes of course ... and in this case, we won't have to make the wrong decision on the level!
MT4/MT5 EAs/Indicators/Alerts coder
  • #57
  • Oct 18, 2013 8:42am Oct 18, 2013 8:42am
Thomas, I noticed nothing said about the trend. Is this something that you consider? If so, which trend: daily, 4h, hourly. I only ask because part of my rules is to stay with the trend of the 4h. I use this as kind of an odds enhancer I guess.
  • #58
  • Oct 18, 2013 9:12am Oct 18, 2013 9:12am
This does not mean that there are people who failed to use those levels
That those levels is a bad idea
But there are people who can still make a profit using this method and other no
I know someone who collect one million dollars use only renko chart and i know other can't collect 10 pips
  • #59
  • Oct 18, 2013 9:34am Oct 18, 2013 9:34am
Quoting Riskit
Thomas, I noticed nothing said about the trend. Is this something that you consider? If so, which trend: daily, 4h, hourly. I only ask because part of my rules is to stay with the trend of the 4h. I use this as kind of an odds enhancer I guess.
Forget trends. Trends are illusions you create in hindsight. The market moves somewhere because: a) many small players go somewhere collectivly, sharing the same belief OR b) some player with big pockets sells/buys huge amounts.

If I asked you in 1918 after WW1 what would happen in 20 years you would give me the same answer as if I asked you today about it and that is (considering you are honest): "I don't know". you could never predict WW2. Why? Too many components, too complexly linked together...

You do not know what is behind a movement and you can never know if a trend continues or it is a false trend. This is why S/R is over estimated. No line ever holds (and please don't come and tell me it's about confluation zones, because then you would have to define the extent of such zones...). No line EVER.

Ask yourself the question that Northernstar asked here in the forum: Which time frame do you have to move to, in order to have a valid setup? None, cause it's all the same, there is noise everywhere.

I lived in France for 4 years without TV and newspaper. Everyday the government produced noise. How many decisions where made that impacted my life? One - Extra hours were no more tax free. One decision in 4 years. That is a big time frame and still there was incredibly much noise going on.
So please do not invalidate my statement about the lack of correctness of smaller time frames due to noise. NOISE IS EVERYWHERE.

Look, I'd rather lose my 1% risk on a 50 pip move against me in 20 min or 20 sec, thereby expecting a 155-170 pip payoff, all that in a M5 or M15 or M30 time frame, than waiting for the big 200 pip move (expecting a 650 pip payoff) on a H4 or D1... Why? because you do not get as good RRR on a bigger time frame than you get on smaller one, and most importantly you do not get them that OFTEN (even if you have some bad ones with you).

Likewise consider the fact that I hate being in the market for too long. I rather make my tax free 2 percent per trade in 45 min than in 2.5 days, but that's just me - impatient imperfect and with a tendency to be extremely arrogant.

Above all, you take less time to get a good sample size. See what we need here is confidence in what we do. Why? because we tend to lose more often than we win and psychologically the delayed payoff (even if oh-so-big) creates less pleasure than the constant little losses hurt us.
So if you have a sample size of 100 trades behind you with only 30 winners (same amount risked, say one unit) with an RRR of 1:3 it looks like this:
30x3 - 70x1= 90-70= 20 units.
This can take you 3 months or 10 months depending on the time frame you trade.
What you need and what I need is confidence through big numbers, that's the only way to survive the ups and downs.

I know I went from trends and rambled down to trading psychology but sorry, that's just again my two cents.

Take care
Demo only
  • #60
  • Oct 18, 2013 9:50am Oct 18, 2013 9:50am
Points noted. Trends are lagging, and a reflection of history. You never "know" what price is going to do, you can only "read" what price has done in the past.
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