Supply and demand in a nutshell by Alfonso Moreno | Page 173 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #3,441
  • Edited 5:00pm Nov 2, 2013 6:08am | Edited 5:00pm
Alfonso, thank you very much for your work. I have learned a lot about price action from your videos and the rectangle reader indicator is fantastic. May be this is a bit off-topic but I'm trying to make a check list for myself, may be somebody will find this useful as well, or would suggest to make some changes. Here it is

TREND
1. HTF - CURVE LOCATION - BEGINNING [AROUND 50% - WAIT TO BREAK OR BOUNCE] [END - LOOK FOR CONTER TREND]
2. HTF - OPPOSITE SD ZONES ARE BEING ABSORBED [RESPECTED - WAIT TO BE ABSORBED]
3. HTF - TRENDLINE - RESPECTED [BROKEN - WAIT FOR FRESH AND ORIGINAL SD ZONE]
4. CURRENT SD ZONE HAS ABSORBED LAST OPPOSITE SD ZONE [RESPECTED - WAIT TO ABSORB]
5. THERE IS ROOM TO NEXT SD ZONE [NO ROOM - WAIT TO ABSORB NEXT SD ZONE]
6. CURRENT SD ZONE IS FRESH [NOT FRESH - WAIT FOR FRESH ONE]
7. TAKE TRADE

COUNTER TREND
1. HTF - CURVE LOCATION - END [AROUND 50% - WAIT TO BREAK OR BOUNCE] [BEGINNING - LOOK FOR TREND]
2. LAST TREND 2 SD ZONES HAVE BEEN ABSORBED [RESPECTED - WAIT TO BE ABSORBED]
3. WE HAVE ROOM TO GO TILL NEXT SD ZONE [NO ROOM - WAIT TO ABSORB NEXT SD ZONE]
4. SD ZONE IS ORIGINAL [NOT - WAIT FOR ORIGINAL]
5. SD ZONE IS FRESH [NOT - WAIT FOR FRESH ONE]
6. THIS IS NOT A SPEED BUMP OF MOMENTUM CHANGE [YES - WAIT FOR NEXT ONE]
7. TAKE TRADE

+SHORT TIME HAS BEEN SPENT IN SD AREA
+EXPLOSIVE DEPARTURE FROM SD AREA
  • #3,442
  • Nov 2, 2013 6:31am Nov 2, 2013 6:31am
Quoting panoramia
{quote} Look at the GBPUSD scenario now, bouncing off the Monthly supply area and look at the H1 demand areas. Alfonso
I understand what you are saying Alfonso, don't get me wrong. I have learnt a lot from you - thanks for that.

On GBPUSD , I was already aware of Daily Supply in control from a huge pin bar rejection 2nd Jan 2103, where price also formed last weeks high & also last months high at this zone.

My concern is not to overload the chart with zones from too many timeframes and you get into paralysis analysis. I think this is where knowing where S&R levels are in terms of monthly, weekly & daily highs/lows are good to incorporate into S&D trading. For price to break these levels, there has to be new buyers/sellers entering the market, and you can find them with the formation of new S&D zones at the break of these levels.

eg. On GBPUSD, on breaking previous days low (thursday) 1.60045, a fresh supply zone formed at this level - you can see it on lower tf's such as 30m, which gets retested before the big drop.
Also on GU, last weeks low 1.61147 taken out on 29 Oct, a new supply zone formed there also - fallen 187 pips from there to form this weeks new low 1.5907

I always pay attention to Monthly, Weekly & Daily Highs & Lows as these levels are watched by all the pro traders.
It never gets easier, you just get better
  • #3,443
  • Nov 2, 2013 7:05am Nov 2, 2013 7:05am
Hi everyone, I made a couple trades this week, would like to hear your thoughts and critique.

First one CADJPY, supply was being respected and there was a pullback. We are also quite high on the 1D curve. Screen of 1H
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 55 KB


Second one USDCAD, high on the curve (check the D1, nice bounce from supply), sold on the touch, but got scared of a possible support in the H1. Screen of 1H
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 55 KB



I'd appreciate any thoughts or opinions, cheers.
  • #3,444
  • Nov 2, 2013 7:31am Nov 2, 2013 7:31am
Quoting panoramia
{quote}My D1 supply trade was right at the D1 proximal line, it looks like yours was a bit lower.{image} {image}

Hi Alfonso, I believe its broker server time difference and I do not have the MN supply area. But looking at the H4 entry and other areas (Wkly, D1), it's almost the same.

Have a nice weekend.
SMT, IPDA, Market Structure
  • #3,445
  • Nov 2, 2013 7:34am Nov 2, 2013 7:34am
Quoting Shabs19
{quote} The clear differences are in this article: http://www.fxstreet.com/education/re...es/2011/04/05/ It is like saying a trendline is the same as a moving average. You can get the same info from both, but the methodology of how they are drawn is very different.

Its all the same, again you can package it call it something different all you want. Your demand supply boxes always happen to be right at s/r levels.

Its all the same!!!
  • #3,446
  • Nov 2, 2013 7:47am Nov 2, 2013 7:47am
Quoting Deitreider
{quote} You are right Shabs. I´m sorry for not being specific. What I actually meant to ask was how many candles of look-back would be enough? Should this be the same on all timeframes?

I believe, this will be difficult to spot the specifics on how many candles to look back locating SD levels. The approach in locating SD levels is discretionary on trader's style and judgement.

I myself starts from my HTF which is Weekly trickling down to H4 as my entry (Top-Down).
SMT, IPDA, Market Structure
  • #3,447
  • Nov 2, 2013 7:52am Nov 2, 2013 7:52am
Quoting lonewolf1
{quote} Its all the same, again you can package it call it something different all you want. Your demand supply boxes always happen to be right at s/r levels. Its all the same!!!
Ok lonewolf1... we understand, anyone is entitled to its own opinion.

Have a nice weekend
SMT, IPDA, Market Structure
  • #3,448
  • Nov 2, 2013 8:10am Nov 2, 2013 8:10am
If all of You may, I have one more question about look-back. How many candles of look-back would be enough? Should this be the same on all timeframes? I understand that on longer timeframes lookback is longer in terms on time, but is there an approximate number of candles on each timeframe beyond which you don't look for levels?
  • #3,449
  • Nov 2, 2013 8:29am Nov 2, 2013 8:29am
Quoting Deitreider
If all of You may, I have one more question about look-back. How many candles of look-back would be enough? Should this be the same on all timeframes? I understand that on longer timeframes lookback is longer in terms on time, but is there an approximate number of candles on each timeframe beyond which you don't look for levels?
That question is irrevelant You look back as MUCH time as you need to do. Number of candles = a measure of time.

If you have to look back as much time as needed on any timeframe --> THEN --> number of candles is irrelevant

Alfonso
Set and Forget supply and demand trading community
  • #3,450
  • Nov 2, 2013 8:32am Nov 2, 2013 8:32am
Ok, thanks for clearing that up!
  • #3,451
  • Nov 2, 2013 8:44am Nov 2, 2013 8:44am
@lonewolf
You wanted to know the difference, I gave it to you. You have your opinion that's fine by me.

@Deitreider
I would zoom out on the current chart I am looking at, keep doing it until you see as much history as you want to see, this will help you see all the major turning points. Draw horizontal lines at these points & then zoom back in to find S&D zones and find the nearest supply & Demand in control.
It never gets easier, you just get better
  • #3,452
  • Nov 2, 2013 8:57am Nov 2, 2013 8:57am
Sry, but I have one more question. This time about time spent when forming a new SD level. Is there a maximum amount of candles spent when forming a new level?
  • #3,453
  • Nov 2, 2013 9:00am Nov 2, 2013 9:00am
Quoting lonewolf1
{quote} Its all the same, again you can package it call it something different all you want. Your demand supply boxes always happen to be right at s/r levels. Its all the same!!!
We're all free to think different, that's the beauty of life

I see both SD and SR are very different, the fact that a SR price matches a SD zone does not mean that they are the same

Make this test:

  1. Draw a random horizontal line on any timeframe and/or pair
  2. Zoom out and scroll your chart, that Horizontal Line (SR liine) will ALWAYS be a SR in history, make that test and you will see. I have done this trest hundreds of times
  3. If you do the same with SD it will not happen the same, because SD looks at present imbalances without cutting through candles, SR cuts through candles. This is a key difference

But again, this is my own view, SD and SR are completely different even though many times they can match. But that's up to each of you to interpret as you like. I do trade SD and not SR which is by definition completely different.

Set and Forget supply and demand trading community
  • #3,454
  • Nov 2, 2013 1:00pm Nov 2, 2013 1:00pm
Quoting Deitreider
Sry, but I have one more question. This time about time spent when forming a new SD level. Is there a maximum amount of candles spent when forming a new level?
Read this part of post #1:

HOW TO VALIDATE A LEVEL
The only reason why price moves in any and all markets is because of an imbalance in supply and demand. The greater the imbalance, the greater the move.
It never gets easier, you just get better
  • #3,455
  • Nov 2, 2013 1:30pm Nov 2, 2013 1:30pm
Quoting Shabs19
Read this part of post #1: HOW TO VALIDATE A LEVEL The only reason why price moves in any and all markets is because of an imbalance in supply and demand. The greater the imbalance, the greater the move.
I have read the "HOW TO VALIDATE A LEVEL" part in the first post and that is where I get my question. In the 1st post it is written: "Time spent at the level. The less time prices spends at a level, the better. This indicates a greater supply and demand imbalance". I just wanted to ask if there is a maximum number of candles to consider a level irrelevat? For a systematic approach a rule like this would be helpful.
  • #3,456
  • Nov 2, 2013 1:59pm Nov 2, 2013 1:59pm
Quoting Deitreider
{quote} I have read the \"HOW TO VALIDATE A LEVEL\" part in the first post and that is where I get my question. In the 1st post it is written: \"Time spent at the level. The less time prices spends at a level, the better. This indicates a greater supply and demand imbalance\". I just wanted to ask if there is a maximum number of candles to consider a level irrelevat? For a systematic approach a rule like this would be helpful.
This part of the post is subjective, to what you consider time spent at the level. This will look different on a HTF compared with a LTF. You must decide for yourself, look at past S&D zones for the pair you are considering, what worked / did not work ? You will get a feel for the pair over time.

Remember, We want to pick only the best quality zones to trade from, so the bigger the imbalance, the better (more profitable) the move away will be when price returns to that zone.

The probability of a zone working out is greatest when all criteria have been met, not just time spent at the zone.
Don't expect every single zone to work either, Major News events can also affect your results.
It never gets easier, you just get better
  • #3,457
  • Nov 2, 2013 1:59pm Nov 2, 2013 1:59pm
Quoting Deitreider
{quote} I have read the \"HOW TO VALIDATE A LEVEL\" part in the first post and that is where I get my question. In the 1st post it is written: \"Time spent at the level. The less time prices spends at a level, the better. This indicates a greater supply and demand imbalance\". I just wanted to ask if there is a maximum number of candles to consider a level irrelevat? For a systematic approach a rule like this would be helpful.
The base (level) will consist of a maximum of 6 candle range before the big imbalance will takes place. More than 6 candle range will invalidate that level.
SMT, IPDA, Market Structure
  • #3,458
  • Nov 2, 2013 2:03pm Nov 2, 2013 2:03pm
Thank You for the answers
  • #3,459
  • Nov 2, 2013 9:47pm Nov 2, 2013 9:47pm
Hello, I am hoping to clear up a big area of confusion about what appears to be a conflict in the instructions. I feel like I must be missing some key idea, but I can't figure it out.

Many times through out the thread it has been stated that in order for a level to form (say a supply level) the opposing level (a demand level) must be absorbed/violated. This makes total sense to me. However, I've also observed many examples where this rule is not observed. For instance, the screen shot below is from this post: http://www.forexfactory.com/showthre...64#post6912364

In the screen shot you can see the level which was identified as a supply level and a trade taken off of it, but no opposing demand level was absorbed to qualify this as as valid supply level.

I hope someone can show me the error of my ways. Thank you.

Attached Image (click to enlarge)
Click to Enlarge Name: levels.png Size: 70 KB
  • #3,460
  • Nov 3, 2013 1:15am Nov 3, 2013 1:15am
Anyone thinking of trading AUDNZD this week?

I am considering going long because of the following - What am I seeing?

1) On Weekly Big Picture TF
- Curve is at 3%
- Price has dropped since mid-March2013 to be a fair way from a 2 touch STL so potential for price to move back toward the "previous" STL again given price is now crossed above that STL
Attached Image (click to enlarge)
Click to Enlarge Name: audnzdweekly.png Size: 85 KB



2) On H4 Execution TF
- H4 zone sitting very close to Weekly zone
- only 2 basing candles in the zone
- price looks like it may hit the proximal edge of DZ for the 1st retouch coinciding with STL so if long momentum is present it will be a higher probability bounce point
- seen 2xHH so far since late September but waiting for 2nd HL
Attached Image (click to enlarge)
Click to Enlarge Name: audnzd_h4.png Size: 84 KB
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