Supply and Demand Swing Trading

Welcome!

After spending a couple of weeks learning supply and demand trading from Alfonso Moreno's thread on supply and demand swing trading, I've decided to start up my own trading journal using the same style and rules dictated by Alfonso. I would consider myself to be competent intermediate trader, and so this thread is predominantly for my own benefit in order to gain feedback from others on my trades. Having said that, it is also my sincerest hope that anyone reading this thread can join me on my learning journey to become an expert at the supply and demand method of trading foreign exchange and other markets.

You can see Alfonso's thread at the following link. I will not go into the rules and strategy in this post as they are explained in great detail on his excellent thread.

http://www.forexfactory.com/showthread.php?t=428204


The Goal of This Thread

I am going to post every single one of my trades, whether they be winners or losers. If you're reading along, please feel more than welcome to post comments about your opinions on my trades. I realize that I could simply post my trades on Alfonso's thread, however I'd also like to be able to keep track of all of the conversation surrounding what I've been doing in one place for reference purposes.


Thanks for reading, and I hope you'll be able to join me in the future!

Mike.

So without further ado... here's some analysis on what was basically my first SD swing trade.

The AUDCHF has been trending downwards on the daily chart for the larger part of this year. While the trendline drawn on the chart below isn't ideal in my opinion (according to the rule that trendlines must be drawn across the two most obvious valleys in a price movement), I was happy enough with it to take a short trade somewhere near the line.

Please note that these pictures have been taken the day after I closed the trade.

Reasons *For* Shorting

1. Price was high in the daily curve.
2. Price was trending down on the daily chart, and had nearly retraced to the trendline.
3. The retracement had broken its upward trendline on the 4H chart.
4. Price action had broken a key demand area formed from the previous upwards move on the 4H chart.

Reasons *Against* Shorting

1. Price had reached a fresh and original weekly demand area and had already begun to move upwards on the weekly chart.
2. One supply area had been broken on the daily chart (possible trend reversal imminent?)

I set a sell limit order at 0.85812 with a SL a little above .86178 and a TP at .85090. The reason I decided to set the TP here and not at a 3:1 ratio was because of the large gap experienced in the markets at the beginning of the week. I decided that the uncertainty of whether or not the price would proceed lower beyond the point that the price gapped to over the weekend meant the highest probability TP was at or just above the current week's low.

The price ended up reaching this point yesterday and as yet hasn't continued lower. I'm quite happy with the result of this trade overall.

Great you have started your own thread!! Wish you the best luck! You are gonna make it, I'm 101% sure Mike!

Alfonso

Well done Mike.

I wish you the best!

It's not easy, but it's doable... and you are doing it!

From one SD trader to another.

All the best .

Subscribed


TSD

Many thanks for the kind words everyone! It's going to be a wild ride, but I'm very much looking forward to it.

I'm done for this week; finished with a 3.4% profit and I definitely cannot complain about that. I'll be doing a lot of work on the weekend to see where the possible trades for the upcoming week will be, so stay tuned for that!

Mike

So in hindsight after checking the markets this morning I could've left my AUDCHF trade at the original 3:1 ratio and made a lot of money from it after all. There's the benefit of hindsight I guess!

I think I need to trust myself and my trades a little more instead of cutting them short.

Anyway, I wish everyone reading along a relaxing and rejuvenating weekend! See you next week.

Mike

I've had a crazy few weeks recently so haven't really been able to find the time to journal my trades properly... but hopefully from here on I can keep up as it's pretty important to keep a record of everything you learn as a trader.

After doing a lot of work in the last few days on analysing my supply and demand trades, I've decided to make a few changes to the way I take profits. I looked over all of my trades and noticed one interesting thing about them - only about 15% of them successfully made it to a 3:1 risk to reward ratio. On the flipside, about 80% of the trades I made in the last month have made it to at least a 1:1 risk to reward ratio.

For most of this time, I had been simply setting my TP at 3:1 and more or less forgetting about it. Now I know that when I get better at judging and pre-planning levels I'll be able to increase the rate of trades that make it to this 3:1 level or better, but for the time being I've decided to change my TP to only 1:1. This should allow me to keep my balance up during the learning process (I hope!).

So far it's going pretty well - I took a trade yesterday on the USDCAD which successfully gave me 1:1 on my money.



There are still a whole stack of trades that I'm missing out on simply because I'm often too busy to check for new levels every day. Hopefully I'll have the time to do so more frequently soon!

Anyway, I plan to go through all of my previous trades on this thread in the next couple of days and explain in more detail why I believe the 1:1 ratio is going to work well for me for the time being.

Mike

Just a quick comment on the 1:1 ratio Mike. If you start doing that during your learnig process, you will have lots of problems later to remove it from your process, you will get used to it.

Closing part of your trade at 1:1 is not wise because you are removing part of your initial risk to prove your ego that you are not going to lose that trade. Maybe the problem does not lie in the 1:1 or 2:1 partial close but on choosing the right levels at the right locations. Just my 2 cents

Alfonso

Thanks for your thoughts Alfonso! Some part of me has been making that exact same argument, so my plan of attack is to try out this ratio while forward testing only valid levels (ones that I'll verify through other people such as yourself) to determine which method for taking profit I find myself most comfortable, and for which method is the most profitable.

I get the feeling you're right though, and I'll probably end up changing my profit-taking methodology again pretty soon once I've forward tested some more. I feel like I now have a much better grasp on level-picking now though, so things should certainly improve with time!

Planning a short trade on the AUDCAD based on the 4H timeframe.

Reasons *For* Trade

1. Price is very high in the weekly curve.
2. There is a daily supply zone just above the current price.
3. Level price pattern had a very strong departure, breaking through previous demand easily.
4. Price is currently at or near a weekly flip zone.

Reasons *Against* Trade

1. Price is presently in a strong uptrend on the 4H.
2. There is Australian CPI data coming out on Wednesday.

Last week I took a trade on the EURJPY (you can see it in my trade explorer) that in hindsight was NOT based on a valid level of supply. I ended up being knocked out of the trade fairly abruptly... because of this I've decided to not allow myself to take a trade unless I post it along with reasons for and against the trade on this thread. Hopefully this will help me filter out bad trades as I'll not only have to justify them to myself, but also to anyone who is reading here!

Happy Monday to everyone and I wish you the best for the coming week.

Mike

Planning a long trade on the USDJPY (4H timeframe).

Reasons *For* Trade

1. Entry demand level was part of the origin of a price rally that broke the descending trendline.
2. There is more than enough room to the nearest supply zone.
3. We might be seeing the start of an uptrend on the daily chart after breaking a descending trendline on that timeframe.

Reasons *Against* Trade

1. Departure from H4 level is not good. The first departing candle closed almost at the proximal line after breaking previous supply.
2. Price is not moving in any clear direction on the higher timeframes.

Planning a short trade on the AUDCHF (4H timeframe). SELL @ 0.87248.

Reasons *For* Trade

1. 4H ascending trendline has been cleanly broken.
2. We are very high in the weekly curve, and price is respecting the weekly proximal line.

Reasons *Against* Trade

1. Nearest area of demand has not yet been strongly broken, however price has technically broken through by a few pips.
2. AUD could be rallying through weekly supply on other pairs (such as AUDUSD).

Planning a short trade on the EURJPY (4H timeframe). SELL @ 134.521

Reasons *For* Trade

1. All higher time frames are extremely high in their respective curves (+95%).
2. Entry level was created from previous high, with a strong departure in price (good for location trade).

Reasons *Against* Trade

1. 4H chart is presently trending upwards.
2. There is a little more trading in the area at the entry level than I'd like.

Took a pretty significant hit last night, but it's my own fault for trading the NFP! Had 2 losses and 1 win, although one of my position trades from a few weeks ago on the EURCAD was knocked out at a SL as well.

Mike,
Thank you so much to give supply/demand trading method a reality check. Even in Sam Seiden's teaching there was no tracking of his live trades. You wonder was it just a bunch of after-the-fact rationales for trades that should or should not have been taken.
This thread is just what traders need. I must say it does not look promising from my first glance of your equity curve. What has gone wrong? I will comment on individual trades as I go along.

Looking at your EJ trade from a different angle - 30-pip Medium Renko:

Hi fxswordfish,

Thanks for your kind words, I'm just a humble student but like I said in the first post, if I can help anyone else while I myself am learning, I'll he incredibly satisfied.

I'm presently in the process of moving overseas to Canada, so I haven't had much time to trade, but once I get settled in I'll absolutely resume trading.

My equity curve certainly has started badly, I can attribute that mostly to two things: trading with slightly too much risk and trading at inappropriate times (such as major data releases). I would be very much in your debt if you were able to comment on my trades and help me to become better at this - thanks!!

I look forward to discussing this more

- Mike

Hi FxSwordfish.
That's an interesting Renko chart. Does it repaint? Is it offline? Care to share the indicator? I think it could help a lot to find speedbumps (CPs) if it could be incorporated into the IIS Sup Dem indi.

MadCow