Supply and demand in a nutshell by Alfonso Moreno

Hi there Irad, let me answer some of your queries.

Let's start with your drawing, as far as I am concern (based on your drawing), I should be waiting for a nice entry going Long and not Short. Why?

1. I am now very low in the curve (< 30%), approaching a HTF demand area which is fresh and in control.
2. Inside my HTF curve (WK), there is also a H4 fresh demand area, which is a very nice set-up to put a limit order to go long based on my rules.
3. I will set a 3:1 (minimum) TAKE PROFIT since you mentioned in your drawing that the distance between the h4 demand area to the H4 supply area has a 5x distance based on Entry to Stop Loss distance.

Also another thing I noticed from your 1st page post is how do you determine your HTF curve? - It will depend of what type of TF combo will best fit you.

MN/D1 - Position Trading (MN-HTF Curve / D1 - Entry)
WK/H4 - Swing Trading (WK-HTF Curve / H4 - Entry)
D1/H1 - Intra-Swing Trading (D1-HTF Curve / H1 - Entry)


Are you looking for the last original level them formed? does it matter if this zone is R-B-R/D-B-D or R-B-D/D-B-R? - If you are referring to HTF, it doesn't matter if it is an RBR; DBD; RBD; DBR. Bottom line here is, it should be fresh and/or original. RBD; DBR is considered to be the strongest areas than RBR; DBD (this would depend on which location will these RBR; DBD located).

I hope this helps clarify some things.

Have a great day ahead

hello,

I have a question,
do you not trade under 30% curve?

Trade Short? NO

Trade Long? YES, waiting for a good entry from the HTF demand curve and drill down to LTF

Hi isko,
Actually you did clarify some of those things for me,
based on my drawing I did wanted to go long, but I was curious where do I set my targets because of new levels have been formed, but since you've made the point clear so I won't be needing another explanation.

to the second clarificaiton:
you explained how one can determine how low/high you are in the curve by determine where HTF last fresh/fresh+original area is(I thought you need to look for the last original area, but fresh/fresh+original seems logical)

and you added: " (this would depend on which location will these RBR; DBD located)" I would like to clarify this(that a strong word, clarify) what do you mean by RBR/DBD location?


Thanks for your answer, good stuff

Hi Irad,

I believe I replied to this question in my previous post since I supposed you meant a H4 supply right above a WK demand zone. H4 supply near a WK demand zone is not higher probability as per the rules, curve % and parameters used on the strategy.

A HTF in control is that which is holding price, we normally use the extremes and not the CP patterns.
Alfonso

A whole new section has been added to Post #1: Trade Management, Breakevn and Exit Tactics

This is a very important part of our trading, in fact the most important fact. Entries are not a problem, exits are. You can read it at Post #1 but I've also added it below.


There are other exit tactics, but I am not using them personally .

TRADE MANAGEMENT, BREAKEVEN AND EXIT TACTICS

A TRADE SETUP IS COMPOSED OF 5 STAGES:

1. PRE-PLANNING
   1. Do not take any trades if it's not pre-planned
   2. Analyze the market and decide if you have a valid trade as per the rules, room to opposing HFT SD area, that is, following your trade plan
   3. Set your limit order and wait for the setup to be triggered

2. TRADE EXECUTION
   1. The trade is executed by your broker. Now you are in the trade
   2. Control your emotions at this stage. You risked a % of your equity, it's a number's game
   3. Don't touch it if the rules still apply
   4. Walk away from the charts

3. MOVING THE SL TO BREAKEVEN
   1. When to move your SL to Breakeven to protect your trade

4. TAKE PROFIT AND TARGETS
   1. Which are your targets? You have 1 or more targets?
   2. Will you exit at an opposing SD area?
   3. Will you trail your SL above/below new SD zones until price reaches a HFT SD zone?

We've alredy covered the first 3 stages on other lessons, now it's time to cover 2 key aspects of any trade setup.

WHEN TO MOVE STOP LOSS TO BREAKEVEN + SPREAD (and/or commission)

For example:

1. Long entry triggered at 1.1000, our SL is set 25 pips below at 1.0075, THEN we'll move our SL to BE at 1.1050 once price has travelled 50 pips (2 RR) in our direction
2. Short entry triggered at 1.5500, our SL is set 35 pips above at 1.5535, THEN we'll move our SL to BE at 1.5430 once price has travelled 70 pips (2 RR) in our direction

RULES TO MOVE SL TO BREAKEVEN

1. Move your SL to BE + Spread/Commissions after 2:1 R/R
2. Other options:
   1. Move to after 3:1 R/R to allow price to breath a bit more You trust in your level and you don't want to have your entry retested and kicked out of a winning trade
   2. Don't move your SL to BE, your trade is either a win or a loss You don't care what price does, you want your trade to move far away from your entry price before you touch your SL

PROS AND CONS OF MOVING YOUR SL TO BREAKEVEN AT 2:1 R/R

1. PROS
   1. Your trade is safe, your ego will feel satisfied and you will breath better http://www.set-and-forget.com/core/i...lies/smile.png
   2. Your fear of losing is under controlled
   3. You can concentrate on other setups and forget about this one since it's now safe, you can't lose (exception: Sunday open gaps and big news events do not respect your SL)

2. CONS
   1. Price can retest your entry before it finally takes off of your entry level, this happens VERY often
   2. Your ego will fight against you if it sees that price kicked you out of a valid trade on a first retest and the trade played out really well without you riding it
   3. You can miss very good trades if you don't allow price to breath enough to accummulate/distribute before taking off

WHAT CAN YOU DO TO PREVENT PRICE FROM KICKING YOU OUT OF THE TRADE ON A RETEST?

You are tired of seeing your entries retested and then see your level working well without you riding it? We need to let price breath and orders be filled by market makers and big institutions. There are some options to prevent that from happening:

1. Move your SL to BE + Spread/Commissions after 3:1 or 4:1 R/R allowing price to breath a bit more
2. Do not move the SL to BE after your minumum R/R ratio has been reached
   1. Leave the SL where it originally was, above/below your level's distal line, and let the trade breath and take off

3. Close half of your position at 2:1 R/R or even 3:1 R/R and leave your SL alone
   1. By doing this, your trade is safe, you can't lose, fear is under control and you will feel more relaxed
   2. If you close 1/2 of your position at 2:1 R/R, you will sacrifice half of your position but you will kick your ego hard in the ***, the trade is now safe, you can't lose
   3. Manage your SL manually as described below

TARGETS: HOW TO MANAGE YOUR STOP LOSS WHEN YOUR TRADE IS RUNNING
Once your trade is running, there are several ways of managing your SL. Managing your SL is key to become profitable, you have to have rules in order to prevent you from closing your trade too soon. First of all you need to define your targets. A target can be either fixed or dynamic. A fixed target (exit) is a specific price where you will exit your trade. This price can be different depending on which type of exit you decide. You must make a decision before on the pre-plan stage of your trade.

TYPE OF FIXED EXITS: be realistic!!!

1. Targets 1, 2, 3 or more can be at opposing SD areas
   1. You analize your entry TF and locate good opposing SD areas where you are going to set your Targets at. Always a few pips before within the zone, never at the zone

2. Exit at a specific % amount
   1. Define a price based on % amount you want to earn

3. Exit at a specific R/R ratio amount
   1. Define a Risk/Reward ratio at which you want to exit your trade, minimum 3:1. You can set it at 4:1 or 5:1, no matter what zones you have above/below your entry
   2. Be realistic, don't set a 5:1 ratio if there is a fresh D1 supply area right at 3:1 off your long entry at demand

TYPE OF DYNAMIC EXITS:

1. Technical Stop
   1. After your entry place your initial SL under the nearest demand
   2. After a new Highe High has been printed on the charts, move your SL under Higher Low
   3. This is the exit that I normally use. Learnt it the hard way

2. Trendlines
   1. Since we are using Trendlines in order to assess our trend, it's also logical to use them to exit our trades if they are solidly broken in the opposite direction
   2. Let price breath and use the TL rules to move your SL, moving SL underneath your TL if you are long, exiting the trade when there is full OHCL candle below the ascending TL. Opposite for a short entry

3. There are others, these are other like moving average trading, etc, but I won't use them

TOO MANY OPTIONS? DON'T WORRY, THERE IS A PLAN http://www.set-and-forget.com/core/i...lies/smile.png
I guess that now your head is clouded with so many different exits rules. You need to make a decision based on what type of trader you are. If you can't make it or are unsure, let me give you some hints.

These are the exits strategies that I use, it might help you make a decision. You can use mine as well, you ned to make up your mind.

1. MOMENTUM Trade Setups with room to HTF SD zone
   1. Close 25% or 1/2 of your position at 2:1 or 3:1 R/R and leave your SL alone a few pips away from my zone's distal line
      1. By doing this, your trade trade is safe, you can't lose, fear is under control and your ego won't be bothering you
      2. You will sacrifice part of your position but you will kick your ego hard in the ***, the trade is now safe, you can't let it run hundreds of pips IF there is room for that of course, but fear of losing is out of the game

   2. Manage your SL manually using Technical Stops

2. LOCATION and MOMENTUM+LOCATION Trade Setups with room to HTF SD zone
   1. Close half of your position at 3:1 or 4:1 R/R and leave your SL alone
      1. A location type of trade can be a turning point in the markets, not to say if it's a fresh WK supply with a Monthly downtrend, that trade can be a runner, don't play with your SL, leave it alone
      2. A location + momentum setup can become a rocket, don't play with rockets, you may regret http://www.set-and-forget.com/core/i...lies/smile.png
      3. Wait for a nice departure off your level and for brand NEW SD zones to move your SL a few pips above/below those new zones distal lines

   2. Manage your SL manually using Technical Stops

You can change the R/R mentioned above, you have to do whatever fits better your personality as a trader.

Hi Alfonso,

i wanna thank to you for these valuable infos about money management rules.

have to work more on setting tp levels and not putting BE very early, sure this new tactics will help alot.

Alfonso if we have an original demand/supply 4hr zone that it is not into a Weekly zone then we don't take the trade??
or is there any exception to that??

Glad to hear that Irad.

I would like to clarify this(that a strong word, clarify) what do you mean by RBR/DBD location? - RBD/DBR - Picks / Valleys; RBR/DBD - Continuation Patterns

I want you to read through this items on post #01 over again Irad to address RBR, DBD concern.

1. TYPE OF LEVELS, CONTINUATION PATTERN versus SWINGS (valleys, peaks)
2. BUY LOW, SELL HIGH (in the curve or range)

Hi Kaloko,

I've added a new section on Post #1 that talks about TPs and targets, that should answer your first question. I need minimum 3:1 profit margin to take a trade.
As far as the confirmation trade it's all described on post #1 in detail and several of the videos. It's a brand new SD level at a HTF area.
Hope that helps!
Alfonso

okay.. so that what you meant by location, Got it!

let me clear one more thing as we still on it,
alot of time you see price moving on HTF curve from demand(0%) to supply(100%) but before reaching supply(100%) price going back down to demand(around 30%), so now I can still go long right? (regardless that price already almost reached supply(100%), and I don't use trendlines as filter trades).
are we still looking to go long as long demand haven't been broken.

Thanks!

Alfonso,

Excellent new post on trade management (which I believe is the most important part minus emotions). I had two questions.

1. On your post #1 you mentioned you avoid H1 Zones created during slow/afterhours trading. I've noticed these zones don't hold as well. However does that also mean you also skip over 4H RBR/DBD/Continuation zones too?

2. On your curve chart/picture you have 25% on the top, and 30% on the bottom. Is that a typo or do you actually make a distinction whether going long or short.

Gracias Amigo,

Yes, Irad, as long as HTF Curve still holds and is not broken, we will still respect the area even if it is no longer fresh. Look for confirmation areas on LTF (fresh) to go long if it reaches HTF Demand Curve or go short if it reaches HTF Supply Curve.

As I practice drawing levels and watching the webinars, I am finding one particular area that is causing me headaches. I've looked for a specific rule on this in post #1 and other places without success. Please see the attached chart, which has the question embedded.

The question is specific to locating levels for the curve. I understand what to do on the entry time frame. However, for the curve, in some places Alonso has required the opposing level to be violated. Other times not. The screen shot with my question is from his most recent webinar. This problem for me is sort of circular in nature, needing to keep looking back at prior levels and my head just spins when trying to figure out what is valid and what isn't.

Is there a specific rule for this or at some point does discretion play a role?

EDIT: just to be clear, the attached is a Weekly chart and is the "curve" chart, so it it the Higher Time Frame already. And I just noticed that the profit margin on this weekly level is barely 2/1, further questioning the validity of the level according to how I'm understanding the rules.

Here is a set and forget trade I have on (demo of course). I'm using Daily for the curve and 1 Hr for entry TF. As best I can tell the levels are fresh and original. I would prefer I larger distance between my curve levels, but the Weekly demand is almost entirely absorbed and the next trip down there will be it's 4th time back.

Here's another setup on same combo.

Hello Alfonso,
I just went over the last webinar:nerd:,
I wonder about one thing - I watched untill GBPUSD trade
now you use TL to filter trade based on 2 last peaks in order to be more relative to market condition as you said in that webinar,
on that particular trade you could use 3 different ways of drawing TL, in that trade I see you haven't use last 2 peaks but the previous peaks in order to filter the broken TL trades,

you would have filter that successful trade probably if you'd used the last 2 peaks,
how have you decided not to consider that last 2 peaks trendline?

I added a scrshot so you'll understand what I am talking about.
Thanks A LOT!

Hi,
Wanted to share the stuff I've learned here using s&d analysis with TL filtering

ofcourse I don't know if it'll work but it fits the rules so trade must be taken
I used D1/H1
CHFJPY on the daily I used the last non-fresh supply zone which haven't been taken out and reacted to that zone,

on 1H chart I see higher lows and supply areas taken out,
using TL I took buy on the last CP(we are low as 26% of the curve, so.. buy buy buy )

Most excellent post Alfonso.

Trade Management, Breakevn and Exit Tactics.

As you know I am big on the Psychological apsect of trading. For me, it is the defining attribute of successful trading. By placing structural and psychological definitions together, you have given traders a better look at what their trade management should look like and, what they may expect.

Ladies and Gentlemen, with patience and a plan, you can be proftable.

Well done

TSD

Good job, Alfonso, very good job.

I've been using indicators without success and somehow I found myself in Sam Seiden's posts on youtube.com. I'm going to start at the beginning again. with this topic and will definitely be part of your forum.