Supply and demand in a nutshell by Alfonso Moreno | Page 198 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #3,941
  • Feb 7, 2014 12:00am Feb 7, 2014 12:00am
sorry if that is described at first post, but "by confirmation" you mean that you would wait for clear bounce of current D1 Supply and the would look for new short oportunity?
  • #3,942
  • Feb 7, 2014 2:25am Feb 7, 2014 2:25am
Quoting kimis
sorry if that is described at first post, but "by confirmation" you mean that you would wait for clear bounce of current D1 Supply and the would look for new short oportunity?
The confirmation trade is described on the first post and discussed on many videos. It's a brand new valid supply zone on your entry TF right when price hits or is within the D1 supply zone. It's used when you are not sure about the level, level is too wide or you are not confident about setting and forgetting your trades. Or in this case, the Yen getting weaker and the aussie stronger.

Hope that helps.
Alfonso
Set and Forget supply and demand trading community
  • #3,943
  • Edited 5:19pm Feb 7, 2014 5:02pm | Edited 5:19pm
Quoting panoramia
{quote} Not that simple like u said Alfonso
Alfonso, Thank you for all this and the rest!
I know it is not simple, and just suggest to get as close to a numerical definition as possible.
No better tool than rules and screen time (experience) I do agree.
One more question: when you say reversion to the mean, what exactly RU referring to? Is it 50% retracement from previous impulse, or something like the middle of Andrews Pitchfork, or an MA? Or was something I missed from the 1st page ?
Thanks for your hard work, and your good help!
Take care.
  • #3,944
  • Feb 7, 2014 6:45pm Feb 7, 2014 6:45pm
Quoting GregT
{quote} Hi Lobogabor, ... It took a while but I have become used to eye balling the swings from High to Low or Peaks and Valley's as Alfonso expresses it. Main idea I look for is whether each successive High or Low has taken out a previous swing point (a swing point is my generic term for any change of direction ... Cheers GregT {image}
GregT, I definitely added your explanation to my handbook for regular reading and check-up! Thanks a lot for this work!
Cheers
  • #3,945
  • Feb 7, 2014 11:14pm Feb 7, 2014 11:14pm
Quoting lobogabor
{quote} Alfonso, Thank you for all this and the rest! I know it is not simple, and just suggest to get as close to a numerical definition as possible. No better tool than rules and screen time (experience) I do agree. One more question: when you say reversion to the mean, what exactly RU referring to? Is it 50% retracement from previous impulse, or something like the middle of Andrews Pitchfork, or an MA? Or was something I missed from the 1st page ? Thanks for your hard work, and your good help! Take care.
The 50% retracement from previous impulse does not work well with CPs. Many CPs happen at breakouts of a consolidation area where there was no valley/peak, so there is no reversion to the mean when price rallies into a CP pattern, the 50% rule will not work. Visually it's "much easier", to define. Price needs to clearly correct with a clear/obvious leg. I don't use Andrews Pitchfork, in fact it's the first time I hear about that, sorry for my ignorance. I just concentrate on what I backtested and works, so I don't check anything else to confirm what I know works in a very decent % rate.

Alfonso
Set and Forget supply and demand trading community
  • #3,946
  • Feb 8, 2014 2:17pm Feb 8, 2014 2:17pm
Quoting panoramia
{quote} The 50% retracement from previous impulse does not work well with CPs. Many CPs happen at breakouts of a consolidation area where there was no valley/peak, so there is no reversion to the mean when price rallies into a CP pattern, the 50% rule will not work. Visually it's "much easier", to define. Price needs to clearly correct with a clear/obvious leg. I don't use Andrews Pitchfork, in fact it's the first time I hear about that, sorry for my ignorance. I just concentrate on what I backtested and works, so I don't check anything else to...
Alfonso, I really do understand not using anything else but what works for you, it is not ignorance, but it is wise to do so, just wanted to get an understanding of what to look for when returning to the mean.
Can you post an image as an example please?
Thank you!
  • #3,947
  • Feb 9, 2014 4:19pm Feb 9, 2014 4:19pm
Alfonso,

Great thread, congratulations. I've been trading S&D for a while now, watching Sam Seiden's videos etc., and recently starting to have some success, but your thread has certainly helped clarify a few things.

One thing I still have a little trouble grasping for some reason is where to set the higher timeframe curve. I've read your initial post several times, and watched some of your videos, but I'm still not there - must be a conceptual sticking point for me.

So for example the daily curve on the GBPJPY at the moment:

Attached Image (click to enlarge)
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Am I right in thinking the uppermost level is the supply in control, as it is a RBD, and effectively started the current downtrend? And the demand in control? Is it the one closest to current price, as it has bounced there? Perhaps not, because it has yet to remove any supply levels. So is the one below that, because it took out a RBD from back in August 2009? Or does it need to be a DBR, in which case it would be the one at the bottom?

Any tips on clarifying this would be most welcome.

Also, does my H1 short set at 170.884 look reasonable to you? My reasoning: we're in a daily downtrend, and although the H1 trend is now up, price will have to get through a daily supply level and towards the top of another to get to my entry, and shouldn't violate the daily trendline. The level is fresh and original (didn't quite reach another level above it), and left strongly. Good profit margin. Maybe a few too many candles there to be ideal, but other things going for it I think. (I wouldn't be surprised to see it go down from 170, where there's a little level).

Thanks for your thoughts.

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  • #3,948
  • Edited Feb 10, 2014 12:40am Feb 9, 2014 11:22pm | Edited Feb 10, 2014 12:40am
Quoting tzkennedy
Alfonso, Great thread, congratulations. I've been trading S&D for a while now, watching Sam Seiden's videos etc., and recently starting to have some success, but your thread has certainly helped clarify a few things. One thing I still have a little trouble grasping for some reason is where to set the higher timeframe curve. I've read your initial post several times, and watched some of your videos, but I'm still not there - must be a conceptual sticking point for me. So for example the daily curve on the GBPJPY at the moment: Am I right in thinking...
Thanks for your post and comments, glad that the thread is helping you to clarify some of those concepts that are clouding your mind.

As far as the D1 supply in control in GBPJPY, you are right to say that the top D1 supply is in control, it's a peak that removed some supply, yes that one is the D1 in control right now.

Quote
And the demand in control? Is it the one closest to current price, as it has bounced there? Perhaps not, because it has yet to remove any supply levels. So is the one below that, because it took out a RBD from back in August 2009? Or does it need to be a DBR, in which case it would be the one at the bottom? Any tips on clarifying this would be most welcome.

The small D1 demand where price is bouncing off right now is not YET D1 demand in control, not even the one preceding it. It's the bottom D1 demand at the extreme. The curve or price range is measure from extreme to extreme, we thus need valleys and peaks, not CP patterns. We do not take CP patterns as components of the curve. That D1 demand would become temporarily D1 supply in control if we remove opposing supply where you have your H1 short located right now.

Attached Image (click to enlarge)
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The top D1 supply is not an original level of supply, since it's a reaction to a previous D1 supply in October 2008.
Attached Image (click to enlarge)
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Quote
Also, does my H1 short set at 170.884 look reasonable to you? My reasoning: we're in a daily downtrend, and although the H1 trend is now up, price will have to get through a daily supply level and towards the top of another to get to my entry, and shouldn't violate the daily trendline. The level is fresh and original (didn't quite reach another level above it), and left strongly. Good profit margin. Maybe a few too many candles there to be ideal, but other things going for it I think. (I wouldn't be surprised to see it go down from 170, where there's...

The H1 supply level you are planning to take does not look bad at all. I just wanted to ask you a couple of questions about it, since these are crucial to which kind of levels you want to take and what type of trader you are.

  1. The D1 supply (nice bearish engulfing pattern) where that H1 supply is located has effectively removed a D1 demand and support area. But my questions are these... Your trade is not bad, these are just some questions I'd like to ask you, which do not pretend to prevent you from taking that trade, it just asks you what type of trader you are, THEN your mind can decide what to do next
  2. D1 supply (nice bearish engulfing pattern)
  3. D1 Level on top of level
  4. Possibility of drawing a more aggressive descending D1 trendline that would prevent us from taking a D1 short if you are a more conservative type of trader
  5. GBPJPY monthly chart is clearly in an uptrend, any D1 supply zone would be counter-trend, against the MN uptrend. Are you a counter-trend trader?
  6. The NIKKEI is highly correlated with the Yen cross pairs, Nikkei strong --> Yen weak (not good for Yen shorts). NIKKEI index is bouncing off fresh D1 demand within fresh Monthly demand

  1. This is just an objective analysis, not a means of preventing you from taking such a trade. Price is most likely going to react from those D1 supply zones, that's almost for sure, but where exactly if MN supply is in an uptrend and it's a D1 counter-trend trade? It's all about how conservative/aggressive trade you are, of if you are a trend trader or a counter-trend trader
  2. I personally want to try that zone but only in confirmation, that is, if I see there are willing sellers in the zone once it's hit and produces a good imbalance. There are nice supply levels on those D1 supply zones worth to try

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Set and Forget supply and demand trading community
  • #3,949
  • Feb 10, 2014 2:08am Feb 10, 2014 2:08am
Hi Alfonso,

Thanks for your detailed reply. You raise some interesting points. My justification would be:

 

  1. I try to avoid paralysis by analysis (a problem for me in the past), by sticking largely to 2 timeframes (D1 for trend/curve, H1 for entry/targets). Accordingly, I read the situation as a current downtrend, fairly high in the curve, although I take your point about the other possible trend line.
  2. I do look at higher timeframes too, and the fact that MN is up means I will move stops and set targets more conservatively. I use an EA I've developed with a friend to manage my positions (just about to go live, but using the same rules now). In this situation I won't go for big runs, I will close most of the position quite early.
  3. My EA also uses indicators to filter out some trades, so depending on the situation when/if price reaches my zone it may not trigger.
  4. Overall, for all these reasons and the ones mentioned in my first post, I'm pretty comfortable with this setup. It is within my current rules, so I'll take a win or a loss happily and learn from whatever happens.

Let's see!

Thanks again.

TzK.

  • #3,950
  • Feb 10, 2014 3:00am Feb 10, 2014 3:00am
Quoting tzkennedy
Hi Alfonso, Thanks for your detailed reply. You raise some interesting points. My justification would be: I try to avoid paralysis by analysis (a problem for me in the past), by sticking largely to 2 timeframes (D1 for trend/curve, H1 for entry/targets). Accordingly, I read the situation as a current downtrend, fairly high in the curve, although I take your point about the other possible trend line. I do look at higher timeframes too, and the fact that MN is up means I will move stops and set targets more conservatively. I use an EA I've developed...
Yes, no problem with that... Like I said it looks like a great level.. It all depends on your rules, you clearly stated yours, so if it goes with your rules then it's a valid trade, and that's all we can do about it, take all trades that go with our rules. It's all about what is your curve and entry TF, the rules are the same for all TF combinations. As per a D1/H1 combo, the one you are doing, that H1 short is a valid trade as we discussed as per intraday rules for an intraday trade, since it goes against the bigger picture.

Have a great day!
Alfonso
Set and Forget supply and demand trading community
  • #3,951
  • Feb 10, 2014 3:05am Feb 10, 2014 3:05am
Quoting lobogabor
{quote} Alfonso, I really do understand not using anything else but what works for you, it is not ignorance, but it is wise to do so, just wanted to get an understanding of what to look for when returning to the mean. Can you post an image as an example please? Thank you!
When returning to the mean, you always want to see the same thing...

  1. An existing valid SD zone to trade
  2. If there is no level to lean on, let's say at a flip zone for example, then I wait for a brand new imbalance in the zone and trade the pullbacks

Alfonso

Set and Forget supply and demand trading community
  • #3,952
  • Feb 10, 2014 4:20am Feb 10, 2014 4:20am
Quoting panoramia
As far as the D1 supply in control in GBPJPY, you are right to say that the top D1 supply is in control, it's a peak that removed some supply, yes that one is the D1 in control right now.
Hi Alfonso.

I don't understand why the lower supply is not the supply in control. (The one you are pointing to with the red arrow in this screeenshot )

- It is a peak
- it is fresh and original
- it removed opposing demand
- it is the most recent demand and swing high
- this TF is in a downtrend.

Is it because HTF trend is up?
Is it because the DTL will be broken if price reach that area and it should be considered a weak zone?

I thought that, per the rules, in a downtrend supply in control is stepping down until HTF demand is met.

As you stated regarding the most recent swing low:
[highlight=rgb(244, 246, 249); color:rgb(0, 0, 0); font-family:verdana,helvetica,sans-serif]
Quote
That D1 demand would become temporarily D1 supply in control if we remove opposing supply where you have your H1 short located right now.
[/highlight]

[highlight=rgb(244, 246, 249); color:rgb(0, 0, 0); font-family:verdana,helvetica,sans-serif]Can you please clarify?[/highlight]
  • #3,953
  • Feb 11, 2014 8:44am Feb 11, 2014 8:44am
Quoting jsr
{quote} Hi Alfonso. I don't understand why the lower supply is not the supply in control. (The one you are pointing to with the red arrow in this screeenshot ) - It is a peak - it is fresh and original - it removed opposing demand - it is the most recent demand and swing high - this TF is in a downtrend. Is it because HTF trend is up? Is it because the DTL will be broken if price reach that area and it should be considered a weak zone? I thought...
Hi there!
Yes, that D1 supply is temporarily in control, it was mentioned in my previous reply to TZkennedy. What I meant is that is an intermediate area in control, not the extreme, it's a level located in the middle of the higher timeframe curve and the MN in an uptrend. Price is nicely rejecting the lows and removing supply, same happening on all Yen pairs with the strength of the Nikkei helping the Yen to get weaker.

Last week lows broken, D1 descending TL being broken, new potential D1 demand right underneath D1 supply, removing profit margin for a non-set and forget short on GBPJPY's D1 supply, since TL is broken.

Attached Image (click to enlarge)
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Set and Forget supply and demand trading community
  • #3,954
  • Edited 8:57pm Feb 11, 2014 8:50am | Edited 8:57pm
Quoting jack108
{quote} Hi Alfonso, Thanks for the fast reply. The candle pattern does not resemble a drop base drop to me. Obviously my understanding about CP pattern is not correct therefore I hope you can explain a little detail why this is a CP pattern. Appreciate your comments. Thanks.
Quoting lobogabor
{quote} Hi Alfonso, is there a way to find and use more scientific definitions? That level does not fit my earlier understanding of a CP pattern either, also I heard in one of the last webinars about the V-shape. Well a V-shape does not seem to be a repeatable definition either. Would be something more descriptive like wave theory fibo ret (e.g. must retrace minimum 38.2 to call it a valley or peak as an example) or like price action candle shapes and numbers etc. be available and more repeatable? Tnx.
Hi Jack,

I saw the AUDJPY up move and the break of the D1 supply as we had discussed the previous days. The D1 supply zone did not have high probabilities of holding for all the reasons we talked about, if anything a strong confirmation type of trade for shorts. That didn't happen, the D1 supply has been overshot. Nikkei index weakening the Yen (strong Nikkei correlation with the Yen, same as US index inverse correlation with the EURO, and S&P 500 with US index)

D1 supply level overshot. New demand right underneath of the D1 removing all profit potential.
Hope it makes sense to you
Alfonso

Attached Image (click to enlarge)
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Set and Forget supply and demand trading community
  • #3,955
  • Feb 11, 2014 6:23pm Feb 11, 2014 6:23pm
Hi Alfonso,

Thank you for following up on the discussion of this pair. It has helped me to gain a better understanding of CP patterns.
  • #3,956
  • Feb 11, 2014 10:16pm Feb 11, 2014 10:16pm
Quoting jack108
Hi Alfonso, Thank you for following up on the discussion of this pair. It has helped me to gain a better understanding of CP patterns.
No need to thank me Jack, it's nice that I could help you understand that scenario. There are so many different scenarios, that's why I did and still do a LOT of backtesting on the setups, I record them on video so that I can watch them and others can watch them on the community and so on.

There are some correlations to look at in the Yen case:

  1. The Nikkei is bouncing off a strong MN demand with a strong uptrend. Nikkei up, Yen gets weaker
  2. The Aussie is getting stronger, bigger pullback on the MN, even though it's in a MN downtrend
  3. Not a good scenario for a AUDJPY short
  4. In this cases if the D1 is down, I always wait for confirmation, no matter how good the level may look

Alfonso

Set and Forget supply and demand trading community
  • #3,957
  • Feb 12, 2014 12:26am Feb 12, 2014 12:26am
When I apply indi and tpl, on 1st attempt I cannot see blue and red zone and then I change to higher tf and back to 1 hr, afterwards they appear. Am I doing anything wrong here?
  • #3,958
  • Feb 12, 2014 1:40am Feb 12, 2014 1:40am
Quoting fibozone
When I apply indi and tpl, on 1st attempt I cannot see blue and red zone and then I change to higher tf and back to 1 hr, afterwards they appear. Am I doing anything wrong here?
Hi fibo,
on Alf template the SD indicator is working on H1 and lower TF charts (you can set up it to work on other TFs too). That draws automatically SD zones. On higher (H4 and upper) TFs you have to draw manually rectangles at SD zones and this rectangles will be managed by RectangleReader indicator.
  • #3,959
  • Feb 12, 2014 2:47am Feb 12, 2014 2:47am
Quoting Serijbok
{quote} Hi fibo, on Alf template the SD indicator is working on H1 and lower TF charts (you can set up it to work on other TFs too). That draws automatically SD zones. On higher (H4 and upper) TFs you have to draw manually rectangles at SD zones and this rectangles will be managed by RectangleReader indicator.
Thank you Serijbok for your help, shall try as per your advise for sure and if any problem shall post here.
  • #3,960
  • Feb 12, 2014 8:44am Feb 12, 2014 8:44am
Hello fellow traders,

This is just a reminder of next week's webinar on supply and demand backtesting, next Monday 17th February. These reminders get lost in the middle of the posts, so I repost them every now and them to remind you.

This webinar will be completely different, it will be a real time forward test of supply and demand rules with Forex Tester 2, in my humble opinion, key to having success trading SD or any other strategy.

WHY A WEBINAR ON FOWARD TESTING?
Visual backtests on Metatrader 4 or any other platform is not enough, it's useless. You will see what you want to see, that's all. Metatrader 4 does not allow multiple timeframe analysis on backtesting but Forex Tester does. Not knowing which candles come next is crucial in order to backtest any strategy, be it supply and demand, fibonaccci, price action... any!

WHEN WILL IT BE HELD?

  1. DATE: Monday 17th February 2014
  2. TIME: 1 PM to 2:30 Central European Time | 7 a.m to 8:30 a.m EST. Right 1 hour before NY Market Open
  3. Link to join free webinar: fill out this form http://www.set-and-forget.com/free_webinars and you will receive the link after you confirm your email

If you have previously subscribed to one of my webinars, you should have already received the link to join. Else, fill out the form above

WHAT WILL THIS WEBINAR COVER?

  1. How to configure Forex Tester 2 to forward test supply and demand
  2. How to forward test any pair using set and forget's supply and demand trading rules
  3. We'll choose a random year/month from a pair and we'll start from there real time, discussing all possible entries

Hope to see you there!
Alfonso

Set and Forget supply and demand trading community
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