Finding true Supply/Demand on your chart

There are quite a threads on supply/demand with a lot of people asking whether supply/demand trading works or not.

This question is a vastly simplified issue that most people find when they first run into S/D.

Does s/d work? Without a doubt.

Does it take a hell of a lot of skill to filter out most zones as pure pivotal highs/lows? MOST DEFINITELY.

One thing I would like to clarify is that when you are looking for zones that Sam Seiden talks about, is that you have to distinguish between those areas that represent profit taking and therefore less significant pivot highs/lows and between the areas where market participants actually agreed on the price for a few periods ie candles.

Profit taking moves can easily kick off trends, especially if the big boys take off their huge positions off. The herd mentality kicks in with the rest of the participants and voila - you have a trend. BUT! That doesn't mean that ANY high/low you locate will be suitable for a trade.

If I see a level on a Daily chart that is comprised of only 1 candle before a massive drop with lots of clean follow-through, before I jump in to mark it as an area of interest, I will go up and down through several timeframes to figure out if on any of them there was an equilibrium, a balance, a "base" at any one point.

Bear in mind that using purely Supply/Demand to trade intraday is incredibly tough without some kind of way of gauging INTRADAY SENTIMENT, which changes even session to session.

S/D alone fails miserably at this. Which is why I also use MARKET PROFILE to trade intraday AND to time my SWING entries. This is a method that I've come up with over the last 6 years of being a trader and the last 3 years of my career a professional proprietary intraday futures trader. By using my method I don't even need strong zones for my trades, I only need some kind of a demand that lines up with market profile sentiment.

EDIT 26th Nov 2015: I have finally finished my first ebook on the first part of the method which explains the concepts of S/D and Q points, along with how to accurately read trend and trend changes. I've honed my system over the last 4-5 years on FF and in prop trading companies I've worked for. Many of you have witnessed this development. This resulted in me eventually opening and running my own small prop trading company I have today with a few of my own traders I've mentored in the last couple of years.



Blahtech Market Profile MT4 indicator (from MQL5.com Marketplace)


Blahtech SD indicator
Blahtech Supply/Demand MT4 indicator on MQL Marketplace

Summer trading: GBPUSD 15min chart.

Located a possible equilibrium zone for a long trade on the basis of a much larger timeframe and range the price is in on a Monthly chart.

The zone has all the necessary conditions for me: strong move away, with a move away already between 3 and 5 times from the zone, giving me at least 3x risk reward, possibly even the full 5. The zone is fresh, untouched, virgin, how ever you wish to put it. The zone also has a very nice looking base of about 3 candles before the move away.

Also looking like the arrival to the zone is "clean" - ie no congested areas prior to the move to halt the rejection. Don't forget to include the spread into the entry and stop price. My entry here is at 1.5531. Target zone is between 3x and 5x risk:reward area.

Same chart with Market Profile on it, to make sure the day type doesn't mess with the view:

London market profile says that the London day type was a normal variation day with a single initial balance extension.

If the trade works out and price moves back up to the target zone, I don't want to be holding the trade into that G period tail, as the selling tails of that size usually indicate possible aggressiveness from the sellers side.

Trades from lower timeframes have less accuracy and probability so it's important to stick to your trading plan and be quite selective with the areas you want to play. The second most important thing is not to vary your risk:reward much and keep within a similar loss/win model in relation to your account percentage/size.

Nice equilibrium being formed this fine London morning on GBPUSD again.

Two ways to play this: wait for a breakout from the consolidating area and go in, aiming for a zone that's 3-5x away from your entry, based on the number of stoploss pips.

Or

Miss the first move and see how far the price goes away before deciding to play the first pullback into the zone. Which will of course, give you your preset risk/reward that's actually on the chart and there's no need for guess work.

Target 1 almost reached.
Price has now made a strong move away and my directional analysis was correct. As well as playing the break from the equilibrium, I now also have a fresh zone that will be playable again upon retest.

Looking at the price action of the equilibrium there was a subtle clue of a double bottom and then a triple bottom prior to the move, giving me an idea of where the price might pop:

Equilibrium alert on EURUSD m15

If the candle finishes as a bearish engulfing, this is also an opportunity to play an equilibrium break. 3 minutes to candle close.

Entry on that eurusd at 1.1020.

I am now basically hedged against the US dollar with one long gbpusd and one short eurusd. Whatever happens, I will end up in profit because of my high risk/reward.

I can now go and live my life, do some gardening, etc...

I was tempted to put a picture of a hot chick gardening but I shall leave that to your imagination

GBPUSD Target 1 and 2 smashed

Looks like I'm getting my target 3 too as I'm typing.

EDIT: Target 3 done. Final risk/reward is 5:1

DAX equilibrium spotted on H1. Zone was creating during active electronic trading hours, so this makes it a valid level, along with the fact that the price moved away more than 5x the required risk pips (the number of pips you need to risk to get in a trade).

Although we are in a larger supply area, the trend is still prevalently up on larger timeframes. The zone is with the larger trend, which is always a good thing.

My target zone as usual is between 3x - 5x r:r

I also went down to m15 to investigate what the level looks like and found that the first stutter and the originating point of the consolidation was slightly lower than H1 shows, enabling me to use an 18 tick stop. If you're trading on MT4, make sure to include a spread. I will be executing this trade on a futures platform so I can keep it fairly tight.

If your probability and r:r numbers are good enough, following a trading plan should be easy and losing a trade here and there shouldn't bother you too much.

Equilibrium, sideways price action in EURUSD spotted on M30 chart.

This particular consolidation is happening right inside a H4 demand zone so my stop is below that area. The zone itself was formed on 1st June.

Consolidation is happening during the active electronic hours when volumes are high. Because of the location of the price (inside a both a larger H4 demand as well as a larger Daily demand, Daily demand is visible on my chart as a blue shaded area, H4 is represented by the thicker solid blue line) I am making an educated guess that the break of the price will be to the upside.

My stop here in the cash market is 26 pips, I am also executing this trade on a futures platform where I have a stop of 20 ticks. Target zone is between 3x and 5x r:r.

Consolidation break happened to the downside instead of up in a very gradual way. Although there is now a consolidation supply visible, the fact that the price moved away so gradually implies there was no strong interest in selling. So the price simply ended up slipping very slowly. Zone not valid. Next.

Hi doggette

Would you be so kind and shared indicator market profile with the rest of us?
Many Thanks

Hi Skorpio, we're still in development phase and working out the last of the bugs for the Market Profile Indy.

If you're interested in the MP indy, please go to my website www.angelocapital.co.uk, membership is free. I make announcements there for the Members on new indicators. We're very close to releasing it, just sorting out the kink with the backtesting mode. With one click of a button you'll be able to go back to any day and see what the profile looks like and where VA was. Quite handy when doing back analysis.

EURUSD:

After changing the trend on Weekly timeframe by busting the previous supply, I've been looking for a swing setup

Now that there's a trend change, I needed price to be in a good risk/reward area, in relation to previous swing highs/lows. Although this current Daily demand is weak and previously tested, price might decide tomorrow that it's good enough for a bounce point.

However a strong Demand lies just underneath this one and it overlaps 200 DMA too. It's a very strong probability setup for a swing up. I might wait until the price dips a little more into it so I wont be going off limit orders, since I watch the markets most hours anyways, due to my futures trading job with PTP, but this is a zone that's completely tradeable from a limit order:

To stay within the "textbook" S/D trade, we'd have this:

However because my risk model calls for up to 35 pip stops, I prefer to cut into the level halfway for limit orders. Targets depend on how price action behaves afterwards and falls into trade management later on.

So far it touched the level and 200 DMA and reacted by going up. However it's early in the day, I'm expecting a retest of the level later today or Monday. There's usually a 2nd test soon after the level gets revisited.

Going down to lower timeframes, m15 in this case, there's a supply at the Value Area Low (dark purple lines) that the price is having trouble with already. If price fails to break it and we open Wall St below it, we're probably looking at Monday retest, since the open below Value Area will likely set the afternoon for bearish moves. Break of 1.1090, which is the nearest demand, should confirm the trend down for intraday. Likewise, break of 1.1143 will confirm the resumption of current intraday uptrend.

Happy trading,
D.

www.angelocapital.co.uk

Well D you were spot on with the above levels with amazing accuracy.

Good Morning traders,

I am in on an S&P500 short swing. Might keep this one for a while if it survives.

We have finally reached the top Quartile point from an all time high and I was looking for suitable zones to short this thing from somewhere around Q point/inside Q point.

There is a strong H4 zone we've reached and for now we are having a nice reaction from it, putting me in ok profit already. For now, I'm still working from a H4 setup, so I'm waiting for each H4 candle close to see how price is advancing. My entry this time was a textbook conterminous line entry (please refer to my webinars on my main website if you wish to know more about what a conterminous line is, membership is free).

www.angelocapital.co.uk