Supply and demand in a nutshell by Alfonso Moreno | Page 373 | Forex Factory

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Supply and demand in a nutshell by Alfonso Moreno

  • #7,441
  • Mar 28, 2016 6:17am Mar 28, 2016 6:17am
Quoting owal
{quote} HI AKT! Regarding this post I don't understand why is the curve DZ is considered demand since it didn't break any trend line neither removed supply. Or in the curve time-frame you just look for the imbalances?Thanks in advance
Partly correct owal.
It is an imbalance. It is not one that can be used as an area to set and forget a buy IF our goal is to initiate a long position. It will need confirmation.
It is able to be used for curve because of the curve but it would score badly if it were on your entry timeframe for example.
It serves as a reference for where anyone who shorts should consider pulling profits off the table.

What can't happen is that we can't totally ignore that level like it is not there.
The only reason price rallied from there is because D>S

Best wishes
Be careful what you think because your thoughts run your life..Solomon
  • #7,442
  • Mar 28, 2016 7:37am Mar 28, 2016 7:37am
Hello everyone
I'm following this thread couple of weeks, but one thing eludes me.
This is EURUSD daily chart, there is SZ from 20-10-2015 (green one), but should I consider orange zone as a new supply zone?
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To break the rules you must first master them.
  • #7,443
  • Mar 28, 2016 7:54am Mar 28, 2016 7:54am
HY Guys!


Akt, thx for your answer!

I try to transalate, all the comments you (Akt) wrote, and it seems i understand it.

I dont want to rob your time, but I need some confrimation, so I post a few my pictures, i hope you dont mind it?!

Aud/jpy is at hte middle of the curve, and in downtrend, on MM chart.

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Zoom in to the Weekly chart, i can see that the SZ level i marked on the Motnhly chart has too many candles. It means automatically, that the level is not so good? It has mor than 6 candels.
Thre was a TL brake to.

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I analyzed the level i think it will bee good.

A: Strength of Move away from a price level
B: Where is the zone is located relative to the curve timeframe supply and demand zones
C: Profit potential
D: how many times has price returned to the zone
C: How many candles are in the base of the zone

The result is good for set&forget (i think) and there is a levell top of a level to. (not marked)

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On H4 i didn't found anything, for a good trade, but if someone asked me, i will say LONG for countertrend, whit small proft...


I have lot off problem whit charts like this, because i can't find a godd demand nor a god supply zone, because this long, big wicks.

Has anyone a solution for that problem? When we found a chart with long candle wicks. We go X-Ray and that's it?


Happy Eastern for eweryone!

Regards,
Andras B.
  • #7,444
  • Mar 28, 2016 9:07am Mar 28, 2016 9:07am
Quoting Akt
Happy Easter holidays everyone. Seeing we are all chilling and getting some well deserved R&R, I thought it a good time to raise the issue of confirmation entries. Alfonso talks about them a lot in his videos, weekly reviews and posts. It took me some time to get it but I eventually did. Here are my thoughts on them. I hope it helps best wishes CONFIRMATION ENTRIES To start with, Confirmation entries are the opposite of Set and Forget trades. They require the trader to be present at the computer when price returns to the level in order to take a...
AKT, One question about your post 7411 where you described confirmation entries. My question is on the 4hr chart you were looking for a confirmation on the 4hr chart to sell. There were 3 supply zones created, how would you know to take the lower one versus the top one? If you waited for the top one you would have never gotten filled?
  • #7,445
  • Mar 28, 2016 3:29pm Mar 28, 2016 3:29pm
Quoting Mr.PhiBo
Hello everyone I'm following this thread couple of weeks, but one thing eludes me. This is EURUSD daily chart, there is SZ from 20-10-2015 (green one), but should I consider orange zone as a new supply zone? {image}
Hello Mr.Phibo, if i may please,

Yes you should consider the orange zone a supply zone.. for 2 reasons. Please see chart

Best wishes

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Be careful what you think because your thoughts run your life..Solomon
  • #7,446
  • Mar 28, 2016 3:54pm Mar 28, 2016 3:54pm
Quoting projectaha
HY Guys! Akt, thx for your answer! I try to transalate, all the comments you (Akt) wrote, and it seems i understand it. I dont want to rob your time, but I need some confrimation, so I post a few my pictures, i hope you dont mind it?! Aud/jpy is at hte middle of the curve, and in downtrend, on MM chart. {image} Zoom in to the Weekly chart, i can see that the SZ level i marked on the Motnhly chart has too many candles. It means automatically, that the level is not so good? It has mor than 6 candels. Thre was a TL brake to. {image} I analyzed the...
Hello projectaha, sorry for the delay in replying, been away with the family all day. Much needed R&R

please see my thoughts below. I hope they can give you some "aha" moments

best wishes

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Be careful what you think because your thoughts run your life..Solomon
  • #7,447
  • Mar 28, 2016 3:58pm Mar 28, 2016 3:58pm
Quoting mrodrigues
{quote} AKT, One question about your post 7411 where you described confirmation entries. My question is on the 4hr chart you were looking for a confirmation on the 4hr chart to sell. There were 3 supply zones created, how would you know to take the lower one versus the top one? If you waited for the top one you would have never gotten filled?
Hello Mark,

We never know.
We always just take the levels as they come
We know the action we are looking to take and we wait for our criteria to be fulfilled and then we strike

As Sun Tzu said, "he will win who knows when to fight and when not to fight"

We wait for our zones and we take them. If the lower one had failed and our analysis still indicated shorts as being the way to go then we would have attempted shorts at the higher levels as well.

I hope that helps

best wishes
Be careful what you think because your thoughts run your life..Solomon
  • #7,448
  • Mar 28, 2016 9:04pm Mar 28, 2016 9:04pm
Quoting Akt
{quote} Hello Mr.Phibo, if i may please, Yes you should consider the orange zone a supply zone.. for 2 reasons. Please see chart Best wishes {image}
Hi AKT
Please refer the chart below for my question
Thanks
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  • #7,449
  • Mar 29, 2016 12:23am Mar 29, 2016 12:23am
Quoting Vsm
{quote} Hi AKT Please refer the chart below for my question Thanks {image}
Hello Vsm,
Thank you for the question.

I think what i will do is use the opportunity of your question to clarify something for everyone because I get this question a lot.

You see, we have a defined set of criteria we use to qualify what is demand and what is supply. We trade these qualified zones with good success.
Now, there are other scenarios that show up in the market that represent scenarios that do not fulfill our criteria but unfortunately for us, we can not just ignore them and make as if they are not there.

So in your picture, as you rightly say, that zone did not take out any SZ to the left. so "how can it be demand?"

Let me ask you another question in answering yours - since we know that at every price level in the market, there is a supply-demand equation playing out and we see the effects of this tug of war on our price charts, what was the resolution of the supply-demand equation when price was basing at that level?

As you can see, the answer is that the resolution was to the upside, price rallied up.

Now another question - what does that piece of information tell us - that there were more buyers than sellers at that price level, otherwise price would not have rallied, agreed?
To further buttress that point, look at the first retest of that zone, the long wick of the red doji that occurred after the first rally out of that zone. Price went even higher with that retest - only buying can cause that.

Ok, next question - so we have evidence of buying at a zone but is there enough evidence of buying to get us interested in putting our money at stake at that level? Put another way, did that zone take out an opposing supply zone? did it move away a distance twice the size of that zone?, has price returned to that zone since it was created?, how long did price spend at that zone before coming back?, where is this zone located when I compare it to larger time frame levels? if i buy at this zone how much profit potential do i have?

I hope you follow this train of thought - basically, what i am asking is does this zone score high enough on the odds enhancers to allow me trade there?
Obviously, the answer is no.

What I can not do though is ignore that area because it does not fulfill MY criteria for a trade. That would be equal to wanting to impose my personal will on the market which as you know, never works

I hope this helps clarify things a bit.

Best wishes
Be careful what you think because your thoughts run your life..Solomon
  • #7,450
  • Mar 29, 2016 1:00am Mar 29, 2016 1:00am
Quoting Akt
{quote} Hello Vsm, Thank you for the question. I think what i will do is use the opportunity of your question to clarify something for everyone because I get this question a lot. You see, we have a defined set of criteria we use to qualify what is demand and what is supply. We trade these qualified zones with good success. Now, there are other scenarios that show up in the market that represent scenarios that do not fulfill our criteria but unfortunately for us, we can not just ignore them and make as if they are not there. So in your picture, as...
Thanks AKT for your detail explanation. it has broaden my thinking process.
  • #7,451
  • Mar 29, 2016 4:22am Mar 29, 2016 4:22am
Quoting Akt
{quote} Hello Mr.Phibo, if i may please, Yes you should consider the orange zone a supply zone.. for 2 reasons. Please see chart Best wishes {image}
Fully agree with you about zones that you highlighted. I just wanted to make sure. Thanks for your replay
To break the rules you must first master them.
  • #7,452
  • Mar 29, 2016 4:24am Mar 29, 2016 4:24am
Monthly supply in control on XAUUSD (Gold) New daily downtrend and potential Daily supply to short at 1242ish. Too high in the monthly curve to go long. Bearish impulses with a bigger picture downtrend and bigger timeframe supply in control. Longs can happen lower at weekly demand zone around 1106.

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Set and Forget supply and demand trading community
  • #7,453
  • Mar 29, 2016 5:27am Mar 29, 2016 5:27am
Akt, but this brings me to next question: going with this logic, after couple of days during Draghi speech (I know, high impact news but still) EURUSD went 3 pips lower then previous DZ, so last demand zone looks like the red one despite that price bounced second time from nice green zone ?
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To break the rules you must first master them.
  • #7,454
  • Mar 29, 2016 6:38am Mar 29, 2016 6:38am
Quoting Mr.PhiBo
Akt, but this brings me to next question: going with this logic, after couple of days during Draghi speech (I know, high impact news but still) EURUSD went 3 pips lower then previous DZ, so last demand zone looks like the red one despite that price bounced second time from nice green zone ? {image}
Hello MrPhibo

No, that is not a DZ because of the wick

That wick points us to the fact that the rally that followed drew liquidity from the zone below since it only occurred after price spiked into where the orders were (the zone below) before the rally followed
Also, structurally there is no basing to lean on. The wick shows where the real demand was

So to find a fresh DZ, we have to look below the wick.

Please see chart picture. I have a question for us all there if no one minds please.

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Be careful what you think because your thoughts run your life..Solomon
  • #7,455
  • Mar 29, 2016 9:15am Mar 29, 2016 9:15am
Hello everyone.
Seeing that things are quiet around here (you are all off making money!!),
I thought I would start a discussion on an interesting perspective to trading S&D that I had not been aware of till a couple of years ago.
i think this will tickle your minds and hopefully broaden our understanding of the methodology.

best wishes

The difference between a) buying and demand; and b) the difference between selling and supply.


A couple of years ago, I was discussing trading supply and demand with an old CME floor trader. He knew it as "order flow" because they got to see the actual buy and sell orders on the floor of the exchange.

During our conversation, he made an interesting and profound statement that has stuck with me ever since.

He said, "Not all selling is supply and not all buying is demand".

That statement hit me like a ton of bricks at the time and I then went on to have a two hour conversation with him about what he meant by that statement.

The insight I gained allowed me to come to expand on the traders statement to this conclusion

Not all selling is supply but all supply is selling; not all buying is demand but all demand is buying

Translating that statement to the charts we use as our road map is what I want to discuss.

Let us start with the difference between selling and supply.

Not all selling is supply - Selling is evident on price charts as declines in price. Prices in any and all markets decline at any given point when traders around the world stop their buying interest at that given price point.
For that decline in price to equate to supply though, it must accomplish certain things and pass certain tests all to do with the extent of selling or degree of dis-interest from traders.

If the extent of dis-interest or selling is high enough to result in such a fall in price that the next time interest or buying shows up in that market is a distance (measured in pips) equal to two times the size of the basing period then we can equate this selling to supply.

In addition, when the level of disinterest or selling is so high that willing buyers below price have all their orders filled and price continues to decline then that selling is also qualified as supply.

It is for these reasons that all supply is selling but not all selling is supply

Not all buying is demand We see evidence of buying or a lack of interested willing sellers on a price chart in the large strong expanded range candles (ERCs) on the chart. That is buying/lack of sellers.

That buying is qualified as evidence of demand under the same scenarios as that of selling. When the buying is so much that it overwhelms willing sellers i.e. causes a break of the momentum the sellers have, evidenced by the break of a downward sloping trend line or more objectively, the removal of a zone of sellers.

So, do we ignore buying and selling and just focus on supply and demand areas on a chart?

Yes and No (dont you just hate it when people give you this answer!!!)

We trade supply and demand zones these are the trade-able zones on a chart.

We stay aware of buying and selling activities these are the non-trade-able zones on a chart.

We ignore nothing.
Be careful what you think because your thoughts run your life..Solomon
  • #7,456
  • Mar 30, 2016 12:18am Mar 30, 2016 12:18am
USDJPY daily supply zone triggered 113.72 at the weekly bearish trendline confluence as mentioned in a previous analysis. Monthly and weekly in a downtrend, room to drop. Short bias.

Anybody on this short?
Cheers,
Alfonso

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Set and Forget supply and demand trading community
  • #7,457
  • Mar 30, 2016 7:08am Mar 30, 2016 7:08am
Quoting Akt
{quote} Hello MrPhibo No, that is not a DZ because of the wick That wick points us to the fact that the rally that followed drew liquidity from the zone below since it only occurred after price spiked into where the orders were (the zone below) before the rally followed Also, structurally there is no basing to lean on. The wick shows where the real demand was So to find a fresh DZ, we have to look below the wick. Please see chart picture. I have a question for us all there if no one minds please. {image}
Ok, thank you Akt, all seems to be clear now
To break the rules you must first master them.
  • #7,458
  • Mar 30, 2016 3:56pm Mar 30, 2016 3:56pm
For those that don't know, I'm also posting some supply and demand setups and analysis on my Instagram account, you can follow me at https://www.instagram.com/setandforget/

Last two trades posted have been triggered, XAUUSD Short (Gold) and USD/JPY D1 short. Anybody on these two shorts?

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Set and Forget supply and demand trading community
  • #7,459
  • Mar 30, 2016 4:50pm Mar 30, 2016 4:50pm
Quoting panoramia
For those that don't know, I'm also posting some supply and demand setups and analysis on my Instagram account, you can follow me at https://www.instagram.com/setandforget/ Last two trades posted have been triggered, XAUUSD Short (Gold) and USD/JPY D1 short. Anybody on these two shorts? {image}
Hi Mr Alfonso,

what is the probability of that RBR to act as a demand zone? the red line is a flip zone, so it could bring support to that RBR
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passion and discipline
  • #7,460
  • Mar 30, 2016 11:43pm Mar 30, 2016 11:43pm
Quoting rohule
{quote} Hi Mr Alfonso, what is the probability of that RBR to act as a demand zone? the red line is a flip zone, so it could bring support to that RBR {image}
That's not a demand zone Roberto, it's a failed ERC candlestick, nothing else. There is a potential drop-base-drop being formed on that chart though, potential monthly supply CP supply zone.

Cheers,
Alfonso
Set and Forget supply and demand trading community
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