Price Will Tell - Supply/Demand Price Action Trading

[quote=simond2002;9103340]{quote} What's interesting for me
Spot on !!
buyers and sellers and where to find them is all there is to it

When I look at the market now, I just like to resolve it to buying and selling. The market seeks out liquidity; buy orders push price up, and sell orders push price down. That's it. And so:

Resistance = selling
Support = buying

All good. But... we also know that:

Supply = selling
Demand = buying

So, in essence they're the same thing? We're talking about the same thing, right? Well, yes and no (from my side at least). I see supply and demand, and resistance and support as two types of buying and selling. At its most basic, the key for me (as shabs pointed out the other day) is that with supply and demand, where we know institutional money injects liquidity into the market, we see momentum. We often see a form of reversal as well.

For me, the following is an illustration of supply. Price rallied up, there was a small period of indecision then price thumped down through the swing point (that was also the base of the rally up), and printed those nice momentum candles. This is institutional selling that creates a very clear footprint, and is something that I'd be interested to try and trade in harmony with at some point. It basically opens my eyes.



Resistance on the other hand is something that I see as being quite different. Here's an example that I would cite as resistance. It's the same chart with different annotation. We can see that once buy orders pushed price up and tested that supply, (at around 132.75), sell orders kept on tapping price back down from around that same price over time (as Achlys pointed out). So this selling (resistance) to me is a markedly different behaviour of selling than that which can be called, supply.



I wish I'd screen-grabbed this chart earlier on but unfortunately didn't. Going to use this chart as an SR Flip example now and hopefully highlight one of the pitfalls of this type of fancy phrase, and the pre-cognitive state that it's capable of creating.

Had to do a crude chop on this chart but imagine a trader of fancy phrases has seen the following:



His heart's beating fast, his mind is awash with all those fancy phrases and aphorisms; "What was resistance becomes support", "SR flips.." etc etc etc.
We've all been there so it doesn't take a lot of imagination to get straight into his mind and hear what he's thinking, "This is an SR Flip" or "This yellow line is now support". Of course those who are a bit more battle weary know that this line isn't an SR Flip and neither is it support. Anyhow, what does the trader do? He buys a touch of his support, and the following plays out, and of course he more than likely takes a loss:



This post was probably about a few things; identifying, describing and distinguishing support and resistance/supply and demand, and maybe also skimming across one reason for the importance of trading price-action at SR/SD as opposed to crossing one's fingers and hoping for the best.

Trading PA @ SR/SD is something redsword11 spoke a lot about and gave a huge number of examples. His thread really is recommended reading. It's never been bettered in my view.

It's arrived back at 1.2877. A lot of potential resistance above. Will watch and play accordingly.

EURCAD might be the better option here; 1.4540. We'll see...

On this demo swing, price has just tapped the top of the first target area. Moved the stop to b/e. Interested to see how it plays out.

Stopped out at b/e +.

Despite all of the good looking confluence (and the fact that it ran to circa 1.5R) this trade was still contra-trend.

I think when we take entries like this it's basically a crap shoot. Even though some of these setups do work out (i.e. price never returns to the origin of the zone and just runs to target) I personally don't think it's a wise or controlled way of trading. A much better way to go about it is either trade the test, i.e. a double-top, or at least allow price to establish its new direction.

Will still watch this, zone is valid until it's broken, then take a view if, as and when that happens.... or not.

Supply & Demand vs Resistance & Support. 2 very different concepts, although appearing similar in the respect of Buying or Selling zones.
Both should be at places where fresh momentum has entered the market ie. the institutional & big speculators.

Main differences:
1. The more touches of the S&D zones the weaker it gets vs. S&R zones actually get stronger.
2. Price breaking through S&D zones removes the zone, S&R zones breaks can reverse their property.
3. S&D zones are subjective in their description & application, S&R zones are clear rule defined.
4. S&D zones formed at market consolidations, S&R formed by previous breaks & retests.

Can be very confusing trying to apply both ideas on the same chart. Best to use one concept & stick with what works for you.

Ain't that the truth. The point I would keep pressing is for traders to consider avoiding attempting to trade off of generalised fancy phrases (at least until one fully
understands the DNA of buying and selling from which these phrases are derived). Once one's understanding of that sets in, and that price-action is the manifestation of buying and selling, and within its inherent rhythms lies the opportunities for SD traders to profit, then one probably ends up "canning" all those other terms altogether. Who knows, maybe we'll even invent some fancy phrases of our own?

Some SR/SD annotation on recent GBPAUD H4:

This only comes from many, many hours of screentime & backtesing.

Seen some really crappy behaviour on these forums lately.

Remember; some people fish to eat, some people fish for sport, but some people fish for suckers.

Don't be a sucker.

USDCAD M15

Daily's obviously up but I'm more interested to try and sell this.
Supply zone is valid until it's breached.
A double-top formation here would be nice.

EURCAD M15

Tackling the flag

Hmmm... Just took a double loss.

Yesterday's close got me interested in buy setups.

I've got a pretty good collection of these PAs (where intraday SR forms into nicely defined SD zones) saved and it's unusual for them to fail in such a controlled manner. Still interested to buy it it. Will see.

OK bought it again and running at b/e. This is the last trade of the day. If this piece of dirt doesn't break out I'm going to turn the charts off and come back later.

Added another. Locked the first position against the second with a bit in lieu.

Closing up shop for today. Everything locked in and running at b/e. Be great if price takes out that little H1 supply above.
No worries if it doesn't.

AUDUSD D1

Oz is in Daily. Can still be scalped LTF either way. For the Daily short
need to see Daily PA - minimum H4 PA. Plenty of examples on the charts
how these type of trades set up. Direction is important.

When we don't factor in SR, simple "Zone + PA" trading is myopic.
One day you wake up and go, "Ah, now I know why all those setups keep failing."
That's the day the proper trading journey begins.

Tasty.
First one off, the rest is in the lap of the gods.

...and that is why I don't touch-trade unqualified levels at factored support and resistance.