Will Supply and Demand Trading Rules Stop Working
I cannot count the times that I've been asked the question "If too many people learn supply and demand trading rules, will it stop working?". The simple answer is absolutely not but let's look at a few of the many reasons.
Trading Styles
Each individual trader is unique and has their own personality of trading. Some may trade very short-term and others may prefer to hold their trades. While both of these individuals may be using similar rules for supply and demand trading, their orders will almost always be different because of the data they are analyzing.
Different Entry Time Frames
When a short-term trader looks to enter the market, they're generally using relatively small-time frames to do so. Much of their trading takes place inside the large trading ranges with supply above and demand below. This causes volatility such as trends, pullbacks and is well needed for continuous incoming order flow.
A swing or long-term trader will likely focus on larger time frames to enter and will not be so active within each trading range. The actual entry point(s) can differ vastly from others because they're seeing completely different price values on each time frame.
Different Targets
Having rules for defining targets is just as important as the entry or stop, however many supply and demand traders (and other styles) are prone to dynamic target prices because that is the way the financial markets function. Trends, ranges, levels, pullbacks, candlesticks etc.... are almost always different in size; while that makes it difficult to have a consistent fixed reward, it is the best indication of price movement for future turning points. This will cause targets to be at different price points for each trader.
Emotional Trading
Emotions are a huge and unfortunate part of trading, in fact they are generally the largest factor outside of the supply and demand method or rules. They cause many orders to be closed at inconsistent times and new orders to be placed when all the rules have not been met.
It is important to have a very consistent set of rules for supply and demand trading and even more important to stick to those rules. While every trade will not work out, the amount of stress is substantially increased if we're having to make subjective decisions over and over!
Below see a video from many years ago where I walk through a trade using the exact same rules that we use today. I'll apologize in advance for the poor quality and my rambling :)
Today in the live room we discussed the short-term supply level below ($2931.25) as a potential opportunity. The irony is that today's supply zone was very similar to the one from many years ago; both made a new high and became an original supply level, then a retest of that area provided yet another wonderful drop in price.
In Conclusion
Everyone is different in day to day life and trading is no different. No matter if many learn the exact same supply and demand trading rules, the method itself will be personalized to each individual. Entries, stops and targets will be placed at different price points and volatility will be generated in different sizes. An important thing is trying to capitalize on this by NOT trying to be overly accurate. We generate zones from supply and demand levels and allow price to turn in the vicinity, thus removing the necessity to be crucially accurate.
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