Supply and Demand Trading is a method used to determine where the majority of buyers and sellers will take place. Today I want to look at trading supply and demand zones in combination with two other elements that will help you become much more consistent in your trading. When analyzing the markets it is important to get a "big picture" outlook so that you have an understanding of what the overall direction of the market is. After we determine the direction, we simply need to know where to get on board, and lastly where is it going to end. To determine this information we need to know the following three points:
1. (Big Picture Trend/ Direction) Depending on your style of trading you will want to choose a paticular chart that suits your trading time frame. For example we can look to a 60min chart to get an intraday "big picture" trend, or a daily chart for a swing trading outlook. Choose one and be consistent with it.
2. (Supply and Demand Zones) Locate these areas for reasons to buy/sell in the current direction. Defining these levels gives you not only a reason to enter, but more importantly you can reduce your risk to a specified amount. Be sure to allow your stop to take you out of the trade if you are proven wrong. We never want to allow a loser to run!
3. (Altitude of Price) Use this to determine if you are at the beginning or end of a trend. If you are capturing a trend following trade from the beginning you may consider looking for larger profits. When you are nearing levels of altitude that place you at the end of the trend you should consider smaller profits and wait for the change in direction to reverse your position.
Understanding these 3 elements of price action can be very helpful in determining trades. It is key not to over analyze a market or try to combine too many elements as this will cause too much emotion and hesitation.
CFTC RULE 4.41 HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. All Software provided or purchased is strictly for educational purposes only. Any presentation (live or recorded) is for educational purposes only and the opinions expressed are those of the presenter only. Testimonials may not be representative of the experience of other clients or customers and is not a guarantee of future performance or success.
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