Forex Supply and Demand: The Wild - ForeXposed


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Monday, February 20, 2017

Forex Supply and Demand: The Wild

This time I wanted to write about how the supply area changed into demand area, and vice versa. I'm trying to show you how to identify these changes, which we want to see is the characteristics shown by price motion .

Generally, the price leaves a price level on the two ways:

  1. Strong moves, prices move quickly (the body candle is tall).
For example; in the up moves, the buyer sought to put pressure on high volume to trigger “Buy Order” in the area of supply and demand or stop loss that is usually placed on top of it. The consequences, more speed on price motion.

  1. Gradual moves (the body candle is short).
This reflecting the power of supply and demand is not too different. And there are still doubts between buyer and seller on the commitment to take a position.

Gradual Moves

You can see on the picture below, how the demand area is gradually turning into supply area.

Forex Supply and Demand: The Wild

The area shaded with a blue color shows the beginning identification. By the help of two flat-line, we know this is an area where demand from this price traveled up, previously.

Based on the visual observations, we find out that the prices go back down and consolidating, shortly (aqua circle). From here, it's beginning to see row changes gradually which indicates the demand turned into supply:

  • Breakout (A), the beginning of the changes.

  • Pullback (B1, B2, C), retest that further, strengthened the occurrence of changes and confirm the shaded area with the magenta color was transformed into supply area.

Entry for the example above can be carried out on:

  • A, breakout entry for sell

  • B1 and B2, pullback entry for sell

  • C, pullback entry for sell. Especially for C point, the gap down was happen. We will try to discuss the understanding of Novice Gap vs. Professional Gap, later.

Take Profit (TP) on the next level of support or resistance, with adequate profit zone or wide enough. If your chart does not show the existence of this next level, trying to do some zoom out and look towards the left, like the example below:

Forex Supply and Demand: The Wild