6 Tips to Success in Forex Supply and Demand Trading Strategies - ForeXposed


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Friday, March 31, 2017

6 Tips to Success in Forex Supply and Demand Trading Strategies

If we see the price is at strong turning points, whether it be on trend or support and resistance areas, The Law of Supply and Demand has always been there.

A strong uptrend only occurs if the existence of traders who want to buy is more than traders who want to sell. Along a trend happens, prices will keep moving until the seller has been feeling enough in absorbing order buy on the market. Strong bullish trends derived from the accumulation or demand zone.

The bearish trends occur when the number of people who want to sell is more than 'buy orders'. The price will fall to creating a  new balance. Bearish trend wave comes from the supply zone or distribution area.

Supply and Demand are the main law for changes occurrence in all markets. At traditional markets to international markets. If there are many people who want to buy a limited number of specific items, then prices will rise continuously until the item is available. Vice versa, when no one is willing to buy a particular item then a seller must lower the price to the buyer becomes interested and want to buy it, if it's not done, the transaction will not happen.

6 Tricks to Success in Forex Supply and Demand Strategy

The 'accumulation and distribution' can explain how a trend going on. The price will remain at 'accumulation zone' until the 'big players / big boys' have accumulated his position and then push the price to rise to the top. They will not instantly flood the market with full orders, because it could cause the price to rally, and as a result, they could not take a complete advantage and thus reduce their profit.
6 Tips to Success in Forex Supply and Demand Trading Strategies
Example of a zone of short accumulation before a strong breakout happens.
Why is this so? Because, this way the forex traders will feel safe enough, assuming that after the price left accumulation zone, not all 'buyer' has to close their orders, and at that level, the open interest still exists. Supply and demand strategies users can use this knowledge to identify high probability reaction zone.

This is the 6 components that you can use to identify supply zone:

  1. Prices Moderate Volatility.
Usually, a supply zone will show a narrow price behavior. There are many candle wicks and strong, moving back and forth, sometimes even to cancel a supply zone for use in future trades.

The more narrow of a supply and demand zone prior to the strong breakout, then likely the better reaction to come.

  1. The Price Only Shortly Visit.
A good supply and demand zone is when the price only shortly in the supply zone. Although the accumulation position requires a time, but usually long ranges do not indicate that the 'big player' come into play. Usually, a supply zone is good if the price does not hold too long at supply zone. The shorter the price required at supply zone then it is better to be footing re-entries when the pullback happens.
6 Tips to Success in Forex Supply and Demand Trading Strategies
This is example of narrow and short accumulation zones followed by a strong breakout.
  1. The Occurrence of 'The Spring'.
'The Spring' describes the price movement in the opposite direction with a 'false breakout'. ' When 'The Spring' happens, it will trap a trader to take trades in a wrong direction. Big Boys or Institutional Traders use 'The Spring' to load a buy order and then push the price towards the higher.
6 Tips to Success in Forex Supply and Demand Trading Strategies
The Spring is a pattern usually used by a professional trader to take larger positions.
  1. Price Leaving The Zone with Strong Force.
This is a very important thing. When the price left the supply zone and trending started to happens. The power imbalance between buyers and sellers resulting in strong price movement. The stronger the movements a strong supply, the greater profits could be taken. Especially when the price is only shortly at the accumulation area.

Especially in 'Rally-Range-Drop' and 'Drop-iRange-Rally' that could be said that the trend reversal has been completed.
6 Tips to Success in Forex Supply and Demand Trading Strategies
The strong turning points can give a great opportunities to re-entry.
When the price is in the position of selling off to a strong bullish trend, there are considerable opportunities in the forex market, absorbing all the sell orders and the prices began to move towards the top. Always observe a strong turning point, where there are a high probability price levels.

5.The Supply Zone is Fresh.

When you make a trade forex from supply areas, always make sure that the supply zone is still 'fresh', that is to say, after the creation of the zone, the price has never returned to that point. Because every time a price revisits the zone, that shows there are unfilled orders and the level will be weakened. This principle can also be applied in analyzing the support and resistance trading.

  1. The Amateur Squeeze.
The 'Rally-Range-Drope' pattern describes the occurrence of a market top (or swing high), which continues with a sell-off. This level point shows where a selling interest became so great and absorb all buy interest, even to urging to lower prices for longer.

The amateur squeeze makes a patient and good traders take advantage of the ignorance of the traders. This is one reason why many amateur traders fail. You need to assume that, on top of the strong market, at a top and below market bottom there is still very big orders, i.e. orders that carried by traders who specialize in fake breakouts.
6 Tips to Success in Forex Supply and Demand Trading Strategies
The price typically will go beyond the initial zone to squeeze the amateurs and to triggers stops and picking up more orders.

This is how to use the supply and demand strategy.

The majority of forex trading strategy concepts only looks good in theory. If you are using supply and demand strategies, your daily trading will very profitable. This forex strategy is very worth to investing your time and effort to master it.

The strategy of supply and demand plus open interest can be used in three ways:

  1. The Reversal of Forex Trading.
After successful in identifying strong levels on the previous market, wait for the prices to return to the area. In a case of false breakout happens, the chance for the reversal to happens is very large.

To seek higher probability trades, combine the fake breakout with momentum divergence and a fake spike by using Bollinger Bands.
6 Tips to Success in Forex Supply and Demand Trading Strategies

  1. Support and Resistance Levels.
You need to know, that supply and demand zone is a natural support and resistance levels and will be very useful when you place it at your charts. Combine supply and demand zones with support and resistance levels will be very helpful for a trader to understand the price motion. Sometimes you will find that the support and demand zones just above/below the support and resistance levels. More special, when the traders who are using support and resistance is very difficult to take a position, the supply and demand traders still keep a good position.
6 Tips to Success in Forex Supply and Demand Trading Strategies

  1. How to Place Stop Loss and Take Profit.
As well as support and resistance levels, supply and demand zones can also be an excellent tool to set Take Profit position. Always place your profit target ahead of supply and demand zones, so that you don't risk your profit when profit target has been achieved. As for the Stop Loss, place your stop loss beyond supply and demand areas to avoid premature stop runs and squeezes.

Reference: TradeCiety.

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