Supply and Demand Forex Trading Method - ForeXposed

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Tuesday, May 9, 2017

Supply and Demand Forex Trading Method

Supply and Demand forex trading method is the best method from the various forex trading method. This method refers to a large number of seller volume (supply) and buyer volume (demand) in determining the order.

In contrast to the future market where a large number of seller volume and buyer volume can be known with certainty. On forex market (spot market), the number of seller volume and buyer volume cannot be known with certainty.

Default MetaTrader volume indicator programs alone cannot be used as a reference, because it only shows a movement of the value of Open, High, Low and Close (OHLC) overall in each bar (candle), instead of showing the large number of sellers volume and buyers volume overall, separately.

If forex traders know how a large number of sellers volume and buyers volume, the traders will always be right in deciding the order and will never experience a loss.

Please note, the ups and downs of the exchange rate of a currency due to an imbalance between supply volume and demand volume. As shown in the table below, each there is an imbalance between supply and demand, then the prices will change until the balance between supply and demand occurs.

 



 

The table above can be described in detail as follows:

  1. As much as 12000 sellers sell at the highest price 5, because the price is too high so that only a little of buyers who bought (2000 volume only), resulting in the surplus of supply occurrence as much as 10000. Due to a surplus of supply then the price will come down quickly.

  2. As much as 10000 Seller sells at a price of 4 because prices have started to drop, but still too high for most buyers, then only 4000 taken by buyers, so there is still a surplus of supply as much as 6000. Because there is a surplus of supply so prices are still going down.

  3. As many as 7000 Sellers to sell at the price of 3, because the price is quite cheap already considered by the buyers, then the supply is absorbed runs out (7000). This phase occurred in the balance between supply and demand, so prices are not moving up or down.

  4. As much as 4000 sellers sell on price since the price was considered a bargain by the buyer, then the 11000 buyers do a mass order, resulted in an imbalance between supply and demand, and the market shortage of supply as much as 7000, causing prices to rise.

  5. As many as 1000 sellers sell at the price of 1, because the price is considered very cheap by the buyer, then 16000 buyers do a mass order, resulted in an imbalance between supply and demand, and the market is very deficient supply as many as 15000, thus causing prices to rise quickly.


 

To know the amount of supply and demand for certain it is extremely difficult, but we can observe a pattern formed on MetaTrader chart as a reference as to whether the price will move up or move down based on the following pattern:

 



 

Images on a turquoise line above show the phases of accumulation, in this phase the price movements still tend to be steady, supply and demand are still balanced, when there is a shortage of supply the price will move up quickly, and when there is excess supply then the prices will move down quickly.

The image on white line show phase of distribution, in this phase a supplier starting to lets off his price so the significant price movement happens and then the balance between supply and demand occurs. If it happens then the balance will return to accumulation phase again.

The image on orange line is the right moment to do the order. In making an order you have to follow the formed candle pattern, it’s would rise (bullish) or down (bearish). Bullish means having to buy order, while bearish means it must sell order. Timeliness in taking decisions is important, for it, you should be observant and patient in looking for movement of the candle.

The Distribution phase usually begins when there is important news (high impact). When the accumulation phase is formed, wait until high impact news release, if the news released is positive (good news) immediately make a Buy Order, otherwise if negative (bad news) immediately do Sell Order. Therefore please observe important news information either through the terminal or another web trader.

Many beginner traders are still not known about buyer volume and seller volume term. Buyer volume is not a large number of Buy Orders volume done by traders, also not a multitude of Sell Orders volume done by the trader. Make it a habit to distinguish the terms between Sell Orders and SELL, also between Buy Orders and BUY.

The real BUY is when a forex trader closes his Buy Order position at a price that is considered profitable. For example, a trader makes Buy Order for EUR/USD pair at 1.2240, when the price rose to 1.2270, the trader closes his Buy Order position, then the trader recently said to BUY 1 EUR and at the same time SELL USD at a price of 1.2270. So when a trader closes his Buy Order position then he begins to be said; BUY the first currency of the pair and SELL the end currency of the pair. This real BUY volume is what is called a buyer volume.

The real SELL is when a trader closes his Sell Order position at a price that is considered profitable. For example, a trader makes Sell Order for EUR/USD pair at a price of 1.2240, when the price dropped to 1.2220 the trader closes his Sell Order position, then he begins to be said; SELL 1 EUR at the same time BUY USD at 1.2220. So, when a trader closes his Sell Order position then he begins to be said; SELL at the early currency pair and BUY at the end of the currency pair. This real SELL volume is what is called a seller volume.

 

Reference: Mukh47