Supply and Demand: Simple Profitable Forex Trading Strategy - ForeXposed

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Monday, May 8, 2017

Supply and Demand: Simple Profitable Forex Trading Strategy

The forex supply and demand strategies tutorial I am going to share it's very easy to implement, even for those who are still early in the forex world. This strategy is fairly simple, where we just take advantage the opportunities of "Break Out" from Supply and Demand Area.

In this study I divide the material into three subjects; Supply and Demand, Understanding Break Out and determine the OP point.

Please read and understand this discussion from start to finish. Do not hurry up. Read, understand, and then practise.


Break Out Supply and Demand Techniques: Simple Forex Strategies

Before understanding further, what we have to understand first is what it is Supply and Demand? Where any economic activity is definitely associated with this, when there's a supply there is definitely a demand. Based on a citation from Wikipedia in a simple way, supply and demand can be defined as follows.


What is Supply and Demand?

“Supply and demand is an economic model of price determination in a market. It postulates that in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted”.

Source: Wikipedia.


In fact, in the forex market, the concept is always used, and certainly, there are. As we will discuss the implementation in this article.

In applying the simplest forex strategies we will involve Supply and Demand.
Supply and Demand: Simple Profitable Forex Trading Strategy

To facilitate your understanding, I will try to give an illustration of this;

  • Why the price of rice can go up?
Because of the number of requests/consumer is greater than the amount of the offer/seller.
Vice versa when rice prices down.

  • Then, how would it be if the number of consumers and buyers continue to be balanced?
Yes, the price will still be in the same range. That's called Supply and Demand Area.

This concept simply provides insight into the workings of supply and demand. On the forex market, a similar concept can also be applied. For more details, please look at the example of the Supply Demand on the following chart;
Supply and Demand: Simple Profitable Forex Trading Strategy

Notes:

  • The Supply and Demand Area is price deal area between seller and buyer.
  • To display in the chart, SnD consists of some candle that was in the same area (raw of the candle).
  • Every trade activity, anywhere, in any case, never off from this term, including in forex market.
The question is, why we should refer to Supply and Demand (SnD)?

Actually is not a must, but with reference to the SnD, we will better know the limits. Like we want to travel, we know which terminal of the Chair and the dismissal. Generally, the price in forex trading deeply affected by SnD area.


What is Break Out?

Understanding this strategy certainly not off the connection with the break out term. When price broke SnD area (either upwards or downwards). This event is what referred to as Break Out.

"Break Out is when the price breaking Supply and Demand areas marked with close body".

Prices will continue to be in the area of Supply and Demand until new factor appear which led the price to out / break out from the area.

The following is example of breaks out on the chart;
Supply and Demand: Simple Profitable Forex Trading Strategy

Well, we as retail traders can take advantage of this moment to get the profit. Really simple trading strategy aren't it?


Then, how to do breakout forex trading strategy?

  • Determine The Point Of Open Position (OP).
Arriving at this stage I assume you already understand and can identify areas of Supply n Demand and had also been able to identify when the price breaks out.

  • The next step is to determine the right OP point. This is the steps;
  1. Find the SnD area.

  2. Wait until the price breaks out from SnD.

  3. Wait until the price back (retrace) in the area of SnD.

  4. OP.
For the step number 4, of course, we cannot open position directly, there are rules that must be adhered, it’s will help us to know when to buy or Sell.


What kind of a rule and when the time to execution?

  • Rule for OP Buy Action
-The open ‘Buy’ done when the prices break out from SnD towards the top.
-SL for OP Buy at the lower limit of the area of SnD.
Supply and Demand: Simple Profitable Forex Trading Strategy

  • Rule for Sell Action
-The open ‘Sell’ done when the prices break out from SnD towards the bottom.
-SL for OP Sell at the upper limit of the area of SnD.
Supply and Demand: Simple Profitable Forex Trading Strategy

As I said before, we suggest that when the prices are break out do not direct the OP, but wait for the price back to the SnD zone. This is intended to minimize Stop Loss so as not too big.

This forex strategy is indeed quite simple so that suitable for all traders, even among the newcomers. No need to hesitate when you feel fit with this strategy, even though it looks simple but proven quite profitable.

So, that is a discussion about Supply & Demand: Simple Profitable Forex Trading Strategy. I hope this strategy can help fellow traders in reaching a sustainable profit.


Reference: Kurniawan, IDRforex