Once again you can see that if we used the price preceding a major move, as our definition above said to do, then we get mostly swing lows. Zones that once again where returned to, were often areas where buyers were once again found and price was ripping higher as a result.

These are areas on the other side of the market that could have been longed if you were a supply and demand Forex trader. As you can see on the charts found within the section above, you can immediately see how a retest of nearly all supply and demand zones saw another rejection.

With this in mind, the best Forex supply and demand strategy focuses on trading reversals when price returns to retest zones for a second time. Trading reversals at supply or demand zones will give you the highest probability of success using a strategy of this type.

Depending on your appetite for risk, there are two ways you can go about trading a supply and demand strategy. The first is for aggressive traders who want to milk every last pip they can out of a move by getting in early. Aggressive traders would enter trades using pending orders as soon as price returns to a strong supply or demand zone.

You can see that price immediately reversed when it returned to the supply zone and with a stop placed just above the zone, it was never troubled. This strategy requires you to be more active, using market orders to enter trades when the conditions presented are just right. In this case, price stuttered at the supply zone before retesting short term support as resistance and confirming that sellers were once again in charge of the market. The supply and demand indicator is a technical indicator that draws the demand zone and supply zone based on four advance price action patterns.

Rally base rally and drop base rally give rise to the formation of demand zones, while drop base drop and rally base drop makes supply zone. So, if a supply and demand indicator uses these two natural patterns to draw the zones, then that indicator is drawing valid zones. It works by making high probability zones on the candlestick chart. Price always moves from one zone to another zone. This indicator picks only high probability zones. It is impossible to draw all the zones on the candlestick chart.

The rally base rally pattern consists of three portions a rally candle, a base candle, and a rally candle. The zone is always drawn on the base candlesticks. You can also look at the image below to better understand this price pattern. In the same way, the other three patterns work. Keep in mind that the zone is always drawn on the high and low of the base candlestick.

In trading, risk management is the most crucial factor after technical analysis. If you are not following a proper risk management strategy, you will most likely lose your capital. The ultra-high risk-reward ratio is the feature of the supply and demand indicator. The second feature is the tight stop loss. Because small size zones with fixed high and low forms in case of supply-demand. Then in the future, if you lose even seven trades, you will still be profitable.

This is the magic of risk management with supply and demand. The main difference between the conventional and advanced SD indicator is the logic or price action pattern behind it.

When the price goes up, it means demand has been increased, whereas when price goes down, it means supply has been increased. This is the fundamental concept. And conventional indicators use this simple method to draw the supply-demand zones on the chart. Suppose an indicator draws a zone based on price increase or decrease. Then it does not mean the future price will respect those price levels again.

The object of scalping is to make a profit by buying or selling currencies and holding the trade positions for a very short time, for a small profit, and closing it. Typically these types of trades are only kept on for a few minutes. The key aim for the forex scalpers is to catch small amounts of pips as many times as they can do in a day.

For it to be effective it needs intense concentration and quick thinking. Whereas a day trader may try to take up a position once or twice, or even a few times a day, scalpers are far more frenetic and attempt several times in a session to skim down small profits. Scalpers are looking to enter the market, and hopefully exit positions before the session close of the market.

Scalpers usually employ technical trading techniques using short-term on supply and demand base.

IMPORTANT: Click Here To Download My Supply And Demand Guide As A PDF! Before we get to grips with supply and demand as a strategy, we need to talk about the supply and demand as a concept.

Now Forex, as well as all other markets, stocks, commodities, crypto, etc, are driven by supply and demand. News events, economic announcements, and general market action cause different groups of traders to buy and sell, resulting in changes to the supply and demand equation.

Observing the previous image, you can easily see how changes in supply and demand create the moves we see. First: Supply and demand are in relative balance, resulting in a consolidation. Supply is equal to demand. Second: for whatever reason, something changes, and supply suddenly outweighs demand.

Third: demand really comes in and pushes price higher, setting off a new upswing. This continues before equal supply enters the market and creates equilibrium. With supply and demand now in relative balance, price moves sideways, and we see a tight consolidation form. Of course, it also goes on hour, half-hour, quarter-hour, 5-minute, 1-minute, and yes, etc. How does the concept of supply and demand create a trading strategy we can use to anticipate where and when major market changing reversals could begin in the future?

Changes in supply and demand ONLY happen when the big traders buy or sell. Their positions are so large they must break them into smaller chunks and place each trade individually, around a similar price, to avoid pushing price away and potentially forcing their following entries at a worse price.

This way they achieve the effect of placing one huge position, by placing a bunch of small ones instead. Their positions are often so big that not enough people exist on the opposite side , to get them placed, even if they break them down into smaller chunks. The banks need thousands of other traders completing the opposite action for them to enter their positions; buying if they want to sell, or selling when the banks want to buy. To compensate, they must let price move away and make it return later to get the rest of their position entered.

Next: the banks make price return to the source, the point they placed their initial position. That way, they can enter their remaining positions like trades at a similar price, replicating placing one total position into the market. In supply and demand trading, our job is to locate and trade these points where the banks enter their positions. That will give us a low-risk entry with a very favourable risk to reward ratio. Demand Zones represent points where the banks have placed a significant number of buy positions.

Demand Zones form when the banks place a large number, or size, of buy positions. This creates excess demand, and results in the price reversing and moving higher. Supply zones show points where the banks place a significant number, or size, of sell positions and these are the resistance points where price could fall. Supply zones form when the banks decide to sell a large amount of currency. This selling creates an excess of supply, which causes price to fall, creating the supply zone. We can break these Supply and Demand zones down even further.

Now, we need a quick discussion about the two types of supply and demand zones. While supply and demand zones are the same thing, zones where price could reverse, the zones come in two types based upon whether they develop from a reversal or continuation. The two types are as follows: 1. Rally — Base — Rally RBR and Drop — Base — Drop DBD Zones,. Rally — Base — Drop RBD and Drop — Base — Rally DBR Zones. Form, when price moves in one direction, Base, i.

e consolidates or pauses, then Continues in the same direction. They develop from banks placing a small number of positions into the market. That said; they can give you good trades here and there, especially if you know which zones to watch for in particular. Form, when price reverses direction, Base, then Reverse and set off a new swing.

These zones form when one major swing changes to the other, usually caused by the banks buying or selling large quantities of currency. Reversal zones are the ones you should be trading using Supply and Demand methods. Reversal zones are formed by the banks and other big traders placing huge buy and sell positions. These zones are much larger when compared to the much smaller positions they place to create continuation zones. If you want to be successful trading supply and demand, you MUST master the finding of high probability zones and correctly drawing them on the chart.

It takes time, practice, and experience to get this right: But, I know a couple of tricks that should make everything much easier. But, stay with me, because I know a method you can use to make finding zones much easier.

Supply and demand zones are formed by the banks buying and selling large quantities of currency, right? These tell-tale signs reveal the banks are buying or selling a large amount of currency, which means a massive build of supply or demand must exist at the source of the rise or decline.

These rises occur when a huge imbalance exists between supply and demand. Demand is outweighing supply in this case. Those actions ALL require the banks to buy. These reveal the banks have decided to take some action in the market, like place buy trades, which means price has a high probability of reversing once it returns to the source of the rise.

And with the zones marked, this is how it looks…. Right away, you can see how almost all the zones resulted in price reversing or at least caused a reaction of some sort. That gives you some idea of how accurate the zones are at predicting when and where price could reverse. To find supply zones we use the same process as with demand zones, only the other way around.

Sharp declines occur when excess supply comes into the market, which happens when the banks sell. This means it is likely the price will return to the same point, the supply zone, so they can get the rest of their positions executed. Again, almost all the zones cause some sort of price reaction.

Most result in a large reversal. But, a couple only cause minor declines, which last for two or three hours. It will take some practice to get good at finding the right zones. If you follow these guidelines, you will pick it up fast. Draw the zone too big and your risk will be higher. You must cover a larger area with the zone. Draw the zone too small, which is probably even worse, and price may not touch the edge before reversing.

This will cause you to entirely miss the reversal and not get into a trade at all. To draw a demand zone , find a sharp rise where you think a zone has formed.

Now you need to locate the source of the move. The source is the point where this most recent rise originated. If the banks still have positions left to place, they will bring the price back to this point. We need to cover it with a zone large enough to ensure price reverses within it. Open the rectangle tool from the tool menu, and place the rectangle on the MOST RECENT SWING LOW that formed at the source of the move.

The banks need sellers to buy from; remember, this is the key: opposing orders. Leave the bottom edge of the zone on the low, and move the top edge up to the LAST SMALL CANDLE that formed before price shot upwards and created the first big bull candle.

If the small candle is bullish, mark it to the close. If the small candle is bearish, draw it to the open. The lower edge should sit on the most recent swing low, and the upper edge should rest on the last small candle before the first big candle appeared — a small bull candle in this case. No problem — draw the zone from the low to the point where price first breaks higher. But, it will cover the right price range and provide a valid trade if price reverses.

Place a zone on the most recent swing high , bringing it down to the last small candle that formed before the decline. If the banks still have positions left to enter, they will bring price back to this point to place their remaining positions at a similar price before causing the reversal.

Place the rectangle tool on the most recent swing high, drag the opposite edge down to the LAST SMALL CANDLE that formed beforeprice fell sharply and created the first big bear candle in the down move. You can see the top of the rectangle rests on the swing high and the lower edge sits on the open of the last small candle before price fell sharply, which was a bear candle in this example.

As trading strategies evolve, new ways of trading them get created. Sometimes these ways work better than the previous methods or better suit a particular style of trading. Supply and Demand has also gone through this process, and today, there are TWO different ways of trading the zones…. Popularized by Sam Seiden, the set and forget entry is the original way of trading supply and demand.

The idea is that by placing a limit order at the edge of the zone, when price returns, it will execute the order and put you into the trade.

The downside being price may just blast through the zone, causing you to lose money, which happens a lot! If price is going to reverse from the zone, it must at least breach the closest edge, either by spiking through or by moving in via normal price action. In this case, the trade was successful: price came up, spiked the upper edge triggering our order , before reversing and moving lower. Like I said, the limit order entry is a decent way of trading supply and demand.

I used it for a long time, and the results were overall pretty great. With the price action entry, you trade the zones using price action, candlestick patterns to be exact. Look for pin bars or engulfing candles to form inside a zone and then enter. These price-action candles indicate the banks are interested in making price move away.

Now with the price action entry, we must wait for price to enter or touch the edge of the zone BEFORE entering.

These are areas on the other side of the market that could have been longed if you were a supply and demand Forex trader. Keep in mind that the zone is always drawn on the high and low of the base candlestick. We need to cover it with a zone large enough to ensure price reverses within it. Well, what does that look like on a price chart? All of these areas could have been shorted as part of a Forex supply and demand trading strategy.

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