FIRST, ABOUT THE THEORY.
Trading based on key levels or zones is very common and for most traders, it's a well-known method.
Supply and demand is a trading strategy, but more than that, it’s a theory on how the Forex market works. The strategy tells us how and why things happen in the market, which we automatically accept as being true by using the strategy – we wouldn’t trade it if we didn’t think it works.
The theory is summed up as:
The banks cause zones to form by placing trades, taking profits, and closing trades. They then make price returns to these zones to get their remaining trades placed or to take the rest of their profits off. This causes upswing and downswings to form and creates the price action we see on our charts. We must thank Sam Seiden for creating the supply and demand method. (google for "Sam Seiden")
Not only did he create a Superior method of trading than what was available at the time i.e (price action at support and resistance) he also gave traders a strategy which if understood correctly can generate a significant amount of profits from the market.
The main premise of supply and demand trading is when the market makes a sharp move up or down the large institutions i.e banks/hedge funds are not able to get their entire trade placed into the market, therefore they leave pending orders to buy or sell at the zone with the expectation the market will return to the zone and the rest of their trading position will be filled.
Older zones should be combined with higher timeframe zones (nested). On its own, it's better if you only place trades in zones that have been created recently.
Let's first understand what a trend is.
Traders say, "The trend is your friend."
Some add, "...until the end when it bends."
This phrase has stood the test of time because trends are critical to any trading plan. We try to identify the strongest trends in the market. Use ACS28 on a higher time frame (H4, D1, W) to get the strongest and weakest currencies and combine them to get the trend of a pair. Example: If we see JPY weak and USD strong, then we have an UPtrend in USDJPY.
Confirmation of the trend:
First, we see a strong USD against a weak JPY.
Second, we see supply zones being broken (9 in a row) but not demand zones.
What are the best TimeFrames for Forex trading?
Typically, novice or inexperienced traders look into a specific time frame and ignore the more powerful primary trend. Alternatively, traders may trade the primary trend but underestimate the importance of refining their entries on an ideal short-term timeframe.
By determining the overall direction on a higher time frame and trading in that direction, you ensure that you are trading in the direction of the overall trend - this increases your chances of making profitable trades.
Understanding time frames will help you identify trends between two time frames, especially when there are opposing trends. Markets exist in multiple time frames at the same time. Therefore, there may be conflicting trends within a given symbol, depending on which time frame is being looked at. It is not uncommon for a symbol to be in a primary uptrend while also being in intermediate and short-term downtrends.
As a rule of thumb, a ratio of 1:6 or more should be used when switching between time frames.
Said this way, our TF choice will be:
m5 - h1 (optional m15 - h4) (for experienced traders).
m30 - h4 (good for beginners)
h4 - Daily (optionally also possible h1 - Daily)
Daily - Weekly
Beginner traders should set their time frames as high as possible, at least M30 or higher.
Warning. Until analysis with longer time frames is mastered, a novice trader should generally avoid trading with the 1-minute to 15-minute charts: Even though trading in low minute charts offers many trading opportunities, it is not advisable for beginners and intermediate level traders. The movements of prices in lower minute charts are very fast, which makes it riskier to trade them.
You start with the higher time frame and then work your way down.
If you are a beginner, and use the 4-hour time frame to judge the bigger picture, and use the 30-minute chart as the lower time frame.
Definition Pullback and Reversal:
Pullbacks or retracements are temporary price movements that occur within a larger trend that does not reverse the trend.
A reversal, on the other hand, is when the larger trend changes direction.
Any reversal begins first as a pullback.
Some rules in an uptrend:
A pullback can occur at any time, but it is likely expected when the price is near a supply zone. In a downtrend, the price is near a demand zone.
We consider a pullback as a reversal when the price broke through a demand zone. In a downtrend, the price broke through a supply zone.
Try to find above rules in the picture below:
Supply and Demand Method:
In an uptrend on Advanced Supply Demand, you could be looking for a demand reversal alert or a demand fake breakout (FBO), or a break of the supply zone.
In a downtrend on Advanced Supply Demand, one could look for a Supply Reversal Alert or a Supply Fake Breakout (FBO), or a Demand Zone Break.
TP:
Find a good entry zone and see if there is enough room to trade.
Advanced Supply Demand or SDDP gives enough room for a TP to the next supply/demand zone. I prefer to use the supply/demand zones of some higher time frames and can ignore lower time frames.
SL:
SL a few pips above the supply or below demand zone depending on buying or selling. It should not be too far away. Try to get Reward/Risk (RR) better than 1. Rule: an SL should be at a place where the setup will be invalid if the price gets there.
Hundreds of trade examples and info find in the links mentioned here:
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