🔶Supply & Demand
a comprehensive guide to Supply & Demand also referred to as Support and Resistance levels.
Last updated
a comprehensive guide to Supply & Demand also referred to as Support and Resistance levels.
Last updated
This section talks about buying low and selling high and their benefits.
Why is it good to buy low and sell high?
If you buy at the 0.75 level and the price goes up to 0, you make a profit. But if you bought at 0.5 and the price goes up to 0, you would make less profit.
If you buy at 0.75 and the price goes down to 1, you make a loss. But if you buy at 0.5, you make much more of a loss.
In the examples above, we can see that buying low is beneficial because it reduces how much money we lose and at the same time increases how much we can earn.
The same logic can be applied to a sell. If we sell high at 0.25, we have less money to lose if the price goes to 0 AND at the same time, we have more money to gain if the price goes down to 1.
But if we sell at 0.5, we have more money to lose (if the price goes up to 0) and less money to gain (if the price goes down to 1)
The point is that it’s best to sell & buy at price extremes. Buy high. Sell low. This concept will be used throughout this course.
What is this about: This talks about using everything we learned before to trade bases (both reversals and continuations)
1) Look for a base which is like this: rally base drop or drop base rally2) Find an Institutional Candle (a.k.a. IC) near the fair price (50%) of the base. This is your supply/demand zone3) Enter a trade when price revisits that zoneFor a buy: Look for a base which is like this: drop base rally. The rally should be a strong reaction out of the base (this signifies a reversal). Mark out the base.
Find an IC near the fair pricing of the base. The IC should be the origin of the move that broke out of the range. That candle will be your demand zone.
Then wait for price to come back to that demand zone. The low should be equal to/below the top of the zone (to say that price revisited the zone). Then you can take a buy.
For a sell: Look for a base which is like this: rally base drop. The drop should be a strong reaction out of the base (this signifies a reversal). Mark out the base.
Find an IC near the fair pricing of the base. The IC should be the origin of the move that broke out of the range. That candle will be your supply zone.
Then wait for price to come back to that zone. The high should be equal to/above the bottom of the zone (to say that price revisited the zone). Then you can take a sell.
1) Wait for a new range to form (price should break out of an old range and close inside it).2) Wait for price to reach the Premium/Discount zone and reject off of it3) Wait for a base to form near the fair price (50%) of the new range and wait for price to break the 50% level4) Look for an IC in that base and expect price to revisit the zone that it formed5) When price revisits that zone, take a trade
This is in case of a buy:
We can see that price broke an old range and closed back inside the range. Now, our new range was confirmed. Then we waited for price to reach the Discount zone (a low must be equal to/below the top of zone and a high must be equal to/greater than the top of zone to say that price reached the zone).
Then, price went up and formed a base. Then it broke through the 50% level. Within that base, we looked for an IC. That would be our demand zone. Then, we waited for price to revisit the demand zone (we bought here). Then price reached the Premium zone. We can exit once a high is equal to/above the bottom of the premium zone.
This would be in case of a sell:
We can see that price broke below an old range and closed back inside the range. Now, our new range was confirmed. Then we waited for price to reach the Premium zone (a high must be equal to/above the bottom of the zone and a low must be equal to/less than the bottom of the zone to say that price reached the zone).
Then, price went down and formed a base. Then it broke through the 50% level. Within that base, we looked for an IC. That would be our supply zone. Then, we waited for price to revisit the supply zone (we sold here). Then price reached the Discount zone. We can exit once a low is equal to/below the top of the Discount zone.
What is this about: This talks about when a supply candle turns into a demand candle and a demand candle turns into a supply candle.This is when price fails to reject off of the supply/demand candle and instead breaks through it.
(In case of a demand candle turning into a supply candle) Let’s say a demand candle has formed and it pushed price up.Then price came down to that demand candle and instead of bouncing up, it breaks through (with no movement to the upside).Price does this because there are more sell orders overpowering the buying force which makes it go down.That demand candle then acts as a supply candle. So, when price goes up to that candle, it goes down because the selling force (sell orders), which pushed price down earlier, is still there and will now push price further.
(In case of a supply candle turning into a demand candle) Let’s say a supply candle has formed and it pushed price down.
Then price came up to that supply candle and instead of bouncing down, it breaks through (with no movement to the downside).
Price does this because there are more buy orders overpowering the selling force which makes it go up.
That supply candle then acts as a demand candle. So, when price goes down to that candle, it goes up because the buying force (buy orders), which pushed price up earlier, is still there and will now push price even further.
When supply turns into demand and demand turns into a supply, that’s called a valid breaker block.
This is when a supply candle still remains a supply candle and a demand candle still remains a demand candle even though price breaks through.This is explained in the case of a supply candle. The opposite applies to a demand candle.Over here we can see a supply candle in the premium zone. When price reaches it, it gives a small push down (the red candle). Then price breaks through the supply candle.This might seem like a supply turned demand candle but it’s not. Since price gave a small push down (in the form of a red candle), it shows that price did react from the supply level (even though only a little)
Later on, we can confirm that the supply candle remains a supply candle by looking at how price rejects from it and goes down.
When supply zone remains a supply zone and a demand zone remains a demand zone (like we see in the examples above), that’s called an invalid breaker block.
How this can be programmed: To check if price broke straight through a level, take 2 ZigZag degrees and check if the smaller ZigZag is the same as the bigger ZigZag leg. The smaller ZigZag should not form small zigzag lines inside the bigger ZigZag leg. Examples:
