Simplicity Supply Demand Trading Strategy

supply_demand_trading_strategies

Supply demand trading strategy is one of my favorite trading strategies, is because in simplicity. Well in my opinion the best demand and supply levels are those that don’t have been tested at least once so far. Untested demand / supply levels should always offer us a opportunity to trade cheap since there should be a lot of orders left.

Also we can rate the value and power of a possible supply/demand level by checking how quick and straight price reversed from the very certain ones. This is the basic concept of supply demand trading strategy.
supply_demand_trading_strategysupply_demand_indicatorBefore continuing my series of articles about trading Supply and Demand, I thought that it could be useful to take a break and focus a bit on what candle pattern. Because this candlestick pattern is one of the most important on making decision. At the last, candlestick pattern is the key of risk management.We have to consider that there is several other factors on this trading on simplicity (but not so many, stay calm, this is the real deal). We can use it on m30 time frame for intraday trading. We will see some example charts from this simplicity supply demand trading strategy. And remembering in apply money management.So let’s get to the bottom of it.

WHAT DO YOU HAVE TO ASK YOURSELF?

 

1) Where is price likely to turn? Supply and Demand areas.

2) What can tell us if price is turning? CANDLES.

3) Where is price likely to go next? The opposite areas of Supply and Demand.

That’s it, you know everything there is to know. Good luck!

More seriously though, if you manage to convince yourself that you DO NOT need much more to succeed in trading, you have done half the way. The other half is only discipline and a proper money management.

THE SUPPLY AND DEMAND AREAS

 

So, how to identify the good areas? If you never used pure supply and demand zones to trade, and were focusing on Harry Potter’s dragon-shaped moving averages clouds, you will probably have a hard time to identify the zones, because it would be way too simple for you to see.

So you will probably need the supply demand indicator mt4, based on Zig Zags, which spots and draws for you the supply and demand zones of interest. It is nothing more than a small indicator that shows you where price turned in the past. Simple, yes, but the most important thing we need to know. Because those are areas where the big guys decided to buy or sell and are likely to do so again when price comes back. Then, if you want to filter your zones, watch precisely how price left the zone: big bold candle? Several small candles building a base? Etc etc etc… Then backtest and see how the best zones are created. We cannot do everything for you, take it as a gift for your future success. Only hard work will take you there, remember.

 

SHOULD I TRADE ON WILD GUESSES?

 

While If my ante and I love to pick top and bottoms (something to do with a hatred of drawdown and a flattery of our egos), it is not something we recommend. Because if you are not experienced enough, you will suffer a lot from it. And experience taught me that in the end, you are less stressed with less precise entries but a better money management. Our best asset is that we know that most of the time, when price decides to turn, it will always come back to test the newly created area and pick up new orders that will help the price move faster, for good.

The conclusion of this paragraph is that you do not need to enter at the perfect pixel, you need to know if the area will hold and have enough strength to make price turn. So consider yourself lucky enough that price is coming back for you. The precision does not matter.

 

WHAT IS THE BETTER TIME FRAME?

 

Now, we have our zones drawn on our chart. People often ask me: what is the better time frame? Well, there is no answer to that, and this question is quite dumb really. Supply and Demand is an universal law, OK? So it works on M1 and on weekly. The rest depends on what type of trading you want to do. If you want to have some free time like Ken, you go for H4 and Daily. If you like the thrill too much and have a lot of time to devote to trading, you go M5-M15. If you like taking a couple of trades every two days, you go M30-H1. Simple.

For the purpose of this article, let’s go with M30, hoping it will satisfy everybody.

SO WHATS OUR MISSION?

 

Your mission is very simple:

1) Wait for a new zone to be created (imbalance of supply and demand)

2) Watch price action to see if the professionals (with all their big money) will read the new zone as a signal to take the trade or not. The candle patterns become the most important thing at this point (read articles about candlestick reversal patterns).

3) Enter with confirmation of price action ( bear candle(s) at supply / bull candle(s) at demand)

4) Exit the trade when happy with gains or wait for the opposite zone of supply/demand and trail your stop.

OK, enough chit-chat. Have a look at the charts below. I explained the reasoning on the first ones. I just marked the other ones with circles and yellow rectangles to underline the important price action that gets you into the trades.

Then your next missions are :

  • spend some time observing live which zones hold and which don’t.
  • study the importance of the different sessions (Asia, London, New York)
  • learn how to use the dollar index as your best indicator
  • if you want, you can add one or two ingredients to fine tune your edge: fibonacci retracements / projections, trend lines, etc… Just make sure to not overload your charts so that you can still see what matters most: PRICE ACTION.

I hope it was helpful. ;)
SEE SOME EXAMPLE FROM M30 TIME FRAME CHARTS BELOW :

AUDUSD M30 TIME FRAME

 

supply_demand_audusd_m30

supply_demand_audusd_m30_a

 

EURUSD M30 TIME FRAME

supply_demand_eurusd_m30

 

GBPUSD M30 TIME FRAME

supply_demand_gbpusd_m30

supply_demand_gbpusd_m30_a

 

USDCHF M30 TIME FRAME

supply_demand_usdchf_m30

supply_demand_usdchf_m30_a

Happy practice with this simplicity supply demand trading strategy and if you want read some great e-book from this core supply demand trading system download here. Try this supply demand strategy in real account with our recommended forex brokers.