purhaps there is something Im not getting here,
I really don’t think there is any difference between SD and SR
ofcource SR is best viewed on a chart,
I don’t know how else one could view it,
what is happening when price reach resistance is exactly the same thing as would happend when it reach supply,
there is a lot of selling pressure there and that is why it becomes resistance,
about the strength of a resistance,
how could you even know it is supply or demand if price just have touched it once?
it is not that every minor high and low would make a difference,
it’s the areas where price has touched more times and that also indicates the strength
Im not just talking about support and resistance "lines"
there is also Zones which are not talked about much.
I don’t agree with you that a zone would be less likely to hold if it’s touched more times,
it’s not that it gets worn out if buyers are picking on it more,
the buyers will in that case be worn out at the same rate,
and a resistance is well established even before the buyers aproach it,
ofcource you are right about every price level will run out of buy or sell orders eventually
but, that could take a very long time, weeks or even months,
and I think it’s more likely that the buyers will run out of steam than the sellers at a already confirmed resistance,
on the other hand, a level that has been touched more than 4 times is very likely to hold
and price will eventually decline,
anyway, this is from my experience trading
ofcource, every time is different in some degree.
we are two thinking the same…so I am in the minority too!
when I see an area that has been touched at least twice, my focus turns to look for PA to give me a clue to play a breakout… the reason is that is likely a lot of buy/sell stops could have been built beyond that area, this means the “big sharks” will be more than happy to breach that particular S/R level (that is the way they make easy money…)…of course the level might hold eventually… but then again i am watching PA
This is the problem - saying that you should just go with the trend, when you realise the price isn’t bouncing off your levels you should reverse your trade - you don’t know until your stops are hit. And even if you reverse, its more common, for the price just to search out for a few orders below yours before bouncing up. So suddenly reversing your trade is usually a poor decision unless you have a specific point to reverse from.
yes I seen this many times
Here we go 234.
Identify supply and demand zones on a daily/weekly chart, plan to take reversal trades when price enters that area, have rules that say a previousmove from that area must have had strength, the bigger picture/higher timeframe must agree, there must be at least 3:1 reward to risk, this must be the first retracement back in to that area, the previous time at this area musthave been short thereby indicating a strong buyer seller imbalance, and finally :32:32::32: The speed at which the price enters the SUPPLY or DEMAND ZONE must be an overextended/PARABOLLOCK candle called a doji, hanging man, hammer or some such thing.
Bint. Thank you. Absolutely perfect. You did in one paragraph what i’ve been trying to do for 2 months here.
Jay
Here is my thoughts about this,
please excuse any wrong spellings,
this example assumes there is a down trend and price are bouncing against support/demand.
what I have noticing is that the first bounce is usually the strongest,
it generally bounce the highest, the next time price comes down to support,
there isn’t so many limit buy orders left in the zone,
because the most of them was executed in the first bounce,
thats why the first one allways seem to be the strongest,
the place where price will bounce the first time is very hard to find
unless there have been atleast one bounce before,
so we could then guess that the second bounce will come
somewhere below that first area,
price will have to shot further down in the zone to activate
the rest of the limit buy orders in the second bounce,
so up until this point I can agree that a zone is becoming weaker,
and the second bounce is going higher than the third
but that does not neccesarily make it the better choise,
the second bounce is generally weaker than the first,
just because there isn’t so many limit orders there as in the first bounce,
however, after the third bounce this is what will happend,
traders are noticing that the support holds inspite of three attempts,
and that is incurriging them to refuel the zone with more buy limit orders,
this is why it becomes stronger the more times it have been hit.
and also we can clearly see that in such situation, the zone is widening
to the upside a bit, this is because traders at this point
think that price will probably not go all the way down to support the next time,
so they are placing their buy limit orders little higher,
this is why we sometimes can see the fourth and fifth bouncing from
a higher place above the support,
when this happends we have the best risk reward ratio possible
because this is not just a bounce, this is probably going to be a trend change,
I will trade the the secound bounce but not the third,
the third is very uncertain if it will bounce at all,
it all depends how strong the bears are.
please note that the bear side is also getting refueled when they se that the supply/resistance holds,
lets remember this is a downtrend and there is already very bearish,
the bears was controling the market before the first bounce,
and after the first bounce completed,
there is a higher chance they could take control over the buyers on the third one,
however, if the support holds after the third attempt, I like to trade every time
price comes down to support after that, because I believe this is
the best risk reward ratio. and a chance that we can see a breakout and a trend change is high,
a trend is allways better than just a bounce
and will go a lot longer. this is not allways happening
but I believe that it happends more times than not,
so in the cases where it doesn’t happend
you are right in your assumptions that a supply demand
would go weaker the more times it been hit,
it all depends how strong the oposite side is.
It seems to me there is some confusion about supply and demand versus support and resistance. Whilst they do appear to be the same thing at first blush, I am not so sure they are formed and behave in the same way.
With support and resistance we draw lines on a chart indicating that price will struggle to go above or below that level. In technical analysis it is percieved that the more often a S/R line is hit and holds the more likely it will hold in the future. This is basically true.
With supply and Demand the general concensus is a virgin S/D level is more likely to hold than one that has been tested several times. This is also basically true.
thats the main difference between S/R and S/D. Whilst on the face of it the two concepts seem to be the same the levels are formed very differently.
Typically S/R indicate areas on a chart where buyers/sellers deem a currency to be over or under valued causing traders to react at those levels appropriately. This becomes a self fulfilling prophecy the more often a level holds and traders either buy or sell thinking they are at the top or bottom of a move.
S/D levels form differently. They tend to form when a level gets hit that has pre-existing orders. If the pre-existing orders outweight the new orders pushing price to that level, once those new orders are exhausted price moves rapidly away from the S/D level. Because S/D relies on pre-existing orders they tend not to hold beyond 2 or 3 tests.
I am hoping that makes a bit of sense to anyone misunderstanding the difference/similarity between S/D and S/R
Thanks for the reply, you are both right and wrong, please let me explain,
supply and demand and support and resistance is exactly the same thing,
just with different names, you are right when you say support and resistance
are just lines we draw under lows and over highs, but those are minor SR levels,
then there is major support resistance and this is what you call supply and demand,
and you are right! support and resistance IS supply and demand,
and because they are so major they create levels on top of levels with supply and demand,
thats what is making them zones, that is major S&R,
there is certanly confusion about this with many thinking supply and demand is some new phenomenom.
the expression supply and demand is coined by a guy with the name Sam Seiden,
before that nobody ever heard of supply and demand.
At the risk of looking like I’m self promoting lol…I’ll post a link to some videos I’ve made on the topic.
petefaders’s Channel - YouTube
Thats a very good video describing support and resistance
acculmulation at the bottom (Support) and distribution at the top (Resistance)
I wouldn’t bother using Volume in Fx though, it’s pretty useless compared to using it in other
markets such as Futures and shares.
Trade… volume analysis methods work well in forex… if you base your decisions on futures volume. I personally trade forex futures almost exclusivly (for a number of reasons).
I don’t want to debate whether what i’m saying is correct or not, because I don’t think that will get us anywhere.
WHat I would recommend doing…is watch volume for the nearest expiration contract in the corresponding futures market (for example, Eur/Usd is basically the 6E futures contract. next expireation date is dec…so you’d watch the volume on the 6E-december expiration)
You will find that if a the highest volume spike of the day results in a very solid looking pinbar… that you will often see a reversal in trend from that point on.
And this reversal will occur in futures… as well as forex.
On a second note… I traded forex spot full time for about 9 months before i transitioned to futures…and a core aspect of my scalping in forex SPOT was to watch the volume in the corresponding forex FUTURES market. It worked extremely well, because, wouldn’t you know it, when the euro futures contract starts moving up… the eur/usd spot moves up at almost exactly the same rate!
Crazy, i know. But hey, i’m a crazy guy like that.
Check it out…really, you’ll be impressed. If you still don’t see it, i’ll even trade with you for a night sometime to show you waht i’m talking about.
Maybe I’ll make a video…hm…
Jay
Thanks for the tip! I will be looking out for it.
in Forex I was refering to that Volume is only showing ticks,
not how big they are, it’s only showing the amount,
for example, if Soros would buy for 3000 Lots EURUSD
you will se that tick just as small as someone buying 1 lot,
so it wouldn’t be much useful information
as in other markets such as futures and shares
Hey shorts, you trying to tell us that what Sam seiden says rocks and the rest sucks. I have been on numerous seminars and courses with EXPERTS, real EXPERTS. The besty way to trade FX is look at the volume that you are given by your broker and only enter trades when your broker tells you that the conditions are correct. Support and resistance lines are the only real benchmarks that the EXPERTS use, the REAL SAVVY TRADERS follow what the EXPERTS do, don’t they?
Don’t know the protocols of this site but I love it and don’t want to get banned.
Hm? I dont think I say that, please read again
what Im saying is that SR is the real thing,
Supply Demand is just an expression of the same thing,
S&D is not "something else"
exept it would be a major SR level,
or it can be a level where there is exhaustion,
a tip would be to look for macd divergence
The EXPERTS should have taught me MACD?
You have that problem because you are trying to trade using support and resistance in a trend enviroment. If you want to use support and resistance as entry signals you should trade RANGES…not TRENDS.
When you trade a trending market, the main thing you should consider is trading with the big trend. Only use support and resistance to filter trades and for exit points. For example lets say you trade the 4h chart. First you establish the big trend on the daily chart, and then you trade the 4h chart according to that, here support and resistance is only used as reference to filter trades not as entry signals. For example if you are prepared to short but see an important support close to the price, then you dont take the trade.
If you are taking a short entry and the support level is far away, lets say 2 times your SL, then you take the trade and set the target on that support level… So remember that because it will make the difference between making money or losing:
SUPPORT AND RESISTANCE ARE NOT USED THE SAME WAY, IT DEPENDS IF THE MARKET IS RANGING OR TRENDING.
Happy trading.
If youare considering reversal trading first you must establish where the controlling price ranges are on a daily or weekly chart noting that where these 2 line up then that is a very strong reversal probability call this price range or candle the candle in control then consider the strength of move away from this candle previously the reward to risk the higher picture the first retracement the time that the price remained at that level the speed of arriving back at that area if these conditions meet then and only then whats more you’ll be a trader my son18::18::63::62:
I like it bint. I felt like I was reading an original, ancient jewish torah (supposed to have no spacing between words or punctuation), and I already know EXACTLY what your talking about (I even have some videos I made for the babypips community that go over some of these concepts) and I STILL had to review it several times to understand what your trying to say…
but yes, I like it. This works.
And it makes the point that using these types of criteria effectively will indeed provide one with high probability supply and demand levels.
Furthermore, almost none of these criteria are used in the text books as the describe “classical” support and resistance concepts.
So, we I think we can reasonably conclude that the strict definition of “supply and demand zones” as used by Sam Seiden, and how to measure them to determine their potential effectiveness, is radically different than that of “support and resistance”
And also more effective… IMO anyway
Jay
P.S. it’s a good thing you know how to trade, because you’d just suck at teaching english! (if that is your first language)
There is no radical difference, I just don’t hanker after bearish doji hanging man harami bull flag head and shoulder bollocks. For me it is the classic price range extremeties that line up in multiple time frames that are consistently the highest probability trading opportunities. When the price looks like getting near then I set out my trade plan according to my personal set of rules which tell me exactly where to pull the trigger and exactly where to place my stops and targets. My abrasive attitude is at times misleading, but I have been to many trade conventions and presentations where trading leveraged products such as FX is depicted as a game. To me it is serious business and demands the same discipline as being a FIGHTER PILOT, or a BATTLE MANAGER, or a WARTIME BRIGADE COMMANDER. in reality driving a car in traffic demands the same rule following process.
PS English is my first language at least the Belfast version is, so it is.