How to do a simple supply and demand analysis in the forex market for beginners?
The theory of supply and demand has never changed. That will always be the most straightforward and fundamental technique to elucidate pricing changes. This is so because markets are where buyers and sellers come together to transact the business of trading goods for money.
It will be really simple to identify SD zones on charts once you understand the supply and demand idea. Despite the fact that this is a retrospective observation, it will provide us with a useful indication of where to seek for our trades in the future.
It is crucial to realize that the foundation of supply and demand theory in forex trading is the analysis and definition of historical zones. Where we should anticipate price reactions in the future is determined by these zones.
definitely agree, supply and demand are basically aggressive selling and buying, potentially creating a reversal in price. What you need to do is to ride the trend. Here’s how I personally do it:
For a bullish trend:
- Look for three momentum candles in a row (minimum).
- Find the area where the move started. Mark the high and the low of the previous candle before the uptrend move is formed with the rectangle tool and drag it all the way to the front (which is called the demand zone)
- Wait for the price to return to the area.
- Confirm the reversal signal by looking for a bullish engulfing candle.
- Enter for a buy (place the buy limit at the demand zone or manually buy), and you will ride the trend. Since the market is testing the demand zone, it will shoot back up.
- Put stop loss below the last low.
For a bearish trend, the steps are the same, except this time, we are using a supply zone by marking the high and the low of the previous candle before the downtrend move is formed with the rectangle tool and dragging it all the way to the front. After that, the market will go down.
I hope this helps!
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