Hi everyone,
I am a newbie, and started using “Supply” and “Demand” levels in order to find opportunities (XAUUSD, M1).
I marked within my screenshot two areas (see also arrows) that I have a question about:
Based on my level you see that the first one is a sell situation, but the 2nd one is a buy situation. Both are connected through the same level I drew.
So far I thought that a level can be only a sell OR a buy position.
Based on my screenshot, it seems that both can be the case when you draw a level!
With other words, if you draw a “supply” level and at some point the candles come back to the same level, this time it can be the other way around or a buy situation. Saying that the “supply” level became a “demand” level.
So far I though that when you draw a supply level it will be all the time a sell position or if you draw a demand level, all the time when it hits the same level, it will be a buy position.
Sorry, if I am not so clear in my explanation.
Thanks!
Michael
Hi, where is your question? Regards Greg
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You seem to be talking about “Support” and “Resistance” levels. The general wisdom is that those levels are turning points where the price will bounce off them and return to the middle. However, sometimes they are not, the price will barrel right through them and keep going. Then the level it went through changes its status, support becomes resistance or resistance becomes support. Your first arrow shows the level being resistance as the price bounces off it. Your second arrow shows how once the price went through the resistance level then the resistance became support and the price found a new resistance level further up.
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If the same demand level (before) can become a support level later on? Thx
yes
exactly so!
support often becomes resistance, and vice versa
if you read “Trading For a Living” by Dr Alexander Elder, he explains why in detail and in an easily understandable way
note that it’s often not exactly accurate, but more approximate, more “areas a few pips wide” than “precise lines”
“supply and demand” is NOT really a helpful way to look at it in a forex context, “support and resistance” are
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Like others have said, previous support became a resistance as to the image you posted.
In addition, in situation where previous support becoming a resistance, watch out, there’s the trend.
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The reason these type of trades work is bc odds increase when buying at relative lows and shorting at recent highs. No historical prices can accurately predict future price discovery. Looking for trade opportunities with an R-multiple over 1 with this analysis will be futile.
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yes, exactly so
this is for sure
hedge funds and other financial institutions trading on this basis - and there are many - typically aim for an ‘R’ of about 0.6 to 0.8, in other words their risk on each individual trade of this type is higher than their reward (this is common anyway among successful/professional traders, of course) but their win-rate is very high
like many things, when correctly applied, it works
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