The idea is that by using the volume ROC we can identify price bars of interest. On left side of chart when price is falling entry orders were placed at supply, the supply zones we identified via volume spikes. Now that price is rising on right side of chart the entry orders are at demand. If price starts to take out our demand then price has not finished falling. The idea is not new but I believe easier to identify the demand and supply zones easier.
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this is a 15 min view on UsdChf. Price will seek out these high volume bars. The target for swiss now is demand .9545 touches top of bar - the zone is fresh meaning price has not touched this area since exploding out of it, the likelihood it will return to this area is high
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This is a daily view of UCad - we can see that there are momentum bars that price is more then likely to recover down to 1.2693 - 1.2564. However to get an entry to short one has to go to a smaller timeframe which I will do. So we have short targets in site but need entry price
This is the 1 hr view. We expect supply to hold at top the entry should be wick in V and the initial demand targets below - If price breaks through supply then we need to find the demand zones that price will pick up and replenish on
I will add Aussie as well - nice momentum bars down - we have demand low at .7263 that price needs to stay above targets above - supply at .7348 - .7357 and next level .7401 - .7414. What we are missing is the conviction of a volume spike at these levels which I would be looking for
15min view of the pound. This chart builds more on the momentum bars plus we have added pivot lows. From my first chart we identified bars of interest in green rectangles, these are modified SD zones. We have momentum bars which I expect to be recovered. We have a failed high and a break of the higher low in the triangle. As a general rule price moves in threes. I use pivot lows and pivot highs to identify our three moves. The last pivot high or low will result in your strongest reaction in this case we can see pound is at pivot low 3 and expect a strong move up into supply. So again no conviction in volume yet. What I want to see is demand at bottom hold plus the pivot low 3 hold price up. If demand holds then I would expect areas of supply above to fall till we get to target. I will start to add the conventional SD zones as I post charts. This scenario on this chart plays out on all time frames.
I cannot ignore the long term pic of pound so I am going to add the 2 hr image - price is in demand however we have the pivot high which price broke above that will be challenged at some point
Hi,
Interesting draw of supply and demand zone.
May i know which volume ROC you use? It seen different from what i have.
Yours is bar graph and mine is line.
Also, may i know the setup of the volume ROC?
Lastly, your demand/supply zone is having a range, how to identify the range?
Hey champ I use tradeinterceptor to get the Volume ROC, they offer several different ways to display the indicator - one of which like yours is a line. I use just the basic 14 on the ROC. You are correct about range as it often overshoots the bar of interest but not by much. I have a hard time identifying the exact zone price will go for - this at least shows me where the interest lied before price left the zone.
Kate this is still unclear to me. I would prefer more of a step by step. First what do you mean price is rising?
For example in the first picture you shared. Right in the middle price rose up a little and you marked the area as supply. Then a little to the right price rose to the same level and gave a high volume bar and you labelled it as demand.
Price increased by the same amount, yet you had two different verdicts. How come?
This is traditional supply and demand. Supply is always on the top and demand is always on the bottom. In a falling trend, price will replenish on supply and drop. Now we see on right side of chart that demand is holding - the question is will supply be broken here. What I am looking at is there better price points - supply/demand zones that can be identified with Volume ROC -
No I get all that. I’m asking on a specific example to walk me through it. Right at the bottom, price rallied into the supply area (the last supply area going from left to right) then fell. Let’s show a picture of what I mean.
So now this picture shows clearly that the first area you named as demand is the exact same area you showed as supply. In other words, using this system you would have sold here and gotten stopped out. Yet you decided in your picture to neglect that and simply convert the area to demand.
Now you cannot say that you changed it to demand because “price was going up.” Because in the picture I showed you (which shows you price movement in real time rather than in retrospect), price was not yet going up and this was an area of supply.
That is why I’m asking you, do you have any other reason why you decided to call that specific area, an area of demand? Or was it just a case of curve-fitting?
ok here are those two areas on the original chart. Supply which hit not only twice but if I drew it straight across it would have hit a third time - as a SD trader you understand that zones are best when they are fresh - would I suggest we trade a zone for the third time - not likely. For those who are reading supply and demand is based on the idea if price explodes out of an area there are left over orders that price will got back to and get filled. Everytime price goes back to the same zone eventually in this case buyers out stripped sellers and we formed demand - price clearly came back to demand and promptly left - I would have entered both trades only on the first hit. The tradional chart I gave you reflects the same zone as yours - price would have only hit at demand - the modified hit before. The system only wants to identify bars of interest using volume roc - using a SD background - simple - I will either fall flat on my face this week and be done or it will work - wait and see
Interesting observations. Funny how I stumbled on this. Anyway good luck this week. :5:
I had (and still have) the same question, Philip. I may have misunderstood, but it appears to be “labelling only with the benefit of hindsight”?
Forgive me if I’ve missed something, Kate, but I don’t understand how any of these comments answers Philip’s question?
Yeah that’s how I feel. That’s why I want to know at which candle did Kate determine the area as demand.
Looks simple enough to me, old supply becomes new demand just like old resistance becomes new support. But besides that Supply and Demand is simply a basic economic principal traders apply to the markets to label a stack of orders either buy orders-Demand or sell orders-supply. It is common knowledge and widely held among traders that a small pocket of consolidation being left with strong momentum down and away is considered supply. Likewise being left with strong momentum upward is considered demand. Is that right Kate25?
Yes James and you know this because you taught me supply and demand. I think you are correct I cannot run this system without teaching the basics of supply and demand - I am going to try and do both as I go along. Thank you James.
Lexys said I was creating the chart with benefit of hindsight. In supply and demand the price action on the right side is solely dependent on the zones created on the left side - that is a fact. All I am saying with a supply and demand chart the spikes created on the volume roc histogram that lie directly vertical to that candle bar become a point of interest - I labeled the histogram spike and the candle bar. Supply or demand were drawn directly off of them. For those who are unfamiliar with supply and demand we only trade fresh zones - meaning we place our entry order there only once because we know there are unfilled orders left over. Everytime price returns back to that same zone less and less orders are present till all the supply has been used up and now we have more buyers then sellers - as in the case of euro at the bottom of chart. Presently on euro demand has been holding up and price is breaking high through supply. The supply that we drew on left side of chart that was created by volume spikes are our targets - the supply zones that were drawn - that is not charting with the benefit of hindsight Lexys that is trading were large orders were placed and what the retail traders should be exploiting
Yeah its clearer now. Its not much the idea of hindsight but the first presentation of the method seemed to suggest that.
You are saying find the area with high volume. We note that area first without acting. Once price pushes through that level, we place our orders assuming price will come back to it. That I can understand.
Now if I may I want more to know two more things. 1) Why aren’t we concerned with the red ROC bars.
2) May be give us a clearer example of how you would determine your stop loss and target.
I like your idea a lot.