Supply and Demand Trading


What is a Supply/Demand trading?
K.I.S.S.
Every possible market, whether it is a financial market or not, is being moved by the ongoing supply and demand that is present in this particular market. Supply (sellers ) represents the quantity of products that is available in the market and
Demand (buyers) represents the quantity of products that is wanted in the market.
When there is more demand than supply, the price of any product is going to rise (demand exceeds supply) and when there is more supply than demand (supply exceeds demand), the price of the product is going to drop.
Selling at Supply or Buying at Demand offers you the best price possible. So why would you want to pay more for a product, service or currency if you can get it at a better and cheaper price?
The Edge
In trading, knowing where a Supply/Demand level is, is knowing and understanding what type of trader or trading account is on the other side of your trade.
Knowing that there are two different types of market participant: The novice trader that belongs to the 95% and the Banks, institutions and Big Money that belongs to the 5%...
A small retail trader isn't able to move price in the market, only institutions and banks are able to do so. The good news is that it is possible to trade in the right direction and to follow the Big Money by simply buying at Demand and Selling at Supply. In other words it is up to you to choose which market participants you want to join.
How to recognize a novice trader?
Most of the retail traders aren't trading profitably, it is a fact. They are losing because they buy after a period of buying and they sell after a period of selling while institutions/banks are doing just the opposite!
Identifying a Supply and Demand Level/Zone
Finding a good Supply or Demand level on a price chart isn't that difficult. The first thing we want to do is:
1) Look for an area on your charts where you see that price shot up (for demand) from a certain point in a strong fashion or dropped (for supply) from a certain point in a strong fashion.
We look for a specific point where price has to leave, where it simply couldn't stay there. We can tell this because of the strong move up or down.
2)Once we found an area on the charts where price shot up or dropped down in a strong fashion, we then want to see if we can find the base of the move.
The base is basically a cluster of trading, where the candle's bodies are trading sideways, next to each other, creating a zone.
If you can find that kind of zone and then see price dropping or rising in a strong way from that zone, then you have a Supply or Demand area.
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