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Supply and Demand Made Easy by Bossman FX
Supply and Demand Made Easy by Bossman FX
By @bossman_fx
Disclaimer:
This PDF is not a blueprint of how Supply and Demand should be traded, rather it is just a
summary of how I trade using the given strategy. It may therefore need a bit of tweaking on your end in
the event you need it to work with your style of trading.
I have broken the PDF into 4 main chapters (of the sort):
Before I get into how to identify these zones, let’s shed light on what Supply and Demand is all about,
and I shall give an example to make it easier to understand.
Definition:
Let us take a country in the tropics, say England for example. A certain company sells heaters and air
conditioners. In the summer, the majority if not everyone will be out looking for air conditioners
because of the heat in that season and hence the prices will escalate. (Demand has exceeded supply >>
Price of commodity goes up)
Similarly, come winter, the Demand for the heaters will cause its price to go up (Same reasoning as
before), and since the demand for the air conditioners will have gone down in the winter, (Supply
exceeding demand), then its price will end up going down.
Therefore, I will term Supply and Demand as “The amount of commodity/ service available and the
desire of buyers for it, considered as a factor regulating its price” (S/O to @Spraxx_fx’s pdf)
With all that in mind, let’s now get into identifying these zones.
There are 4 types of structures that form the foundation in this Strategy, 2 of which are continuation
patterns and the other two are reversal patterns i.e.
Drop Base Drop, Drop Base Rally, Rally Base Rally and Rally Base Drop.
*Go back to your charts, scroll through and try identify these structures.*
DBD- Continuation DBR- Reversal
PLOTTING OF ZONES:
Okay so you have gone back to your charts and have noticed that price actually forms such structures
day in day out, and so what next?
These zones are plotted using the last bullish candle where a reversal of a bullish trend, or a
continuation of a bearish trend has occurred (RBD or DBD).
Since these are zones where the market makers look for premium prices for entries on sells, it needs the
highest possible spike to sell high, and thus will be drawn using the selected candle body to the upper
wick i.e.
It’s basically the opposite. They are plotted using the last bearish candle where a reversal of a bearish
trend occurred, or a continuation of a bullish trend (DBR or RBR).
For this zone, we cover the body of the wick down to the bottom wick as shown below;
1) In my own view, this method of plotting zones is not entirely a blueprint, such that in some cases
you can be forced to draw a supply zone using a bearish candle rather than the bullish candle,
and as so for the demand zones. Below are 2 examples;
2) Also, as you go ahead in drawing these zones, be sure to look left, especially since this strategy
works best with fresh zones as to be discussed later.
You now know how to identify and plot zones, but what next? Do you just sit behind your computer and
draw every supply and demand zone that you can find and hope to sell supply and buy demand? HELL
NO!
This is where the whole idea of fresh zones comes in handy. A Fresh Zone basically refers to “a zone that
hasn’t been tested before.” Simple as that.
How then do I pin point the fresh zones from the NOT SO FRESH ones???
1. Open the chart that you want to trade, say UJ, and then as per the current market price, draw a
horizontal line and from there look left to look for zones that are close to the price, and that
they aren’t broken (will have a video for this in the event it doesn’t make sense)
2. You could alternatively identify the prevailing trend and then plotting zones where the price
may retrace for a liquidity grab before a trend continuation.
Once you have plotted that zone, you will have either of two ways to trade it;
For example, you would wait for the rejection, and then sell on the confirmation of a candle
close below the zone. This strategy is basically for the respecting of a zone.
ii) Anticipating a break of the plotted zone
In the above example on UJ being on a rally and getting to a supply zone, we can wait on the
break of the zone (candle close above supply) of which the TP would be at the next supply
zone.
That’s basically it.
Using the same example of UJ, the price is on a rally to a major supply zone. What the candle close
basically means is waiting for how the price reacts in that zone. If we have a bearish candle closing
below our zone, that will be a confirmation of a rejection and thus sells should ping, and for a close
above the zone will mean taking buys to the next zone.
With any trades using this strategy, do note that the stop loss needs to be above/below the zone
depending on how the market sets up and how you make your entries. Apply proper money
management as well as good R:R ratio.
I use this strategy with one Timeframe at a time as I find that it suits me better that way. However, it is
still possible to work it out by marrying the timeframes. (Check out Spraxx’s PDF)
Enough about all that theory now, below are screenshots of a short simulator session I did purposefully
for this pdf, as well as trades I have taken using the strategy.
1. I came to realize that most if not all the time, price cannot break 2 consecutive zones at a go.
This means that in the event a demand zone is broken, you can take buys on the next zone
without confirms. (Don’t hold me accountable if it doesn’t work out for you. Thoroughly back
test it.)
Example below:
Broke the first zone>>waited for it to get to the next zone>> BAM!!!
And the trade hit TP easily.
2. Price will not always get to your zone. Instead, it might miss your zone by a few pips and then
reverse, but worry not. Opportunities will always be there. Example below:
3. Don’t beat yourself up if you miss an opportunity, price in most cases does a retest of a zone
before progressing to hit the tp. So you can make your entries on the retest. It also allows you
time to assess how the market is setting up.
SUMMARY:
TO NOTE:
Once a zone is broken, it changes and becomes the opposite, just as in support and resistance i.e. a
broken supply zone will turn to a demand zone and vice versa.
I will cover how institutions make their trades, both entries and their profit taking on my next PDF so
stay tuned.
Many thanks to @Forex6god as he’s been the best big brother I’ve had, to @Spraxx_fx for sharing his
knowledge, and the whole FOREX6GOD/FOREX FAMILY.
HAPPY HOLIDAYS!!!!!!