Supply and demand trading course

Supply and demand golden zone…

Supply and Demand with the trend
(Detailed Text Lesson)

Supply and demand

Supply and Demand with

the trend (Detailed Text
Lesson)
LESSON 48 MODULE 8

In the previous lesson, you learnt how to

combine the power of supply and demand
zones with the 61.8% and 50 % Fibonacci
retracements to spot golden zones and make
the best trading decisions. This strategy is one
of the most powerful strategies that you can
ever use in the market. Because it is based on
the law of supply and demand that governs
financial markets, and the 61.8% golden ratio
that governs our collective trading decisions. If
you have these two elements in hand, chances
are you will become a successful trader.

One of the difficulties that you will encounter

while trying to identify and trade supply and
demand zones is the top down analysis. I got a
lot of emails about this topic, and I recognized
that most traders get confused when doing top
down analysis, because they find different
scenarios, and sometimes they find it difficult
to decide what to do in certain cases. In this
module, I’m going to cover all the scenarios
that you will encounter while analyzing your
charts, and how to gather the right information
from your top down analysis.

Our top down analysis is based on two

important time frames, the trading time frame,
and the higher time frame.as traders we have
different personalities, some traders like to
trade smaller time frames and other traders
like to trade bigger time frames. There is
nothing wrong with a smaller or a bigger time
frame. You need to choose the time frame that
fits your personality or the trading style that fits
your psychology. But whether you trade bigger
time frames or smaller time frames, when
analyzing your charts, you need to stick with
the following rules:

When trading the 5 minutes or the 30 minutes

time frame, your higher time frame is going to
be the 4H. and when trading the 1h time
frame, your higher time is the Daily.

If you are a swing trader and you want to trade

4h, you should look at the weekly as a higher
time frame, and when trading the daily time
frame, your higher time frame is the monthly.
You should stick with these rules, because this
is how successful traders analyze and trade
the markets. You can’t base your trading
decision on one-time frame.

Trading with the trend

As you always hear, the trend is your friend,

you should always trade with the trend,
because trading with the trend is the easiest
way to make money in the market. Supply and
demand zones that form in line with the trend
are easier to trade than the ones that form
against the trend. What do we mean by trading
with the trend?

Trading with the trend means that if you trade

the 1h time frame, the trend in this period
should be in line with the higher time frame
which is the daily. In other words, the trend in
your trading time frame should be in line with
the trend in your higher time frame. Look the
chart example below:

This is the GBP USD daily chart, as you can

see the market is making lower high and lower
low indicating a downtrend market. and as you
see the last red big candle broke the previous
demand zone which signals that the market is
still going down.

By looking at the daily chart, we know that the

trend is down, now let’s look at our trading
time frame which is the 1h. look at the chart
below:

As you can see on the GBP USD 1H chart, the

market was ranging, after that price broke the
support level and goes down indicating a
downtrend. So, on the daily chart which is the
higher time frame the market is down, and on
the 1H chart which is our trading time frame
the market is also down. So, we can say that
the trend in the trading time frame is in line
with the higher time frame. and we should now
focus on supply zones that are in line with the
downtrend. Look at the chart below:

As you can see, we have three powerful

supply zones, we don’t really know which one
of these zones that the market will respond to.
Let’s draw our Fibonacci retracement to see if
one of these zones holds the golden ratio.

As you can see on the chart above, the

second supply zone holds the 61.8 % golden
ratio, and the third supply zone holds the 50%
Fibonacci retracement.so the both supply
zones are powerful, what we need to do is to
wait for the market to approach the third
supply zone, and wait for the formation of a
candlestick trading signal. See what happens
when price approached the third supply zone
below:

As you can see, when prices approached the

golden supply zone it formed a pin bar that
was rejected from it. It was also rejected from
the golden supply zone that was above it, I
didn’t want to draw it because I don’t want to
confuse you.

Now let me show you how you can enter this

trade, because there are different entries that
depend on the strength of the zone, and also
on your personality.

In this case, there were three supply zones,

and we didn’t know which one will be
responsive, so I don’t recommend placing a
limit order. You should wait for a confirmation
from the market to make sure that the supply
zone is valid.

The formation of the first pin bar candlestick

pattern was a great opportunity to enter the
market, so we have two different type of
entries.

The aggressive entry: this entry type is not bad

or good, it all depends on your personality and
your risk tolerance. Aggressive traders usually
enter the market immediately after the close of
the pin bar candlestick pattern. The stop loss
is above the supply zone, and the profit target
is the next support level. Look at the chart
below:

The example above shows an aggressive

entry that was made immediately after the
close of the pin bar. The stop loss was placed
above the supply zone. The advantage of this
entry is that you are sure that you will join the
trade if the market goes in your favor. The
disadvantage is that the stop loss is going to
be tight. If you place it above the second
supply zone, you will not have a good risk to
reward ratio.

The conservative entry consists of entering the

market when prices test the 50% of the range
bar. And the stop loss is placed above the
second supply zone. See the chart below:

As you can see on the chart above, you can

place a limit order at the 50% of the pin bar. I
mean at the half of it, and the stop loss above
the second supply zone.

The advantage of this entry is that your stop

loss is placed in a safe place, and if the market
goes in your favor, you will always win the
trade with a good risk to reward ratio. But the
disadvantage is that sometimes the market
doesn’t retrace to test the 50% of the range of
the pin bar. This happens frequently in the
market and this will make you miss lot of
opportunities.

I can’t really tell you which entry is the best for

you, nobody can tell you about it, because it all
depends on your personality and your risk
tolerance. Sometimes I take aggressive
entries, and sometimes I take conservative
ones. They both work perfectly well, but only
with time and practice, you will decide which
type of entry would you take when you spot a
high probability setup in the market.

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