Hsaka @HsakaTrades

16 Aug 18 • 11 tweets • HsakaTrades/status/1030129762369449984

#TATip | Supply & Demand

A short primer on one of the most fundamental aspects of

trading.

i) Premise
ii) Types
iii) Identification
iv) Factors of Strength
v) Trading
i) Premise

The primary reason price of any asset moves is because of an imbalance between
supply (sellers) and demand (buyers). The larger the imbalance, the stronger the
move.

• Supply > Demand: Price falls

• Demand > Supply: Price rises
• Supply = Demand: Consolidation

ii) Types

There are several types of supply/demand zones, but broadly speaking they fall into
two categories:

• Reversal: Price rallies (falls), consolidates, and reverses to fall (rally).

• Continuation: Price rallies (falls), consolidates, and continues to rally (fall).
iii) Identification

As noted above, supply/demand zones always from during the consolidation (the
base) b/w rallies and drops.

Method 1 (Clusters):
• Demand: Use the low of the base and the highest candle body.
• Supply: Use the high of the base and lowest candle body.

Method 2 (Single Candles):

More commonly known as order blocks (OB), you'd have seen these all over Twitter
in the past few weeks.

• Demand: A down candle before an up move that leads to a higher high.

• Supply: An up candle before a down move that leads to a lower low.

iv) Factors of Strength

a) Force of breakout:

The more explosive the breakout from the base, both in terms of speed and distance
of ensuing rally/drop, the stronger the buying/selling power at the base, ergo, the
stronger the zone.

Re: A clean move away, no wicks.

b) Freshness:

The best reactions to a supply/demand zone will always be on the first return to the
zone. With every subsequent retest of a zone, the supply/demand at said zone
depletes, ultimately leading to a break of the zone.

Some examples.

Hsaka
@HsakaTrades

Contrary to popular belief, with every subsequent test of a

supply/demand zone, the said zone loses it's strength. Soon,
most of the orders in the zone will be consumed causing it to
cave and give way to price.

9:19 PM · Jun 7, 2018

153 27 people are Tweeting about this

c) Length and width of the base:

The less time spent forming the base, the stronger a zone is, since that connotes the
buy/sell strength out there is greater than its counterpart.

A narrower base is stronger. Too many wicks above/below the base depletes supply &
demand.

d) Miscellaneous:

• Reversal zones > Continuation zones

• The best zones form around key high time frame support or resistance levels
• An exception to the supply/demand depletion factor is if there's an extremely
important price from a fundamental/psychological perspective.

v) Trading

Aggressive: Bid/offer the upper/lower limit of the zone with a tight stop loss
below/above the zone.

Conservative: Scatter your bids throughout the zone at various intervals and place the
stop loss at idea invalidation.

Note: Zone retesst can be traded upon a break.

Hope you found this useful.

DM opens for questions.

Fin.

•••