SUPPLY & DEMAND TRADING STRATEGY IN

FOREX

BY NESSAAWEALTH
+2349018629534
INTRODUCTION
Supply and Demand represent the two most powerful forces of the
forex market. Demand means the number of buyers buying a security in
the market. Supply means the number of sellers selling a security in the
market. Large supply takes the price to move down and large demand
takes the price to move up. Balance in both forces will keep the price in
sideways movement.

It is the most basic and essential element for technical analysis as well
as fundamental analysis. It is the key to understanding the forex
market.

The main benefit of S&D in technical analysis is to capture a Pinpoint

entry exactly from where banks start buying and selling. Another
Main benefit is that we can increase our risk-reward using a tight
stop-loss or an open take profit with a breakeven.

How does supply & demand work?

There are two types of states of the price of a security in technical
analysis
• Balanced state
• Unbalanced state

In a balanced state, the price is moving in a range like moving sideways.

Simply means forces of buyers and sellers are balanced. Both of them
don’t have the ability to create a trend either bearish or bullish trend.
After breakout of this sideways (range) movement of price, imbalance
in price occur. And after the breakout, the recent range will be called a
base zone and the price will again come to this base zone to pick
unfilled orders.
How to identify supply and demand zones?
Supply and Demand zones are formed on the base region of price on
the chart. There are basically two types of movement of price in
technical analysis.

• Impulsive move
• Retracement move

The impulsive move represents the price movement of market makers.

Retracement move indicates base regions where market makers decide
their next direction either to go up or down. Price moves from one
base region to another base region in technical analysis.

S&D Trading is to just figure out zones to open and close orders.

There are four basic concepts of demand and supply in forex:

1. Rally Base Rally (RBR)

2. Rally Base Drop (RBD)
 3. Drop Base Rally (DBR)
4. Drop Base Drop (DBD)

Key Points
Simple Formula = Big candle + base candle + Big Candle

Rally Base Rally: A Demand Trading Strategy

What is Rally base Rally in trading?

Rally base rally (RBR) is a price pattern that represents the formation of
a demand zone. It creates special zones on the chart that increases the
demand/number of buyers at that zone.
It is a type of Supply and demand in trading. Supply and demand are
the origins of technical analysis trading. Without understanding the
basics, you cannot become a technical analyst.

How to identify Rally base rally?

In the RBR, a base zone is sandwiched between two rallies or bullish
trends of price. The base zone indicates the demand zone.

A simplistic form of this RBR pattern consists of three candlesticks.

• Two big bullish candlesticks
• One Base Candlestick
There is a simple formula to identify RBR patterns in trading
Rally base Rally = Big bullish candlestick + Base candlestick + Big bullish
candlestick

There are a few criteria you need to follow to before identifying a good
RBR pattern.
• The body to wick ratio of two big candlesticks must be greater
than 70% of total candlestick size
• In case of base candlestick, the body to wick ratio must be less
than 25%
How to draw demand zone?

The base zone in RBR can consist of one to more candlesticks.

To draw demand zone in rally base rally pattern, mark the high and low
of the base zone. Draw a rectangle meeting the high and the low of the
base zone between the RBR pattern and extend the rectangle to right.
You should take the low of the recent big candlestick if its low is lower
than the low of the base zone.

What does RBR pattern tell the traders?

This pattern creates a demand zone on the price chart. The demand
zone indicates that there is a lot of demand in that area. Big institutions
and big banks are already willing to buy from that area. The demand
zone is under the attention of big traders.
The RBR Pattern helps us to find out those zones that are under the
attention of big traders. The price will only go up when there is more
demand.

The base zone in the RBR pattern is the footprint of institutions. You
should use those footprints and follow the path of real money.

How to trade rally base rally demand zone?

A simple and straightforward rule of trading demand zone is to buy
from that zone.

There are two methods to trade rally base rally demand zone
After formation of base zone, if price suddenly pullback towards the
base zone, then you should buy from base zone at the price pull back
towards zone.

If price did not pull back just after zone formation, then you should wait
until the price to come back to the zone and form a bullish candlestick
pattern.
A bullish candlestick pattern at the base zone will increase the
probability of winning. By doing this, you will be able to filter out bad
demand zones from the crowd.

Procedure to trade by using candlestick pattern

After drawing the demand zone, wait for the price to pull back towards
the zone and form a bullish candlestick pattern. Place a stop loss below
the demand zone. You must hold your trade until 1:2 risk-reward, then
close the trade partially and break even the trade. Hold the rest of the
trade until you get a huge risk reward

Conclusion
Rally base rally is a high probable price pattern. You should not miss a
buy trade opportunity after RBR formation.
Keep in mind that you should backtest this pattern at least 100 times to
master it. Do not use it alone. Always use it with a confluence in
trading.
Rally Base Drop: A Supply Trading Strategy

What is Rally base drop in trading?

Rally Base Drop is a price pattern that indicates the formation of
a supply zone in forex trading. Big institutions and big traders place
their pending sell orders at the supply zone to go short in trading.

It is a type of supply and demand; retail traders use it to find out hidden
sell orders of market makers. Supply and demand trading methods are
the origin of technical analysis in trading.

How to identify rally base drop?

This price pattern means a bullish impulsive wave will form on the
chart. After a bullish impulsive wave, the price will move sideways like a
retracement wave. Then it will form a bearish impulsive wave. Like in
the image below.
If you look deeper like a professional trader, you will see a big bullish
candlestick, a base candlestick, and a big bearish candlestick. A
candlestick with a big body and a little wick represents a huge
price momentum. On a lower timeframe, it indicates a complete wave.
That’s why we have replaced a wave with a candlestick to make it easy
for you.

Follow the following simple formula to identify the rally base drop
pattern on a candlestick chart.

RBD = big bullish candlestick + Base candlestick + Big bearish

candlestick

Body to wick ratio of candlesticks

After proper back testing, the results have shown that the body to wick
ratio of big candlestick must be greater than 70%. For the base
candlestick, it must be less than 25%.

If a candlestick is not meeting the above criteria, then you should avoid
that RBD pattern.

How to draw supply zone in RBD pattern?

The base zone is always drawn on the high and low of the base
candlestick. Base candlesticks can be more than 1. If there is more than
one candlestick in the base, then you should choose the highest high
and lowest low of the base.

Draw a rectangle on the highest high and lowest low of the base zone
and extend the rectangle to right. It will become a base zone. A base
zone is also called a supply zone.

Psychology behind RBD pattern

Rally base drop patterns mostly appear in the form of fake-out at key
levels. These fake-outs create areas that become more attractive for
sellers. You can identify those areas in the form of a rally base drop.
In real life, market makers do stop loss hunting in the form of fake-outs
but in technical analysis, it becomes a rally base drop pattern because
of natural phenomena.

How to trade RBD pattern?

To trade RBD patterns, the price will give a pullback just after rally
base drop formation. It is the most effective and high probability
setup.
The Bottom Line
I recommend you learn supply and demand if you want to master
technical analysis. Always try to learn the logic behind the occurrence
of every chart pattern. This price reading technique will make you a
good technical analyst.

Drop Base Rally: A Demand Trading Strategy

What is Drop Base Rally in Trading?
Drop base rally (DBR) is a price pattern that represents the formation of
a demand zone on the price chart in technical analysis. Market makers
open buy orders from demand zones to go long in trading.

It is a type of supply and demand in technical analysis and known as

DBR. These patterns are the basics of supply and demand. You cannot
master SnD trading without mastering these basic patterns correctly.

How to identify Drop base rally?

As the name suggests first drop, second base, and then third rally. It
means DBR consists of three waves.

• Bearish impulsive wave (Drop)

• Sideways retracement wave (Base)
• Bullish impulsive wave (Rally)

When these three waves form in the above order on the chart, then it
means a drop base rally pattern has been formed.
If you analyze a higher timeframe candlestick that has a larger body and
small wicks on a lower timeframe, then you will see a complete
impulsive wave on the lower timeframe. By analyzing higher timeframe
base candlestick, you will see a sideways market wave on the lower
timeframe.

From the above results, instead of analyzing a wave which is a difficult

part, you should analyze candlesticks. Follow the following formula to
identify a demand zone on the chart.

DBR = Big bearish candlestick + Base candlestick + Big bullish

candlestick.

Criteria for candlesticks

All the big candlesticks do not represent an impulsive wave. That’s why
you should follow strict guidelines.

• The body to wick ratio of big candlestick must be greater than

70%
• Base candlestick must have body to wick ratio less than 25%

When you will follow the above two rules, then you will identify a
correct drop base rally pattern

How to draw demand zone in DBR?

The base zone is directly proportional to the demand zone in the drop
base rally pattern. Draw a rectangle by using high and low base
candlestick and extend it to right.

The base candlesticks can be more than 1. But you should always take
the highest high and lowest low of base candlesticks to draw a demand
zone.

Remember big candlesticks will always remain two but base

candlesticks can be more than 1.

What does DBR pattern tell traders?

In trading, you always look for the areas on the price chart that is under
the consideration of big traders/market makers. Because you want to
trade with institutions and trends created by market makers.

Supply and demand patterns help us to find those high probability

zones. DBR pattern creates a zone that shows the demand to retail
traders on the chart. Demand zone means more buyers want to buy
from that zone. Because market always move from one zone to another
zone in technical analysis

How to trade Drop base rally pattern?

Likewise in the other three supply & demand patterns, the price will
pick pending buy orders of traders by touching the demand zone just
after the formation of the DBR pattern on the chart. It is the best
method because the price takes a minimum time to return to the zone.

• A demand zone will be weak if price will take more time to return
to zone
• A demand zone will be strong if price will take minimum time to
return to zone
Bottom Line
You should always trade with logic and try to improve that logic by
analyzing the history and reading the price on a candlestick chart.
Supply-demand is the best and the first method of trading by technical
analysis. You should master it before learning anything else.

Rally Base Drop: A Supply Trading Strategy

What is Drop base drop in trading?
Drop base drop is a price pattern that indicates the creation of a supply
zone on the chart. More sellers are willing to sell from the supply zone
created by the drop base drop pattern.

It is the most basic type of supply and demand in technical analysis.

You need to learn the basics of supply and demand to become a supply
and demand trader.

In short, drop base drop is also called DBD.

How to identify drop base drop?

It consists of two bearish impulsive waves and one retracement wave.
The retracement wave is sandwiched between the two bearish
impulsive waves.
After going deeper in technical analysis, a bearish impulsive wave can
be seen in a single big bearish candlestick. A Doji candlestick represents
the sideways movement of price or price retracement.

So, to identify a drop base drop pattern on the candlestick chart, look
for two big candlesticks with a Doji candlestick sandwiched between
two big bearish candlesticks. Like in the image below.

Follow the following simple formula for DBD

DBD = Big bearish candlestick + Doji candlestick + Big bearish
candlestick

Body to wick ratio of candlesticks

The body-to-wick ratio of big bearish candlesticks must be greater than
70%. It is necessary because the big body of the candlestick indicates
the huge momentum of sellers.
Doji candlestick must-have body to wick ratio below 25%. The same
opening and closing of the candlestick indicate the sideways movement
o price on the chart. It also represents indecision in the market.

How to draw a supply zone?

To draw a supply zone, simply highlight the high and low of the base
candlestick. Now draw a rectangle meeting the high and the low of the
base candlestick and extend the rectangle to the right to the
appropriate length.

A base zone is basically a supply zone in technical analysis. The base

zone can consist of more than one candlestick. But you should always
take the high and low of the total base zone to draw a supply zone.

What does DBD pattern tell traders?

The psychology behind this pattern is based on a natural pattern. Like
in nature, real life is full of ups and downs. In the same way, the market
is full of impulsive and retracement waves. Price travels from one zone
to another zone in the form of impulsive waves.

This is nature and the DBD pattern is a purely natural pattern. When
the DBD pattern forms, it creates a supply zone naturally. The supply
zone is always under the attention of big traders and big institutions
that are willing to sell from that zone.

The supply zone in the DBD pattern is the footprint of market makers in
technical analysis. If you want to sell a currency pair or synthetic
indices, you should sell with market makers from supply zones.

How to trade Drop base drop pattern?

There are two methods to trade DBD pattern
First method is to sell a security when price come back to touch the
supply one just after the formation of supply zone

Second method is to sell a security when price come back to touch

supply zone after a full swing

After back testing, we have come to a result that the supply zone
becomes weak if the price takes more time to return to the supply zone
to pick sell orders. So, we have made a strategy for the later method.
Trading plan for second method
After drawing the supply zone, when the price will return to the zone
after a full swing/sometime then wait for the formation of a bearish pin
bar or any other bearish candlestick pattern

Open a sell order on the formation of a bearish pin bar at the supply
zone and place the stop loss above the supply zone. The base zone will
protect your stop loss from fake-outs.

In the drop base drop pattern, the supply zone does not tell us about
the take profit level. So, to fix this issue, you should trade the supply
zone with another chart pattern or any other trading pattern.
Conclusion
DBD is the basic concept in technical analysis. Using this pattern as
a confluence to trade other chart patterns or key levels will increase the
probability of winning.

It also helps to fix a proper stop loss above the supply zone, and it
increases the risk-reward ratio.
I will suggest you to back test this Drop base drop pattern at least 100
times before trading on a live account.

In Summary
If you want to ask me about the most basic concept of technical
analysis, then I will say “supply and demand”. There is always a tug of
war between supply and demand in the market. Base zones are the
footprints of market makers, when you will try to read the price on the
chart, you will see price picking orders from one base zone and then
staying for a while on another zone.
I will recommend you to back test this supply and demand trading
method by taking at least 100 samples. This will improve your trading a
lot. Without back testing, you will not be able to learn it properly.