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Are sellers or buyers in control?

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rd

Just some random rambling thoughts because trading is slow and I'm bored. Any of you who have
watched markets for long have seen the phrases "sellers are in control" or "buyers are in control." You
hear them on tv, you read them in books and magazines and online. They're everywhere. These
phrases always refer to market prices falling or rising, respectively. I've always thought they were
backward. If prices are falling, it means orders are being filled at bid prices, which are buyers' prices,
which to me means buyers are in control. And vice versa, when prices are rising, orders are being filled
at ask prices, which means sellers are getting their prices and are in control. The trader completing
transactions at his desired price is the one in control, not the trader paying or accepting the other's price.

If everybody who walks onto a used car lot pays the price marked on the windshield, the seller is
controlling price, not the buyers. If the seller raises prices every night and buyers continue to pay what
he's asking, he's really in control! But if nobody will pay the windshield price, and he has to keep
reducing the asking price to move any cars, then buyers are in control. Similarly, when a housing
shortage causes house prices to increase, and buyers remain willing to pay the higher prices, sellers
control price. It's called a sellers' market for a reason. But the talking heads never say buyers are in
control when house prices increase. They only seem to do that with markets, particularly the stock
market.

Actually, they're likely to say bulls are in control when markets are up, or bears have taken over when
markets are down. But bulls aren't necessarily buyers, and bears aren't necessarily sellers. Bullish and
bearish are descriptions of market sentiment. Buying and selling are market activities that might or might
not reflect sentiment. A trader can be bullish or bearish for a long time without buying or selling
anything. He might just be waiting for a better price. Or a bull or bear can close part of a position without
changing sentiment. I think buyers and sellers are more appropriate terms for who's causing market
movements, while bulls and bears just describe which way market participants think things will go.

In a rising market example, when bulls stop buying, prices stop going up. They're bulls, so they're not
selling. But they don't want to buy at the current price, so it's a standoff. Sellers have to agree to a lower
price in order for the bulls to become buyers again. At that point, sellers have ceded control of price. But
once buying resumes and sellers have their ask price met, sellers regain control and price starts rising
again. Bulls will remain buyers as long as they think prices are fair and going higher. Buying is driving

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the market up, but it's not setting prices. Sellers are. Buyers are just agreeing to pay sellers' prices,
putting sellers in control. It seems counterintuitive that in something called a bull market, prices are
controlled by sellers, and in a bear market, prices are determined by buyers. I think the reason the
buyer/seller control phrases came to be used the way they are is that they sound logical, at least until you
think about what's really happening. Markets are up, so buyers must be in charge. But wait. Sellers are
setting prices. Markets are down, so sellers must be in control. Except they're not, because buyers are
setting prices.

I know what's meant by the phrases, even if I disagree with how they're stated. They're saying that when
prices are rising, there are more willing buyers than sellers, which drives prices up. I get that. Buyers'
willingness to pay the ask price or sellers' willingness to accept the bid price drives the market. But
they're driving it against their interest as long as they continue to accept trades at the opposing price. I'm
talking about people who want to build a position, not those who already have a position and are glad to
see to see price move in their favor. Those are holders, not buyers or sellers. Seeing price increase
when you want to buy or decrease when you want to sell is not being in control. Maybe it's a matter of
semantics to some people. But words mean things, and hearing that buyers or sellers are in "control"
when prices are moving against them just never made sense to me. When people in the Netherlands
were paying a year's salary in Dutch guilders for a single tulip bulb in the 1630s, buyers were definitely
NOT in control! They were however, driving the market and allowing sellers to raise prices to insane
levels. In order for tulip bulb buyers to gain control of the market, they needed to stop buying tulip bulbs.
But that would mean they might miss out on great profits, so they kept buying, and sellers kept raising
prices. It's a kind of catch-22 and is one of the reasons bubbles form.

Anyway, this is a long-winded way of saying that from my perspective, buyers drive rising markets putting
sellers in control, and sellers drive falling markets putting buyers in control. I pondered the meaning of
the commonly used phrases about who's in control for a long time, and I think they're misstated. But they
made me think about how I would describe what they're supposedly saying, which probably improved my
understanding of markets. Sometimes putting one's thoughts in writing helps clarify them, so I thought I'd
kill some time and post my thoughts here. I apologize if this all seems like gibberish to anybody but me.
If you've read this far, you deserve some Beeline points!

Thanks for reading, and happy trading!

Thu, 06/30/2016 - 3:50am

jiggerdigger

Excellent, thought-provoking piece rd, particularly for someone like myself who agrees with you that,
"words mean things".

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Furthermore - and the subject matter of the post aside - anyone who knows where apostrophes belong
will always command my full attention!!

Thu, 06/30/2016 - 4:53am

Sokha

"sellers are in control" or "buyers are in control."

These "words mean things" and sometimes are all you need in order to trade Forex. They show on charts
if you know what you are looking for.

Nice to have a fundamental or correlation to back up as odds enhancers such as looking to sell EURUSD
at a supply zone where as a dollar index is simultaneously at a demand zone--correlation. It is not
necessary but a good correlation--high odd trade.

"sellers are in control" -- supply zone-- supply exceeds demand--looking to sell short at at a supply zone
that has the most imbalance.

"buyers are in control." -- demand zone-- demand exceeds supply--looking to buy long at a demand zone
that has the most imbalance.

You can spot them everywhere on charts but it is best to have a rule-based core strategy and process
how to plan your trade, so you can consistently do the same thing over and over. No need to be a
consistent profitable trader--just be consistent of what you do that work for you.

Thu, 06/30/2016 - 6:29am

jiggerdigger

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Thanks Sokha. An extremely helpful addition to rd's post.

Looking at your charts, the supply and demand zones appear to precede strong, sharp price movements.
Or is this just a coincidence? (I'm sure there's far more to it than that!!).

(I am familiar with the expression "supply/demand" trading but that is about as far as it goes).

Thu, 06/30/2016 - 6:38am

Sokha

"the supply and demand zones appear to precede strong, sharp price movements."

A strong sharp move away in price from a level signifies that institutions or big banks with a lot of money
step in and load his orders because he thinks it is a good sell according to his technical, fundamental
analysis, MA, or whatever his reason.

I don't need to know what his reason is; however, since his order is too huge, there is no way he can sell
all his orders at once; thus, a supply zone creates. What I am going to do is to sit on my hand and wait for
that supply zone to be created by institution--footstep--I called it a latent inventory order--unfilled orders
are hidden there for sure!

I use a word, "institution," but you get the point because it does not matter who is buying or selling, could
be a programmed logarithm, but I know for sure it is someone who has a lot of money. News supply and
demand are excluded because those just a reaction to news; not a reliable S&D zone. You want a S & D
that created during the regular session such as European or US sessions.

When prices return back to that level, that's what I am interested in selling. What else can you ask for?
IMO, it is not just a coincidence.

Thu, 06/30/2016 - 8:50am

jiggerdigger

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Hi Sokha.

No, I didn't mean the zones were a coincidence. What I meant was, because I am unfamiliar with the
mechanics of supply/demand trading and was trying to get a better understanding from someone who
obviously fully understands it, was my (very simplistic) interpretation of the charts you posted "on the right
track", or was it that the charts you posted coincidentally showed the supply/demand zones immediately
prior to strong moves?

I hope that clarifies what I meant.

Thu, 06/30/2016 - 7:35am

rd

"...anyone who knows where apostrophes belong will always command my full attention!!"

Hahaha! We're on the same page there, jiggerdigger!

Thu, 06/30/2016 - 9:11am

rd

Sokha, I've seen several of your posts about supply and demand zones. It looks like an interesting and
useful concept.

Thu, 06/30/2016 - 10:24am

jeFX

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Sokha, did you ever attend Online Trading Academy? That is where I've seen those supply (resistance)
and demand (support) zones taught. I am trying to improve in seeing and using them, but; I have used
that method to SET (Stop - Entry - Target) my trades and they do work. I've been trying to figure this out...

OTA uses 3 entry methods... Drop - Base - Drop; Drop - Base - Rally; Rally - Base - Drop; Rally - Base -
Rally

(Drop = Bear Expansion - Base = Consolidation - Rally = Bull Expansion)

Correct me if I am wrong; but, the best Supply Zone or Demand Zone is usually where a brief Base
(Consolidation) forms followed by a breakout with a strong move up or down rather than a long drawn out
consolidation. The theory is that there are residual orders in the zone as price action moves through it. I
can see some consistency with with the break out strategies I have seen here at Apiary.

Therefore: I am wondering if placing breakout buy and sell orders above and below the Base (or
Consolidation) would be one viable way to catch the market; but, to be profitable a 1 to 3 risk to reward
also seems like a good idea in a trade set up that is based on Supply and Demand zones well above or
below the current price, if placing both orders.

When I first started this, I had been trying to guess when the pivots will happen and SET my order at
these zones with limited success. I noticed that sometimes the price action slows and then continues and
other times it reverses... Then it came to me that maybe I should try placing a buy order above the supply
or a sell below the demand zone for those occasions when price action blows through the zone and stops
out the reversal based order near a pivot point. I am testing this now. Has anyone else tried this?

Thu, 06/30/2016 - 11:15am

kbeach01

I have been watching some of the free videos from OTA and I would like to learn more about S/D trading
but their program is a little to rich for me. I have been placing some trade with what I have learned and
have been fairly successful. Sokha can correct me but I think that if price blows through the zone, even
by one pip that the zone is invalidated and you should look for another trade. I am interested to hear
Sokha's take on your question.

Thu, 06/30/2016 - 11:53am

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 hakchinoy

Although words and their respective meanings are important, I'm more concerned about what price is
doing rather than its taxonomy. When preparing to place a trade, one has some choices: buy/sell with the
trend, against the trend, or countertrend; buy/sell in the direction of the trend or as a fade; and structure
the trade with an efficient or inefficient (aka sloppy), high-probability or random-walk entry. The market
will do whatever it does regardless of whatever set of choices that one selects.

Thu, 06/30/2016 - 1:22pm

Sokha

SET (Stop - Entry - Target)

--We can use the USDCAD on H2 (120 min) from example above
--I identified a demand zone that met all my odds enhancers way before the price returned to a demand
zone, i.e., a current price was at 1.3600, the level was fresh because it had never been touched.
--At this point, I don't know what is the trend was going to be when the price returned to the level--it could
be sideway, downtrend--countertrend trade, or uptrend--trend trade---I can put an indicator and go back
in time to prove it, but you get the point.
--Since I knew a demand zone ahead of time, I can use a SET (Stop @ 1.3362, Entry@ 1.3398, Target
@ T1 = 1.3612 and do the same for target 2 = Stop @ 1.3362, Entry@ 1.3398, Target @ T2 = 1.3769.)
--Reward: Risk > 3:1, good!
--I used a tradingview.com and set at 1.3448, so I won't use all my buying power

OTA uses 3 entry methods... Drop - Base - Drop; Drop - Base - Rally; Rally - Base - Drop; Rally - Base -
Rally
(Drop = Bear Expansion - Base = Consolidation - Rally = Bull Expansion)

OTA use 4 patterns—RBD, DBD, DBR, RBR, and 3 entry methods--#1 entry--limit order, #2 entry--market
order inside the zone, and #3 entry--either wait for the breakout to happen and entry at its pullback or sell
stop at the breakout.

You have to be careful with the pattern above because a conventional school of trading called them a
support or resistance as well. We in OTA are very clear what the supply and demand look like is; plus, we

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also use odds enhancers to score an OTA supply and demand level in addition the 4 patterns above,
since I learned most of my technical analysis from a grow rich stays rich with Shawn, Irwin and other
instructors and then MTI. I do understand what is a support or resistance pretty well; thus, I use them as
a target, but not an entry.

“the best Supply Zone or Demand Zone is usually where a brief Base (Consolidation) forms followed by a
breakout with a strong move up or down rather than a long drawn out consolidation…I am wondering if
placing breakout buy and sell orders above and below the Base (or Consolidation) would be one viable
way to catch the market; but, to be profitable a 1 to 3 risk to reward also seems like a good idea in a trade
setup that is based on Supply and Demand zones well above or below the current price, if placing both
orders.”

Please see the supply zone in a 15 min chart below for a DBD. Hope, the label explains itself. 240 min of
a GBPJPY is another good example.

Yes, you can place a breakout buy and sell orders above and below the Base. To me, this type of entry
increase risk and decrease your profit zone because you might need to place a stop loss above a pivot
high. I use a 2% daily ATR for a short-term swing trade and 10% daily ATR for a long-term swing trade +
spread above a distal line. Furthermore, you might miss the trades if it moves so fast like a 240 min
GBPJPY.—see 15 min sz chart below for both limit order and a breakout trade, then.

“When I first started this, I had been trying to guess when the pivots will happen and SET my order at
these zones with limited success. I noticed that sometimes the price action slows and then continues and
other times it reverses... Then it came to me that maybe I should try placing a buy order above the supply
or a sell below the demand zone for those occasions when price action blows through the zone and stops
out the reversal based order near a pivot point. I am testing this now. Has anyone else tried this?”

Yep, I did that before, and this is what I called a sloppy supply and demand level. I used to take a pivot
high, a pivot low, a support, a resistance level because I thought they were supply and demand at the
time because those could be called a supply and demand as well according to the conventional trading
school.

What I have done to change it was to revisit the odds enhancers and only use the OTA supply and
demand patterns that were given by OTA instructors or those have taught me over the years and ignored
the conventional supply and demand because those are the pivot low, pivot high, resistance, and support
IMHO.

I am not saying those pivot lows, pivot highs, supports, resistances are not supply and demand or they
are not working. I am an OTA student; thus, I should know better what an OTA supply and demand
patterns look like is. That's why I use odds enhancers to score an OTA supply and demand for a high odd
trade.

I marked the OTA supply zone (sz)--DBD in the attached chart below as a reference; these are the only
two supply zones that I am interested in selling short.

You can look at support and resistance in the attached link below, where a forexfactory.com members
described,

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"Supply/Demand: A zone, where we assume there are sell/buy orders stacked.
Support/Resistance: A level, where price tested a few times and failed to breakthrough."

http://www.forexfactory.com/showthread.php?t=418796

"if price blows through the zone, even by one pip that the zone is invalidated and you should look for
another trade."

I only take a fresh and authentic supply and demand zone; thus, if the price blows through the zone, even
by one pip. It is not fresh anymore. Some instructors will take a second bite of the apple as long as a
price penetrated the zone < 25%.

"I'm more concerned about what price is doing rather than its taxonomy."

As you can see on my 15 min chart below, I sold short using a limit order at a proximal line of a supply
zone with a 2 % daily ATR + spread above a distal line for a stop loss, target 1 is 2:1 reward: risk and
target 2 at HTF pivot low or support area. I am done with this trade until it either triggered my 1st target or
stopped me out. If it triggered my 1st target, I would move my stop loss to breakeven. Thus, I would not
have a chance to know what PA is going to do at the time when entry is triggered, it is my least concern.
Supply and demand are all I need when it comes to trading. In other words, charts are all you need if you
know what you are looking for.

Hope this helps,

Sokha

Wed, 07/06/2016 - 6:57pm

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