supply and demand area under curve
A trader should consistently identifying areas where prices are likely reversed
(turning point). There are several strategies that can be used to take
advantage of shifting the equilibrium of supply and demand, which is also
triggered by human emotions such as Fear, Greed, and Uncertainty.
If the entry to a situation of reversal do like everyone else, then we have
little or no advantage at all over them. Therefore it is not wrong for us
difficult to sustain in the market and make a profit that is consistent.
Therefore, the process of thinking / analysis should culminate in anticipation
of price movements that price with minimal risk and the greatest chance. Like
the fishermen raise the screen, usakahan wind is behind the boat. We focus
first to a strategy that is relatively easy to understand,
selling Setup
We use the chart on the previous post, where the daily chart shows that the
price moved up close and into the area of Supply (resistance).
Simple Strategy:
1. S / D areas identified on the daily TF (minimum H1).
2. When the candle making high (A) on the daily chart, moving to an intra-day time frame (M15 or M5) to seek opportunities Sell / Short entry.
3. In this small TF looking up the last candle followed by a down candle. (Image below)
4. Entry is done in the second candle down, and do not need to wait close it (image below)
5. Placement SL should be above the horizontal line area S / D daily, if you are a typical intra-day above the horizontal line hourly.
6. TP placed on Demand area (support) the next, or use the risk reward ratio of at least 2: 1
What caused the reversal candle? certainly not the work of a professional trader. Buying from is generally a novice trader after the price moves up far enough, high risk, and this is the first mistake. The second mistake is to buy at a level close to the supply area where more sellers are willing to sell, like that shown in the daily TF, meaning little chance of success. As a trader, we are not seeking certainty, but just looking for a better probability.
Note that the closing candle (A) on the daily chart is the reversal candle which invite more traders to enter short the next day.
Confirmation daily reversal usually eagerly awaited by most traders become valid, and generally they will feel comfortable short / sell at this point.
This is what we want, and increasingly shown at candle (B) indicate that they go with full power (full force). In other words, we are part of the person who invited people to enter, not as an invited guest. More than that, we did entry lower risk than those who short the following day (B). In conclusion, we use trading action short / sell masses at point B as confirmation that the decisions we make are true. If wrong, we exit with a small loss risk.
Rule for intra-day trading
Intra-day traders should have a pattern of rules in making trading decisions. Because usually emotional factors can affect the analysis and trade decision. Do not believe? try to trade using tick charts or time frame for 1 minute, very intense right? feel how your adrenaline driven every second every minute. Failure to control emotions led to the failure of trade. So by following the rules that have been set, you can manage the trade well.
Simple Rule for day traders:
1. Each day, identify one area of supply and demand in the area of the H1 time frame. Always perhatilan this price position compared with larger time frame (D1)
2. Entry is only done if the price of admission / approaching support (demand) or resistance (supply)
3. There are two types of entry, breakout and pullback (see picture)
4. Pre-plan: entry, stop loss and targets
5. OP carried out only if there is sufficient space width between the areas of supply and demand areas, so the profit zone becomes attractive
Classical Patterns ... (In a Different Perspective)
One topic that is much discussed and addressed in the literature tradiing is classical patterns (pattern / classical formation). We encountered similar term Head and Shoulder, Round, Flag, and others. Before we went along to use in analyzing the chart and then take a decision entry, then it helps us try to dig deeper into this case.
We begin to ask the right questions. How do you profit from? If the entry buy, then we want others to buy after us and at a higher price, is not it? Therefore the last thing we want is a buy after others take action to buy in advance or otherwise sell after people were forced to sell. In other words, if we just follow emtry of which is shown in the books, for example, "Round Bottom", then we could be in a position that is problematic and unprofitable. Of all the existing chart patterns, there is a common, namely the entry after a period of accumulation or distribution takes place. Take for example the Round Bottom or Cup and Handle, entry buy here is done after a period of buying took place. Rather, as Head and Shoulder, which sell entry made after penetration pricing neckline. Is not the entry is made after selling the lots in progress? Let's use the basic logic, why there neckline in Head and Shoulder? Very simply, the only reason why is because the neckline is formed because the area into a support which shows the demand for the instrument you trade. Did not bounce back if the price touched this level? until forming what is called the H & S pattern. If this area of support, continued to why you want to sell here? Take a look and remember, that most beginners almost always buy when the price is approaching the resistance or sell when approaching support. They buy or sell after a period of buying / selling takes place. They do this for two reasons only. First let emotions lead to the decision of entry / exit. Both of them might have read too many books written by people who only have a theory but never actually engage in trading directly. These books tend to make traders to follow the crowd. Remember if you follow the crowd / herd, it's unlikely you profit and survive.
Use the Chart Patterns Correctly
A good trader, could use the chart patterns, but they are using it in a different way and always asking questions yourself. "Well if I want to sell at a profit purpose that is bought back at a lower price, why not sell at one or Shouldernya Head?" Because that is where the logic of resistance or supply area is located.
Other examples Cup and Handle. Ever wondered why the bottom of the Cup is formed ?????? Guess, and if the answer is because it is the area of support (demand), then you are correct. That area of low risk / high reward entry for this pattern, rather than after breakout or after accumulation takes place, where others will join in to buy at higher price levels. Let others buy and sell when the breakout moment breakdown whenever they want as shown by patterns of this classic. They will always pay more to us who have entered into the market with a lower risk entry. A good trader will always be trying to sell as far as possible from the support area below because this distance is the "profit margin" her. And he will make every effort to look for a sell position close to the resistance (supply), because it was the only way to reduce risk. Instead thus also for long or buy.
How simple if every time you find these classic patterns on the chart, make sure you always look to the left of the chart. If you look at the H & S pattern, and the price looks to penetrate to the bottom neckline, before taking a decision sell make sure that there is no congestion or consolidation area near underlying demand. If there is, forget this sell signal for this trade will likely fail. If the breakdown, and congestion area demand is still rather far below, please sell because there is room for prices to move down. If you see Bull Flag pattern, make sure that the resistance (supply) are still far above, so prices have room to continue to move up after you buy. Using this simple method will differentiate you from the crowd (herd / crowd) and it will bring you closer to the ways of professional conduct trade.
Plan Your Trade, Trade Your Plan
Trade Plan is a good addition to have criteria for entry / TP / SL, should also be based on a set of contributing factors. All this we will be quantifying the resulting scoring system as a reference for trading decisions.
Supporting factors are:
1. Strength In trading we are looking for is a high probability in each trade to generate a profit. Here we look at how the behavior of the current price of its supply and demand to leave the area. Do move with strong moves? or slowly (gradual)?
2. Profit Margin is where we talk about risk reward or the pros and cons in taking a position. You should be able to measure the extent to which the level of support (demand) and resistance level (supply) versus the position of entry. You measure SL placement of point of entry and then measuring the distance also the profit margin of the entry point. Say you want to take a buy position, the greater the distance area of supply, quality of entry better and better the risk reward.
3. The Big Picture While you are an intra day trader and use a small time frame such as H1 or below, you should consider the areas of supply and demand on a larger time frame as D1. For example, if you want a short position, an effort so that you are closer to the short supply on the daily frame area or areas in the daily demand is still distant enough underneath so as to provide room for the price to move in case our analysis was.
4. Fibonacci retracement Referred to here is the price back to the area of support / resistance after the breakout in other words pullback. It deals with the entry to be performed. I think the first pullback is best compared with the second or third pullback as written in literatures trading. Why? like someone was cutting down a tree, the more often swung an ax, the more likely the tree fell. Likewise, in this pullback, the more often a tested area, the less likely the area to survive the onslaught of the price.
5. Time How long it takes price in this equilibrium position before the breakout. The shorter the time needed to get out / shift of balance, it became clear to us that there are significant differences between supply and demand.
6. Arrival Is the current price is at "fresh" support (demand) / resistance (supply)? For example, the upmove / uptrend, a level that has never been in demand retest promising greater opportunities for profitable trade.
To all of the above factors is rated, and the higher the better scoringnya existing setup. Below I attach tools in the form of an excel file, which may help you in setting up trade plan. As you can see, these simple criteria will be able to make a difference in the quality of trading. Make sure that you have a set of rules that support trading decisions. Because if not, then you will be competing with their own set of rules and a small chance of you winning this war.
before Entry
1. Check the conditions shown in the chart at this time, is trending? consolidation? responsible only YES or NO, do not answer by saying "I think", "I think" ... the answer should be simple yes or no.
2. What is the momentum (currently trending up / down) is getting stronger? weak? You can see from the long body candle characteristics (strong) or short (weak) .. yes or no.
3. Is the price action in the direction of the main trend (use large frame)?
4. Is the price action is currently entering the process of reversal (buy / sell climax)? (Will be explained in more detail)
5. Do you know the area of supply and demand on the chart?
6. Have you calculate the risk?
7. Have you reward calculation?
Suppose you want to entry buy, then certainly uptrend / strong momentum is the most ideal and answers should support a decision to be taken.
after Entry
1. Does the price moves in the direction of the analysis? in line with expectations?
2. Does the behavior of price movements in accordance with the analysis? increased momentum?
If the answer is YES, then hold (hold) your position to generate maximum trade corresponding existing trade plan. If the answer is NO, then get out / exit, we need not argue with Mr. Market.
By: aboutforextrader.blogspot.com
Always try and do not despair
“GOOD LUCK”