As a continuation of the last educational post.
In this post, we will discuss;
1. The Advantages of Supply and demand zone.
2. How to Identify the Supply and demand zone?
3. How the perfect find out(supply/demand zones) could make a difference?
4. Is this enough for a profitable trade?
Trading on Supply and demand zone’s are one of the prominent strategies in Forex market. Technically, supply and demand is an approach based on price action. A demand zone is typically formed after a strong rally north. Conversely, a supply zone is effectively created following a noticeable move to the downside.
Understanding the depth of market will help you to place a buy order and sell it at the different price-accurately.
Imagine, movement of the price level is like a ball that bounces off the floor. Each time the ball hits the ground, some of the energy is absorbed by the floor. Thus, each consecutive bounce will be lower than the previous one until all energy is gone and the ball comes to a standstill.
Likewise, once the price range craved for the supply/demand zones, price range keep fluctuate (up/down).
THE ADVANTAGES OF SUPPLY AND DEMAND ZONE.
Pros of the supply & demand zone.
1. High-profit potential
2. The probability for right trade is high
3. Pretty easy to identify the area
4. The risk to reward ratio is more
HOW TO IDENTIFY THE SUPPLY AND DEMAND ZONES?
Before the start, you need to follow three steps to identify the supply and demand zones.
1. Look at the chart and try to spot successive impulse/candles.
2. Establish the base.
3. Draw the zone
It is hard to draw a precise zone- it takes time and practice to be able to spot those areas. What you need to do is just follow the rules and practice enough until you feel confident in drawing these levels.
NOTE: It is important to note here that a demand/supply zones can and often is including the tails of the candles. As you can see from the demand zone above, there is a large lower tail that is included in the zone.
HOW THE PERFECT FIND OUT(SUPPLY/DEMAND) COULD MAKE A DIFFERENCE?
Generally, identifying structure formation will boost your chance of profitability.
Like I mentioned in pros, perfect order execution from supply/demand zone would have more risk/reward ratio.
IS THIS ENOUGH FOR A PROFITABLE TRADE?
Our globe is full of a binary system, supply and demand zones have their cons, as well. There is no perfect trading strategy or tool. Then What makes a difference along the way is your attitude towards trading.
Some of the most crucial things amateur traders need to pay more attention; for a profitable trade.
1. Proper trading education
2. Trading practice (preferably on a Demo account first)
3. Trading discipline
4. Sticking to your rules in good and bad days
5. Open minded attitude.
PRACTICE MAKES PERFECT.