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SUPPLY
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supply & demand
TRADING WITH SUPPLY AND DEMAND- EXAMPLES
In the previous part of the supply and demand
manual, I walked you through the basics and shared
with you a few examples. This second part aims at
taking this subject to one level up that will help you
understand trading with those zones and prepare
you for the video course (in case you want to join the
PRO Supply and Demand Traders Course). I will share
a few more COMPLEX scenarios and expand your
understanding of trading with those zones. I hope
you will enjoy it. Let's cut through the fluff and get
started straight away :)
Atanas
supply & demand
TRADING WITH SUPPLY ZONES- TRIPLE S
Supply and demand zones are those levels in trading
that attract most buyers and sellers.
This is probably the simplest explanation you will
find online.For a supply zone to be validated, we will
need to meet 3 criteria, also known as the triple S
(SSS).
1. Successive large bullish candles
2. Small bodies (bullish or bearish) or wicks (this
is where price starts a large move)
3. Supply Zone Base (establish where the base is
located)
Once you tick all of these three criteria, then your
supply zone is established.
Ready to do that?
Here it is, as easy as 1-2-3:
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TRADING WITH SUPPLY ZONES- TRIPLE S
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1) SUCCESSIVE LARGE BULLISH CANDLES
1) Successive Large Bullish Candles (Beginning of a
supply zone)
As you can see from the illustration above, we need
a succession of green (bullish) candles (marked
with the black rectangle or just on very large green
candle followed by a small candle as the example
below:
1) LARGE BODY
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TRADING WITH SUPPLY ZONES- TRIPLE S
Remember: Sometimes the bullish move can come
from just a single large candle.
Other times, there are a few candles appearing one
after another.
What you need to know is that there needs to be this
final bullish push toward the top. Here is an
example of a few bullish green candles.
1) SUCCESSIVE
LARGE BODIES
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2) SMALL BODIED-CANDLES/WICKS
2) Small Bodied-Candles/Wicks Marking The
Beginning of The Supply Zone is what we have seen in
the image above. This is the second "S" and a
necessary rule to have a confirmation of a supply
zone.
2) SMALL BODY
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3) SUPPLY ZONE BASE
3) Supply Zone Base- Establish Where The Zone is Located
As we can see from the illustration below, the supply zone is
located at the inflection point of the bullish green candle and the
small-bodied candle.
It is the best confirmation of the end of an existing trend and the
beginning of a new one.
Makes sense?
It is like playing tennis. The moment where the ball touches the
net is the moment where money exchanges hands in the markets.
3) SUPPLY ZONE
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3) SUPPLY ZONE BASE
After price establishes a supply zone, it can test it one-two times
more before establishing a new downtrend.
There is a high probability of a bull trap, which is something we
went through in the previous part of the supply and demand
manual.
3) SUPPLY ZONE
This might look something like that:
supply & demand
TRADING WITH SUPPLY ZONES- TRIPLE S
bull
trap
OR:
supply & demand
TRADING WITH SUPPLY ZONES- TRIPLE S
The variations could be many, but what matters here is the price
action around the supply zone.
If you see a lot of rejections or bearish engulfing patterns or long-
legged dojis (sign of market hesitance), then you can be reassured
that this is the end of an uptrend and beginning of either a
correction or a major reversal.
supply & demand
TRADING WITH DEMAND ZONES
As explained in part 1 of the Supply and Demand Manual, the
opposite of a supply zone is a demand zone.
This is an area that has a high concentration of buyers.
It is always very similar to a large area of support.
Demand Zone Example:
supply & demand
TRADING WITH DEMAND ZONES- TRIPLE B
For a demand zone to be validated, we will need to meet 3 criteria,
also known as the triple B (BBB).
1. Bullish Large Candle(s)
2. Body Of The Last Candle Needs to be Small (Bullish or Bearish)
3. Base Confirmation
Once you have all these three boxes ticked, your demand zone is
established.
Let’s get into the details now:
supply & demand
TRADING WITH DEMAND ZONES- TRIPLE B
supply & demand
1) BULLISH LARGE CANDLE
Just like establishing a supply zone, finding a demand zones
requires the presence of a large candle.
As you can see from the black rectangle below, there are two large
bullish candles, which are the first indication of a demand zone
approaching.
1) LARGE RED
BODIES
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2) BODY OF THE LAST CANDLE NEEDS TO BE SMALL
(BULLISH OR BEARISH)
As with supply zones, demand zones need this second confirmation
to validate them. The small bodied candle at the end of the move
(and sometimes the bearish wicks) is a very important sign of a
demand zone. In this example, we have both: 1) a small-bodied
candle and 2) bearish wick. Let’s see now:
SMALL
BODY
BEARISH
WICK
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3) BASE CONFIRMATION
As we can see from the illustration above (page 15), the demand
zone is located at the inflection point of firstly the bearish red
candle and secondly the small-bodied candle. This is the moment,
where you can clearly see where the demand zone is based.
Acting like a magnet for buyers, this zone is what will move price,
acting almost like a magic field.
1) DEMAND ZONE
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CANDLESTICKS
I have touched on candlesticks in the previous guide, but here is a
quick reminder of what the different parts of a candlestick
represent.
supply & demand
CANDLESTICKS
A candle consists of:
1) real body
2) candle wick
This is literally 50% of the information you need to read a candlestick
pattern.
Now, let's go over the other 50%.
This part has to do with the strength of a particular candlestick pattern.
So, let's see an example of a very strong bullish (one in which buyers are
in full control) and a very weak bullish (one in which buyers are losing
steam) candlestick.
1) Here is an example of a very strong bullish pattern, in which buyers are
in full control
supply & demand
CANDLESTICKS
1) Here is an example of a very strong bullish pattern, in which
buyers are in full control
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CANDLESTICKS
2) Below is an example of a very weak bullish pattern, in which
sellers are in control
supply & demand
CANDLESTICKS
So, can you tell me now WHO IS LEADING THE SHOW in those two
examples?
Is the first pattern a better example of a strong bullish trend?
YES, you are absolutely right- the first pattern is definitely
exhibiting a strong buying behaviour.
The second pattern (weak bullish candle) is showing a lot more
hesitance and in fact possibly a trend reversal.
The small green body comes to show that there were not enough
buyers at the top of the range and closed very close to the open of
the candle.
Therefore, sellers are the ones in control in the second example.
Does this make sense?
supply & demand
PUTTING THIS INTO TRADING CONTEXT
Now, let's put all this into perspective:
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PUTTING THIS INTO TRADING CONTEXT
As you can see from the image above, from the moment when
buyers lost steam and the body of the candle was times smaller
than its wicks, sellers rushed in and reversed the price direction.
For candlesticks to be stronger, you will also need to have context
in place. By context I mean Supply and Demand zones.
Now, if we zoom out and check where this weak candle occurred
before reversing the trend, you will see the following scenario:
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PUTTING THIS INTO TRADING CONTEXT
You did not expect this subject line from me, did you?
Well, I do also like to go over the basics. This is in fact, where one
should begin from.
Now, let's look at some more trading examples
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MICRO VS MAJOR DEMAND ZONE
When it comes to supply and demand zones, I am looking at quite
a few different patterns, which are beyond the scope of this guide,
but I share them in my FULL SUPPLY AND DEMAND VIDEO COURSE.
For the sake of this more advanced trading guide, I will share with
you that two of those patterns form around a major and micro
demand zones as shown above.
These are the best places on the chart to pinpoint a reversal or a
continuation of the existing trend.
Below are given a few more scenarios, but for the full list refer to
my video course.
supply & demand
MICRO VS MAJOR SUPPLY ZONE
In the example above, you can see two of the best places to go
short using supply zones.
I personally prefer the major supply zone, but sometimes you also
can find great entry opportunities from minor supply zones.
I always look at the risk:reward opportunities at those and this is
the leading force behind choosing whether to take a trade or not.
Of course, all other technical factors need to be considered, as
well. Let's look at another continuation example now.
supply & demand
MICRO DEMAND ZONES
In an uptrend, we can only see micro demand levels like the one
shown here.
These are also powerful areas of buying interest and can last for a
very long time. In other words, if price retraces back to these
zones after a protracted period of time, they can still be vouched
as valid.
supply & demand
MICRO SUPPLY ZONES
In a downtrend, micro supply zones are as effective as major
supply zones during a reversal.
Sometimes, the best risk:reward opportunities come from exactly
these places on the chart.
In my day trading room, I have shown the trading members
numerous times how these supply zones when used with the right
technical and management tools can provide returns in excess of
20R, 30R or even 40R (very rarely).
supply & demand
BITCOIN EXAMPLE
Supply and demand zones work on all instruments and all
timeframes. As you can see, I have chosen our first example on
purpose to be a crypto pair and this shows how relevant the major
supply zone is.
It was tested two times before price really changed its course.
Let's have a look at another example now.
supply & demand
CRUDE OIL EXAMPLE
In this example, we are looking at a micro demand zone.
There is a predefined uptrend and price forms a micro demand
zone.
Just one re-test is needed for the price to continue its uptrend.
Usually micro demand zones are not re-tested more than 1-2 times
at maximum. Price tends to be quicker around the micro zones.
Not very complicated one, isn't it?
supply & demand
GOOGLE EXAMPLE
In this example of Google, we are seeing the price forming a major
supply zone after which a major demand zone is formed.
Price has re-tested 3 times the supply zone and only two times the
demand zone so far.
We are expecting to see price bouncing up from this zone in
search of a new equilibrium.
supply & demand
USDCAD EXAMPLE
bull
trap
Here is an example from the FX field- USDCAD.
This major supply zone was tested just once, but as you can see,
price formed one of my favourite patterns- bull trap and then
quickly retraced. I do cover the bull and bear traps briefly in my
first supply and demand manual and also more in length in my
video trading courses.
This is definitely one of my favourite patterns to trade around
supply zones.
This major zone has proven to be a strong magnet&repellent for
the price. You can see how quickly price advances and then how
quickly it bounces back down.
supply & demand
WRAPPING IT ALL UP
I hope all of the above material makes sense to you.
Even though, this is a more advanced manual, I have still tried to
keep it as simple as possible.
I have shown how to find and where to look for the best supply and
demand zones and opportunities.
When it comes to fine-tuning my entries, I do use a few more
advanced techniques, but they are close to impossible to share in
a written format, that is why I have spent a significant amount of
time to create the video course on Supply and Demand trading and
share it on my website.
If you are just starting, I wanted to give you the very basics of
trading with supply and demand, because I know how hard it could
be if you have never looked at those levels before.
I hope by incorporating what you have learnt so far in your trading
analysis will improve the way you see those levels.
supply & demand
WRAPPING IT ALL UP
When it comes to live trading, there are more factors to consider
that are beyond the scope of this manual. Some of these are:
1) Money management techniques specific to trading with supply
and demand
2) Fine-tuning entries, so that you can increase your risk:reward
on each trade
3) Using multiple timeframe analysis the right way with supply and
demand zones
A lot has left uncovered, but also a lot has been poured into those
two volumes of trading with Supply and Demand. I truly hope you
found those beneficial.
If you have any more questions, you can address them to myself
at: [email protected]
supply & demand
WRAPPING IT ALL UP
If, on the other hand, you are looking to get the advanced video course,
which covers everything else that was not possible to be covered in these
booklets, you can check out my website or simply ask me anything at:
[email protected]
It was a pleasure as usual!
Keep up the good work and don't forget to always give back!
Yours,
Atanas
