Great information there adelzadh. I stumbled upon supply and demand trading about a year ago. Great stuff. Something that helped me. computer back-testing and software programs that offer traders multitudes of market indicators, Sam Seiden eschews traditional technical analysis in favor of. Below is a link to Sam Seiden's off tha hook explanation of Supply and Demand in financial market. “price based” trading. He says, “price and price” alone.
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Sam began his career at the Chicago Mercantile Exchange, the largest financial exchange in the world where he facilitated institutional order flow. This allowed. Learn why Sam Seiden's supply and demand method is flawed and a few small New eBook: "How To Determine When A Reversal Is Going To Take Place" Sam Seiden's trading tips & method of trading supply and demand is still very. Despite the dominance of computer back-testing and software programs that offer traders multitudes of market indicators, Sam Seiden eschews.
The key is how did price leave the level? There must be a fast leave of the level, or I won't look at the level. This is what to look for on any time frame. If it can't break out to the upside, the stock will go down and test the lows.
This is just in regards to big picture time frames - there are other things to also consider. But it is important to identify these levels. Only two reasons for the market to have a turning point: At a top, supply level, the sellers exceed the downloaders, and prices move lower.
At the supply level at a number of downloaders that were exceeding the number of sellers. The second things that can happen is the downloaders went away, and the sellers exceeded the number of downloaders and drove price lower.
At a bottom, demand level, the downloaders exceeding sellers, and prices move higher. We calculate the profit margin by measuring the distance between the supply resistance level and the demand support level. In the chart above, the profit margin is the circled area. There are only two types of entries someone can possibly take, the pullback entry and the breakout entry. A key factor in determining whether the trade will work out or not is this: Is there a profit margin or not?
All you have to do is look to your left. When you are about to download, look to your left and make sure supply is far above. When shorting, look to your left and make sure demand is far below. How far?
For me, the initial profit margin must be at least 3 times the stop. In other words, I am looking for a reward to risk of at least to the first profit target. You need to quantify the demand and supply accurately and make sure the profit margin is substantial.
This is literally what happens in every market every day. It's incredibly simple and the vast majority miss the whole game being played out because of the illusions presented to them by those who have more to gain by obscuring reality.
Trading Ideas 10 Year Note Futures Here we will revisit one of my favorite markets, the 10 year note. It is one of my favorites because of the huge volume and significant profit margins. Notice the supply resistance level above, labeled by the red lines.
This level is ideal because of the strong initial decline from the level. Something I teach in the Online Trading Academy stock, futures, forex, and options class is to focus on that initial decline in price from the level. This subject is a whole section in the class so don't feel bad if you don't get it here. The fact that it moves down to the low it does before returning to the supply level shows us what the initial profit margin is. Traders can look to sell short in the supply area as the initial profit margin is greater than Email me with any questions on this or see me at a class in the future.
There is also a strong move out of this level suggesting that we may see a nice trade if and when price revisits the level for the first time. There is one issue with this level, however, that does not make it a high probability level. In the larger picture, this demand level is not well placed on the supply and demand curve. Therefore, 12 day traders will likely see a bounce higher from this level but this is not an ideal area to initiate a swing trade.
This is a large level which is not always a good thing.
The strong rally into the level on no basing does make this trading opportunity one to watch. Volume on this stock is good but not great so you may just want to watch this one as an educational watch idea. Keep an eye on this one. Notice however that we are now getting the big green candles and "gap up's" after the advance in price. The key word here is "after". Consistently profitable traders don't download after a large advance in price so we can conclude that novice downloaders are starting to enter this market.
If price gets up to the supply level, we would be selling to the downloader who is downloading after an advance in price and into a supply level. I used strong words to describe the opportunity saying that the demand and supply levels on the chart were a "dream" for active traders.
Typically, I don't use words like that unless I am very confident about the opportunity based on years of trading experience. I received some emails asking about the quality of a level so we will deal with that a little bit here.
One of the most important things about a quality level is how price originally leaves the level. If price moves away from an area of equilibrium in strong fashion, it is moving away strong because there is a large supply and demand imbalance at the level. If price slowly drifts away from the level, it still may be a trade we will take, just understand that the supply and demand imbalance at the level is not that out of balance.
The higher the "imbalance" at the level, the higher the probability of the trade working out well. The 30— year bond supply level in last week's letter triggered right away and paid about the first day. If you're a trader that took this trade, send me an email and let me know.
Active traders can look to take short term shorts from the level. As always, keep your trading low risk. The supply and demand levels are designed to help you do that. Notice where current price is on the chart. Not far above, we have a supply level that has not been revisited.
Further below, we have a demand level that has not been revisited yet. The distance between them is the "profit margin" which in this case is large.
This level is ideal for a few reasons. Second, it has a decent profit margin which we need if we are to get paid.
Traders can look to download the first pullback in price to the demand level shown here with a protective sell stop just below the level. Why do I focus so much on turning points in markets as areas to enter trades?
Simple… The trader who can pick turning points in markets based on the objective and simple rules of pure supply and demand typically derives his or her income from the trader who enters trends well after they are under way and from the breakout traders who download after a period of downloading and sell after a period of selling.
Many people forget the simple fact of how you make money downloading and selling anything.
When you sell short, many others must sell after you at lower prices for you to profit. Our entry below from last week was at the pre-determined turning point which did two things for us. First, it allowed us to obtain a short entry VERY close to our protective stop which keeps trading low risk.
Second, it allowed us to sell short far from demand levels below which would be profit targets. In other words, our supply area allowed us to sell short when the profit margin was largest and about to decrease. Never forget… The longer you wait and let prices decline before selling short, the more risk is increasing and your reward profit margin is decreasing. Instead of desiring lots of confirmation of lower prices before selling short, the desire should be the benefits of a low risk entry at supply resistance.
To put things into perspective, it's always a good idea to look at supply and demand in the big picture. This chart shows us that this market is not that far from supply. It also shows us that price has not been able to move into this level at all as of yet, suggesting there is plenty of supply at that level. So is anything he says actually new?
I don't think so. His supply and demand levels are roughly equivalent to order blocks. His unfilled orders that make markets move concept is just a description of simple market mechanics. Obviously for price to actually move somewhere it must move to different prices! If you want to extend this concept further then it becomes the ideas of resting stops and liquidity pools.
Yep, that's a good summary Piper. Again though, nothing new surely. Doesn't every smart trader know how not to make retail entries? This is elementary "enter at the first pullback" stuff, which is fine, so long as it's actioned.
His story about his beginning and the secretive screens he was watching is interesting. Most experienced futures traders will have used, and may have traded from, a DOM tool.