Many students email me wanting to know how to tell if a supply or demand zone is likely to hold or break. Understanding this is critical for trading, for if we buy or sell at the wrong time we give up the opportunity to make greater profits or worse, we lose money.
In the Online Trading Academy’s Professional Trader Course as well as the Extended Learning Track, we stress the importance of our Odds Enhancers as a way to filter out weak opportunities and find the best trades that we should take. Although the strategy of using Supply and Demand is relatively simple, traders and investors must know that not every turning point in the market is a high quality trading opportunity. There are many Odds Enhancers, but with knowledge and practice using them becomes second nature and your consistency in the markets generally improves.
An Odds Enhancer that we look at when determining the strength of a zone is how price left that zone. Think of a glass of water sitting on a table. If you were to grab the glass only to find it filled with scalding hot water, you are likely to release your grip very quickly. But if the glass was filled with room temperature water you could hold the glass as long as you would like or even take a sip.
Price works the same way. Traders need to focus on the strength at which price left the origin of the supply or demand zone. If price leaves quickly, it shows a large imbalance of supply and demand and, therefore, a stronger zone.
Looking at the following chart we can see that we left the demand zone with large green candles when demand was formed. This means that this is an area where buyers are much stronger than the sellers. The glass is hot! When price returns to that level we would have a high probability buying opportunity since the sellers are weak there and price is likely to rise again.
What happens if we leave the area slowly? We would likely see smaller candles and/or a mix or red and green candles. The battle between buyers and sellers is pretty even and no one side has the major advantage. Without clear direction in this zone, prices are less likely to bounce fast.
The same can be said for supply zones. For the zone to offer us a higher probability selling opportunity we would want to see a fast drop from that level. On the charts this would be characterized by large red candles, gaps down and/or topping tails on the candles.
If you do not see that occurring you would have a lower probability of success in selling at those levels.
So, now you are aware of one of the Odds Enhancers we can use to increase our chances for success in trading any market and any time frame. To learn the others join us at one of our worldwide education centers and increase your knowledge.
Editors’ Picks
AUD/USD turns south toward 0.6400 as sentiment sours

AUD/USD is heading toward 0.6400, having faced rejection at 0.6450 early Monday. The Aussie fades the bounce, as the US Dollar finds fresh demand on souring risk sentiment amif China's property market concerns and the hawkish Fed outlook.
EUR/USD hovers around 1.0650, focus on German IFO survey

EUR/USD is keeping its range at around 1.0650, struggling for a clear direction in the Asian trading on Monday. Markets stay risk-averse, weighing the Fed's 'higher-for-longer' rate view and lingering China concerns. Germany's IFO survey eyed.
Gold remains steady above $1,920, focus on US data

Gold price hovers above $1,920 during the Asian session on Monday. The prices of yellow metal snapped a losing streak on Friday as the US Dollar (USD) trimmed its intraday gains, which could be attributed to the falling in the US Treasury yields.
Worldcoin Price Prediction: Is WLD done with uptrend after 77% rally?

Worldcoin price has paused its uptrend as it currently trades at $1.57. This move comes after the altcoin rallied a whopping 77% in just three days, between September 13 and 16. As WLD hovers aimlessly, investors need to be patient to catch the next volatile move.
Week ahead – US core PCE and Eurozone flash CPIs eyed after rate pause signals

PCE inflation to grab attention on Friday as Fed signals higher for longer. But markets might be more worried about a government shutdown. Eurozone flash CPIs will also be the in the spotlight on Friday. Chinese PMIs to be watched for recovery signs.
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