Share:

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.

US Strong Demand



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.

US Weak demand


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.

US Strong Supply


If you do not see that occurring you would have a lower probability of success in selling at those levels.

US Weak Supply

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.



Follow us on Telegram

Stay updated of all the news

Join Telegram

Editors’ Picks

EUR/USD retreats to 1.0750, looks to post small weekly gains

EUR/USD retreats to 1.0750, looks to post small weekly gains

EUR/USD lost its traction and declined to the 1.0750 area in the American session on Friday. In the absence of high-tier data releases, week-end flows seem to be impacting the pair's action heading into the weekend.

EUR/USD News

GBP/USD holds above 1.2550 ahead of the weekend

GBP/USD holds above 1.2550 ahead of the weekend

GBP/USD keeps its footing on Friday and trades modestly higher on the day above 1.2550 following Thursday's rally. Ahead of next week's all-important US inflation data and Fed policy announcements, modest US Dollar weakness allows the pair to stay in positive territory.

GBP/USD News

USD/JPY Price Analysis: Climbs to fresh daily peak, further beyond mid-139.00s

USD/JPY Price Analysis: Climbs to fresh daily peak, further beyond mid-139.00s

The USD/JPY pair stages a goodish intraday recovery from a fresh weekly low, around the 138.75 region touched this Friday and builds on its steady intraday ascent through the early part of the European session. Spot prices climb further beyond the mid-139.00s in the last hour, reversing a major part of the overnight losses.

USD/JPY News

Follow us on Telegram

Stay updated of all the news

Join Telegram

Editors’ Picks

EUR/USD retreats to 1.0750, looks to post small weekly gains

EUR/USD retreats to 1.0750, looks to post small weekly gains

EUR/USD lost its traction and declined to the 1.0750 area in the American session on Friday. In the absence of high-tier data releases, week-end flows seem to be impacting the pair's action heading into the weekend.

EUR/USD News

GBP/USD holds above 1.2550 ahead of the weekend

GBP/USD holds above 1.2550 ahead of the weekend

GBP/USD keeps its footing on Friday and trades modestly higher on the day above 1.2550 following Thursday's rally. Ahead of next week's all-important US inflation data and Fed policy announcements, modest US Dollar weakness allows the pair to stay in positive territory.

GBP/USD News

Gold struggles to find direction, holds steady near $1,960

Gold struggles to find direction, holds steady near $1,960

Gold price struggles to make a decisive move in either direction on Friday in the absence of high-impact data releases. The benchmark 10-year US Treasury bond yield stays relatively calm above 3.7% following Thursday's slide, limiting XAU/USD's action.

Gold News

Weekly Roundup: Binance US halts fiat services, Coinbase does business as usual, XRP hits key milestone

Weekly Roundup: Binance US halts fiat services, Coinbase does business as usual, XRP hits key milestone

The US financial regulator, the Securities and Exchange Commission’s (SEC) clampdown on exchange negatively influenced the crypto market and assets throughout the week. The lawsuits against Binance and Coinbase resulted in several challenges for the platforms’ users. 

Read more

The Week Ahead - FOMC, ECB and Bank of Japan, US CPI, China retail sales and Tesco results

The Week Ahead - FOMC, ECB and Bank of Japan, US CPI, China retail sales and Tesco results

A busy week is ahead, including meetings from the Federal Reserve, the European Central Bank, and the Bank of Japan. Data to be released includes US CPI and China retail sales. Tesco will also release results.

Read more

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Strategy

Money Management

Psychology