Supply & Demand is a popular trading strategy used to identify areas of large buy and sell orders. In this thread I will show you how to identify these levels of interest 🧵
$SPY
Before showing you how to identify these zones, first you must understand the difference between Supply and Demand
Supply: Large unfilled sell orders waiting to be filled (Resistance)
Demand: Large unfilled buy orders waiting to be filled (Support)
Areas of Supply & Demand act as magnets in the market. Our job as traders is to identify these areas of imbalances and evaluate how price trades at these imbalanced areas.
There are two main ways I use to identify areas of Supply & Demand
In order to identify these zones of Supply & Demand, you must first identify a "Basing Candle"
A Basing Candle is a small bodied candle that forms before a large aggressive move in one direction. The Basing Candle MUST BE the opposite color of the aggressive candle. Example… twitter.com/i/web/status/1…
The idea behind the Basing Candle is this is where orders have been left unfilled. Since the Basing. Candle in this example was RED before we saw a large aggressive move UP, this would become DEMAND.
If the Basing Candle was GREEN before a large aggressive move DOWN, it would… twitter.com/i/web/status/1…
When drawing a Demand zone, I take the wick low to the body open. Some traders to wick to wick, but I prefer my way. If the following Green aggressive candle wicks lower than the Red basing candle, I will use that lower wick instead. Example below
When drawing Supply Zones, we are now looking for a GREEN Basing Candle before a large aggressive move DOWN. With supply I take the wick HIGH to the candle OPEN. Just like the last example, if the following red wick is higher than the basing candle's, I will use that/ Example… twitter.com/i/web/status/1…
Sometimes these Supply and Demand zones can be large. There is two ways to go about this. With larger zones, I primarily watch the BEGINNING of the zone as that spot tends to see the most price action. The second way is to break down the timeframes to see if there are smaller… twitter.com/i/web/status/1…
That is going to wrap up Part 1 of this Supply & Demand thread. If you would like Part 2, make sure to retweet and like the thread♥️
$SPY
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