In this is post I will make an attempt to explain DEMAND - SUPPLY ZONE. Before we proceed some basic idea about DEMAND-SUPPLY.
1. DEMAND > SUPPLY: Price will RISE 2. SUPPLY > DEMAND: Price will FALL 3. SUPPLY = DEMAND: Price will CONSOLIDATE
When the price RISES/FALLS there is an IMBALANCE which is created and if in this IMBALANCE DEMAND > SUPPLY then you will see PRICE WILL RISE. On the contrary if in this IMBALANCE SUPPLY > DEMAND then you will see PRICE WILL FALL.
There will a point of time when the MARKET WILL REACH AN EQUILIBRIUM POINT that is the point where DEMAND = SUPPLY and the PRICE starts CONSOLIDATING or the PRICE will start moving in a RANGE
Cont..
Thus always remember after every IMBALANCE move there will a BALANCE move and also after BALANCE move there will an IMBALANCE move
Now talking about DEMAND - SUPPLY ZONES these zones are broadly divided in TWO ZONES: 1. REVERSAL ZONES 2. CONTINUATION ZONES
Reversal Zones are formed with RALLY-BASE-DROP & DROP-BASE-RALLY
Continuation Zones are formed with DROP-BASE-DROP & RALLY-BASE-RALLY
1. RALLY - BASE - DROP (REVERSAL PATTERN)
This forms a POTENTIAL SUPPLY ZONE
2. DROP - BASE - RALLY (REVERSAL PATTERN)
This forms a POTENTIAL DEMAND ZONE
3. DROP - BASE - DROP (CONTINUATION PATTERN)
This forms a POTENTIAL SUPPLY ZONE
4. RALLY - BASE - RALLY (CONTINUATION PATTERN)
This forms a POTENTIAL DEMAND ZONE
Next once you are up with the basics of DEMAND-SUPPLY ZONE lets make an attempt to check one of its variant which is referred as an ORDER BLOCKS
ORDER BLOCKS are much more POWERFUL and improves the success ratio because these are SINGLE CANDLES which rule the whole setup.
There are two types of ORDER BLOCKS: 1. BEARISH ORDER BLOCK 2. BULLISH ORDER BLOCK
See the images for better understanding
For those who are facing problem in marking the DEMAND-SUPPLY ZONE.
SUPPLY ZONE: Use the following two things to mark the UPPER LIMIT - LOWER LIMIT ( they are called PROXIMAL AND DISTAL LINES) 1. HIGH OF THE CANDLE 2. LOWEST BODY OF THE CANDLE
DEMAND ZONE: Use the following two things to mark the UPPER LIMIT - LOWER LIMIT ( they are called PROXIMAL AND DISTAL LINES) 1. LOW OF THE CANDLE 2. HIGHEST BODY OF THE CANDLE
Now up to this level everything must be known to many but the problem which most of us face is in understanding the power of the zone or how much valid the zone is for taking any trade.
Cont..
In order to determine the strength of any DEMAND-SUPPLY ZONE always check "ARRIVAL TO & DEPARTURE FORM THE ZONE"
If you are able to see the following characteristics in any ZONE then you can mark it as a STRONG ZONE.
Cont..
1. Look for the OVER ALL STRUCTURE (DEMAND -V & SUPPLY /\) 2. Departure should be always SOLID AND FAST (because if the departure is SLOW & SLUGGISH then its very much possible that the zone will not HOLD) 3. Candles which are forming should have NEGLIGIBLE -NIL WICKS
Cont...
VALID SUPPLY ZONE. You can use this idea and mark out VALID DEMAND ZONE
Now few things before I conclude the whole post 1. If you are confused about TIME FRAME then look for HIGHER TIME FRAMES (WEEKLY - DAILY - HOURLY) 2. If a DEMAND ZONE - SUPPLY ZONE is formed then try to take the trade when it coming back into that zone for the first time
Cont..
3. If the DEMAND - SUPPLY ZONE is tested multiple times then it will become weak and may not work 4. Use this DEMAND-SUPPLY ZONE in confluence with KEY LEVELS it will be helpful in giving more accurate trades 5. Always take your trades in BASE with SL (above/below) the BASE
If you have found this POST "WORTHY" then please RE-TWEET
HAPPY LEARNING - HAPPY TRADING
With Regards,
Siddharth
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LEARNING POST
[Refining your ENTRIES based on MARKET STRUCTURE]
In this post I will make an attempt to share a simple but effective way of getting into TRADE with LOW RISK
If you find it interesting feel free to "RT"
So let's get started
Most of the time when we want to trade LONG we generally look for a classical pattern of UPTREND i.e. HIGHER HIGH - HIGHER LOW which is the first confirmation to trade LONGS
(See the image for better understanding)
Secondly what we look for is we wait for the price to retrace to the zone where it prior faced RESISTANCE and now it will be acting as SUPPORT and from thereon we will initiate LONG based on the concept of ROLE REVERSAL / CHANGE OF POLARITY
Let's discuss about PRICE ACTION PATTERN which gets repeated again and again but that FEAR OF MISSING OUT (FOMO) over rides and people do wrong trade
In this post I will try to explain about human mindset when PRICE starts moving higher/lower
If you find this interesting
"RT"
See in this image you are able to see that price is moving higher from a zone which is marked with horizontal boundaries and from there price moves up without looking back
Let say in this manner that if this much PRICE ACTION is present in front of you where you will take a trade
Accordingly there will be two categories of traders 1. Those who will try to take trade at CMP 2. Those who are waiting for PRICE to retrace back to POINT-A and then take a trade
You know why people will be ready to take trade at CMP because of one simple reason "CONFIDENCE"
SOME KEY POINTERS ON OPTION CHAIN: 1. The first and foremost rule is we need to check OPTION CHAIN on DAILY basis. The prime problem with most of us is we wake up one fine morning and start analyzing by using the "STANDARD RULE" and apply the following logic
PRICE ↓ OI ↓ - Long Liquidation
Price ↑ OI ↑ - Long Buildup
Price ↑ OI ↓ - Short Covering
Price ↓ OI ↑ - Short Buildup
In short most of us consider these logic as "RULE OF THUMB" but actually they are not because these STANDARD RULES work when NEW POSITIONS ARE DEVELOPED
So the bottom line of POINT-1
- Make an habit of daily tracking OPTION CHAIN
-Apply STANDARD RULES when NEW POSITIONS ARE DEVELOPED and NOT when OLD/PRIOR POSITIONS are changed or played with
1. COMPARISION OF NIFTY PCR(CURRENT EXPIRY) W/ IV
a. According to the data plotted above it being observed that PCR is constantly under falling zone it was getting stuck towards the zone of 1.3 - 1.0 and it fell below 1 today ~0.8 which means OI of CALLS>OI of PUTS
b. Seeing the IV data of NIFTY its being observed that when PCR is constantly falling, IV is setting the higher tones which very conclusive to say that "SHORT COVERING" on PUTS is bringing more pain to INDEX and if this SHORT COVERING continues INDEX will fall further down