Thread by @Montana_Trades

The following thread will be about Supply & Demand, what it is, how to use it, and how it helps you think like "Big Money"⬇️

So lets begin with what Supply & Demand is: Supply & Demand is a fairly simple concept. Supply & Demand zones are high probability areas where the market may turn. Here is an example below.

We can also think of these zones as an "Imbalance" between buyers and sellers. This Imbalance is referring to the disagreement between buyers and sellers where Demand or Supply exceed one another. This creates the zones we are looking for on a chart.

It is important to note we must think of Demand as buyers, and Supply as sellers. We are looking for areas on a chart where impulsive moves have happened in either direction, or areas of consolidation taking place.

Let's first talk about Demand. When we see impulsive moves to the upside, as pictured below, we can spot areas where big orders may remain unfilled. Lets use this $QQQ chart as an example.

We can see an impulsive move to the upside that occured. This is the Imbalance we are talking about. This Imbalance will leave unfilled orders in this area, which creates our Demand Zones. We are looking for these Imbalances turned Demand, when looking to go long.

So how do we draw these Demand Zones? This method may vary from person to person, but I like to start from the candle where the move began, and draw a zone from the bottom of the wick, to the start of the body.

We must be a little lenient with our zones, but also note that we do not want to draw a zone that is too big. This will not give us an accurate area for an entry. As we can see from this $QQQ chart, we bounce perfectly out of this Demand Zone.

So how would we approach taking a position within this zone? Well there are a few ways you can go about. Some people will bid the top of the zone, some will bid the middle, some will bid multiple orders within the zone, and some will wait for confirmation of the zone.

What do I mean by confirmation of the Zone? When we first draw our Demand Zone, we do not have confirmation of that zone until the price retraces back into what we have drawn.

If we see a wick out of our zone, or a pivot within the zone, that is the confirmation we are looking for. The below chart is an example of wicking out of our zone.

So we can either bid within the zone before confirmation, or we can wait for that confirmation we are looking for. Either way, it is CRUCIAL we know that if that zone fails to hold, we most likely will need to exit our position underneath.

Another tool to use when bidding a Demand Zone is looking at Level 2, and seeing an uptick in volume as we approach or enter that zone. Those will signal to us that buyers are stepping in.

Okay now that we have Demand out of the way, lets briefly talk about Supply. We must think of Supply Zones as areas of resistance on a chart, or sellers. The chart below shows a Supply Zone.

We can see on that $DKNG chart, the areas of rejection that occurred multiple times within that Supply Zone. This is very beneficial to us when we want to play the backside, or trying to undercut resitance and get a sell order executed.

The same strategy applies to entries when using Supply as it does for Demand. We can either bid within the zone, or wait for confirmation. Now lets talk about what happens when a zone is broken in either direction.

When Demand or Supply is broken, and price retraces through a zone, chances are that zone has now turned into the inverse. To confirm this we must see if price approaches that zone again and gets rejected or breaks through. Below is an example of what I am referring to.

This is a very very important strategy to study in my opinion as you could solely trade using Supply and Demand on a naked chart. This is a strategy I use every single day, and is by far my favorite to use.

To Recap:
-Supply = Sellers
-Demand = Buyers
-Look for Imbalances in either direction
-Supply can turn into Demand and vice versa
-Check Level 2, Volume to aid thesis
-Map out our zones before day begins

As always I hope this thread helps someone. I do not care about likes, but retweeting this or sharing it with someone may really help. Thank you