Sam Seiden Course: Supply and Demand
The existence of sellers and buyers in a particular commodity is defined by supply and demand, which is a fundamental economic concept. The supply and demand concept is a key element in price change in trading. Because of its simplicity and intuitive nature, supply and demand trading has grown in popularity.
Sam Seiden is one of the most well-known teachers of this trading strategy. Sam began his career at the Chicago Mercantile Exchange, the world's largest financial exchange. This aided him in mastering the art of real market timing with a high degree of precision. He also developed the ability to forecast market turns and movements ahead of time.
From this experience, he developed the first supply and demand market timing technique over 20 years ago. Sam has extensive experience in all capital markets, with over 20 years of trading experience. He's also a member of the Online Trading Academy, where he teaches this trading technique.
What is the relationship between supply and demand?
The basic premise is that when there are more buyers than sellers, the asset price rises. When there are more sellers than buyers, however, the price will fall. When buyers and sellers are in balance, the price will be in a range.
These concepts are both very basic and extremely strong. Traders will use them to evaluate charts and predict where the price will go next. Since trading is all about price movement, the supply and demand equation can also be applied to forex currency pairs.
Zones of supply and demand are easy to spot. Essentially, the S/D region denotes a price extreme (low or high) where the trend has shifted dramatically. As a result, even inexperienced traders would find it easy to understand.
A demand level is visually established when the price drops to a certain level, then consolidates and then rallies, indicating the price zone where demand exists. This is purely a service field.
When price rallies, forms a base, consolidates, and then begins to drop, a supply zone is established. A resistance zone is created in this manner.
As a result, defining a clear entry price, as well as stop-loss and take-profit levels, is easy. This is yet another compelling argument for novices to employ this technique. The zone cannot be interpreted in any way that is unclear.
On the EURUSD map in Figure 1, we used the MT4 Supply Demand predictor. The supply zones, also known as resistance areas, are shown by the red rectangles. The market or service areas are shown by the green rectangles.
As you can see, the indicator automatically plots these amounts. Price retested the demand zone in the middle of the chart and then rebounded strongly. This is simply a case of consumers outnumbering sellers, resulting in higher prices.
The upper Supply zones of the map (marked in red) experienced a similar situation. Price built these resistance zones and then returned to the lower zone, allowing a strong bounce down from there.
Zones of Supply and Demand Strength
Supply and demand have their own fundamentals of strength and weakness. When using this trading technique, traders would have more clarity as a result of this. When the price of an instrument measures the region for the first time after the level has been established, it is the strongest supply or demand zone.
This can be seen in Figure 1 with a day trading strategy applied, where the price first checked the green demand region. If you look closely, you can see that the price only just hit the amount before continuing to rally in the desired direction.
This trend suggests that there is a lot of demand (and supply if it occurs at the resistance area like on the top of the Figure 1 chart).
When the price retests the demand or supply area for the second time, it enters the moderate region. It weakens the power of the S/D zones slightly, so traders should proceed with caution. All of the zones on the Figure 2 map have been checked, with the exception of a small Supply zone in the centre, and are thus considered average power.
Just use moderate (weak) zones if you know what you're doing and have experience with them. People who argue that S/D does not work normally use all of the zones and use their own hands to reduce their chances. However, for a better chance, only new supply and demand zones should be chosen.
Isn't it true that economies are still in a state of equilibrium?
Traders often ask this question before learning more about this technique, and they finally realize that the Supply and Demand theory will assist them in finding a response. An equilibrium is a condition in which an asset has been trading in a price range for a period of time. The duration of this cycle is determined by a number of factors, the most important of which is the lack of ‘driving' factors that would cause the instrument to travel up or down.
But the main point of the equilibrium is that the asset will eventually break out of its price range, and the longer it has been, the larger the breakout movement will be. It is no secret that supply and demand zones do not last indefinitely, and when the price deviates from equilibrium, either the supply or demand zone is broken.
The breakout's potential power is determined by the intensity of the zone and the timeframe in which it was placed. So it's well worth it to keep an eye out not just for reversals from S&D zones, but also for possible breaks across the zones.
Several timeframes Zones of Supply and Demand
Another power criterion for supply and demand is multitimeframe. It instills a high degree of trust in the field where trades can be performed.
When multiple Supply or Demand zones on different timeframes (for example, H4 and Daily Supply zones on Figure 3 chart) are close to each other, it is an additional signal that price may have a greater chance of bouncing from that region.
It's difficult to keep track of multiple timeframes on multiple instruments, which is why a Supply and Demand Multi Timeframe Indicator is used to automatically draw zones on the target timeframes and give warnings when the price crosses multiple zones at the same time.
Setup of supply and demand indicators
The supply and demand indicator has several settings that enable it to be customized in a variety of ways.
The Supply and Demand Multi Timeframe indicator's inputs can be divided into several categories:
Types of zones. Zones with only wicks or zones with price action patterns like engulfing candles are two of the five zone categories that can be used to view zones.
Zones that have not been checked are shown. To get a good setup, we should look for strong zones that have never been visited before, as previously discussed.
Multiple timeframes are used. To get a better view of the instrument, you can choose up to three timeframes for the supply and demand zones to be shown.
Notifications. You may set up different types of alerts, such as when a price enters a zone, when a new zone is created, when a zone is split by price, and so on.
Notifications that are PUSH. There's no need to wait for configurations to appear in front of the camera. When a signal is produced, the indicator will send a PUSH notification to your MetaTrader 4 mobile app on iOS or Android.
Change the color scheme. Each zone's color may be changed to match the desired color scheme, with no restrictions.
Since it's difficult to keep track of several timeframes on multiple instruments, an indicator is used to automatically draw zones on the target timeframes and give warnings when the price crosses multiple zones at the same time.
Entries, Exits, and Stop-Loss Setup
Here are some examples of configurations that could be used with the Supply and Demand predictor to make it easier to use.
To join a buy setup, the price must hit the nearest and most recent demand region on the current timeframe as well as at least one other timeframe (the indicator allows to have up to 4 zones). In reality, this is already a powerful bullish signal.
Stop Loss: On the current timeframe, the stop loss should be a few pips below the zone.
On the current timeframe, the take advantage for the position should be the nearest supply region (red rectangle).
The stop loss should be pushed to breakeven plus a few pips as soon as the price moves out of the demand zone.
Entries, exits, and stop-loss orders are all part of the sell setup.
To reach a sale setup, we must see that the price is in the nearest fresh supply region on both the current and higher timeframes.
Stop Loss: On the current timeframe, the stop loss should be only a few pips above the rectangle.
Take Benefit: For an open position, the take profit should be at the demand zone closest to it.
The trader can trail the stop loss to breakeven plus a few pips as soon as the price moves away from the demand zone.