A critical skill for any trader or investor is to be able to determine the chances of whether a supply or demand zone is likely to hold or break. If we buy or sell at the wrong time, we give up the opportunity to make greater profits, or worse, we lose money. We cannot control the direction of the markets or individual securities. When we trade or invest, we must look to see the highest probability direction and turning points in order to increase our chances for trading success.
In the Professional Trader Course as well as the Extended Learning Track, we stress the importance of the Odds Enhancers as a way to filter out weak opportunities and find the best trades that we should take. 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.
What happens if we leave the area slowly? We would likely see smaller candles and/or a mix of 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.
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
If you do not see that occurring, you would have a lower probability of success in selling at those levels.
This is a partial explanation of one of the Odds Enhancers that Online Trading Academy teaches its students so that they can use it to increase their chances for trading success in trading any market and any time frame. To learn more and the other Odds Enhancers, join us at one of our worldwide education centers and increase your knowledge.