Often, I get emails that I regard as good questions. It’s not that there is such a thing as a bad question but some are related to a more significant point than others. I thought I would share some questions I have recently received and answer them here for your benefit. Keep in mind that any charts below are the charts that were attached to the email from a reader, not charts I or Online Trading Academy have created.
Daniel: Hello Sam, I’m from Buenos Aires, Argentina, South America. I been watching the videos in FXstreet’s archives and decided to start applying the concepts that you teach in every video. I’m a programmer, so I have a regular 9 to 6 job, so I don’t have the time to trade in a short time like you do, so I decided to write you and maybe you can help me to start. I have a few problems trying to find some spots because when I look for the rally base drop or a drop base rally, the base have one or two candles so don’t know if is a valid spot. Like you can see in the image (EURUSD H4) the demand zone have one candle and a stick, is that valid, what do you think about that?
Seiden: Thanks for the email. I hope the videos are helping you get started on the right path. You can actually find many more on the Online Trading Academy website under the free resource section. The two levels you put on your chart here are not “fresh” supply and demand levels. They are pivots into “fresh” levels. There is a big difference between a fresh level and one that is not. That’s not to say that price will not turn at the levels you have here but the odds are much greater when the level is “fresh” meaning none of the supply or demand (orders) that makes up the level has been filled yet. There are two levels in between your levels that are fresh. In the Extended Learning Track (XLT), we would use those as the odds are much higher and the risk is much lower. “Fresh” levels are a key Odds Enhancer at Online Trading Academy. Hope this helps. Let me know how your trading progresses.
Seth: Sam, I was wondering what your thought process is behind the levels upon levels? I have heard you explain the “behind the scenes” scenario and I understand it. My question to you is what price behavior indicates to you which level to actually take? Right now, I find myself setting multiple limits and walking away from my computer. Though I catch the move eventually, I am not sure why the lower level will work sometimes and won’t work other times, and the same with the second and third levels. Thanks Sam for everything, I know you are very busy!
Seiden: Thanks for the email Seth, I am never too busy to answer questions that have to do with your financial well being and the markets. To recap the “behind the scenes” scenario you are referring to, the supply and demand levels we identify as the turning points specifically represent institutional demand and supply. In other words, the picture of a bank’s or institution’s buy and sell orders on the chart. When you have levels on top of levels, that is a picture of large buy or sell orders stacked on top of each other. What determines which level price will turn at are the odds enhancers, so let me go over a couple here to help you get on the right track with your thinking process. Make sure that the proximal level is “fresh” like I mentioned to Daniel above. If it’s not, I would not enter until price reached the distal level. Also, when price leaves the proximal level in strong fashion which suggests a big supply / demand imbalance at the proximal level, price will typically turn there. If the move away from that level is weak and gradual, you’re better off entering at the distal level with your stop just beyond the level. Hope this helps, let me know if you have any other questions.
Arthur: I have read your article with the above mentioned title. I have understood it well, however, my problem is, HOW DO YOU DETERMINE the demand and supply levels before the market opens? I trade the FOREX only.
Seiden: At Online Trading Academy, we have a very rule based process of identifying supply and demand levels. Keep in mind that when I say supply and demand, I am not talking about the conventional terms support and resistance. For markets that have an open and a close, obviously our supply and demand analysis is done prior to the market open, then we simply execute our strategy when it is open. For markets like Futures and Forex that either don’t have a close and open each day or a very short one, an ideal time to set up levels (trading opportunities) is the end of the US session, well before the Asia session when things really quiet down. There are two keys to making this work. First, you need to be able to identify “fresh” supply and demand levels. Second, once you select them, you need to simply execute the rule based strategy of buying and selling with preset orders ideally. In other words, there should be little or no thinking once your levels are selected and your orders are in the market. Hope this helps. Let me know how you do.
Obviously I can only cover so much information in the articles and webinars. Identifying key fresh institutional demand and supply levels depends on knowing all the key Odds Enhancers which we cover in detail in the Extended Learning Track (XLT). I hope the questions and answers in this piece help you in your journey to self employment and empowerment through trading the financial markets.
Have a great day.