This is the first article in the series of concepts of discretionary-trading
It might look like spoon feeding at the start as I want to explain everything I use as detailed as possible so that it gives a clear idea about how I see the market and how I identify low risk and decent reward opportunities. And let me say that again, every single point that I am going to write in this series is important and don’t underestimate the .power of simplicity.
So what are these supply/demand levels? Are they same as support and resistance levels?
Yes.. They are almost the same. But I would like to call it with a different name so that I can differentiate how I pick levels from the chart to deal with markets, which is a bit different to what a lot of other traders do. I never take levels from the future like Fibonacci retracements and extensions, pivot calculations of S/R etc. as I strongly believe that the future in the market cannot be predicted. I am not saying that they don’t work. They might work for you.
But absence of a rational reasoning about anything in trading doesn’t suit my personality and my way of trading with tight stops. Enough of this BS. So what are they?
The price point that had initiated the move, which has broken the last pivot point is what I call a supply/demand imbalance level.
The pivot point can be a swing high, or swing low, or the high/low in a single candle retracements (which I call as trap levels). I repeat, I don’t consider each and every swing high/low as a supply/demand imbalance level.
That’s it. Now lets look at some charts to spot those levels.
1.Swing highs and Swing lows as the levels:-
I explained long back how I identify swing highs and lows. If you miss that, feel free to read that first before moving forward in this article.
Now that you know how to identify the swing highs and lows on the chart, it’s time to filter which of them can create a huge imbalance in the next test so that we can use them either to take an entry, or to scale out the already existing position.
The image is self explanatory and feel free to comment if you have any doubt regarding that. There are other levels(trap levels) in this chart that are not swing highs and lows, which can cause some imbalance in the future, I didn’t mark them intentionally as the primary purpose in this chart is to identify only swing highs and lows that has the potential to create a good imbalance in the future on first interaction.
2. Trap levels as imbalance levels:-
I call single candle pullbacks as trap levels. A trap level on 5min. chart might appear like a swing high or a swing low in 1min. chart. And a trap level on 1min might not appear at all on 5min chart. Lets look at the following chart to make that clear.
Let me explain exactly how I use them for entries
In a trending market,
1. Levels from the higher timeframe – I use them for TTF trend reversal trades(constructing the S/R structure) on the first interaction. ie. BOF, TST when the trend is weak. Also for BPB trades when market is entering into the new framework of support and resistance.
2. Levels from the lower timeframe – I use them while I am looking for pullback and complex pullback trades in TTF trend on the first interaction. Not for CT trades. Never!!
3. Levels from the trading timeframe – For trend definition in TTF. Series of demand levels is uptrend. Series of supply levels is downtrend.
3. Range Boundaires:-
Apart from these, you already know how I define the range boundaries and when I’ll call it a range basically. So I am not going into that again in this article. If you miss that, you can read it here..
These are the three types (and only ) of supply/demand levels I use in my trading.
If the level is below the current market price, it is a demand level. If it is above, it is a supply level.
Understanding the concept of these levels forms the basis of my trading philosophy. You can see there is nothing complex in finding these levels. No complicated calculations like Fibonacci, pivot points of S/R and all. Everything is straight forward and from the market data. And it is well known that market respects it’s own levels.
It might look like spoon feeding at the start as I want to explain everything I use as detailed as possible so that it gives a clear idea about how I see the market and how I identify low risk and decent reward opportunities. And let me say that again, every single point that I am going to write in this series is important and don’t underestimate the .power of simplicity.
So what are these supply/demand levels? Are they same as support and resistance levels?
Yes.. They are almost the same. But I would like to call it with a different name so that I can differentiate how I pick levels from the chart to deal with markets, which is a bit different to what a lot of other traders do. I never take levels from the future like Fibonacci retracements and extensions, pivot calculations of S/R etc. as I strongly believe that the future in the market cannot be predicted. I am not saying that they don’t work. They might work for you.
But absence of a rational reasoning about anything in trading doesn’t suit my personality and my way of trading with tight stops. Enough of this BS. So what are they?
The price point that had initiated the move, which has broken the last pivot point is what I call a supply/demand imbalance level.
The pivot point can be a swing high, or swing low, or the high/low in a single candle retracements (which I call as trap levels). I repeat, I don’t consider each and every swing high/low as a supply/demand imbalance level.
That’s it. Now lets look at some charts to spot those levels.
1.Swing highs and Swing lows as the levels:-
I explained long back how I identify swing highs and lows. If you miss that, feel free to read that first before moving forward in this article.
Now that you know how to identify the swing highs and lows on the chart, it’s time to filter which of them can create a huge imbalance in the next test so that we can use them either to take an entry, or to scale out the already existing position.
The image is self explanatory and feel free to comment if you have any doubt regarding that. There are other levels(trap levels) in this chart that are not swing highs and lows, which can cause some imbalance in the future, I didn’t mark them intentionally as the primary purpose in this chart is to identify only swing highs and lows that has the potential to create a good imbalance in the future on first interaction.
2. Trap levels as imbalance levels:-
I call single candle pullbacks as trap levels. A trap level on 5min. chart might appear like a swing high or a swing low in 1min. chart. And a trap level on 1min might not appear at all on 5min chart. Lets look at the following chart to make that clear.
Let me explain exactly how I use them for entries
In a trending market,
1. Levels from the higher timeframe – I use them for TTF trend reversal trades(constructing the S/R structure) on the first interaction. ie. BOF, TST when the trend is weak. Also for BPB trades when market is entering into the new framework of support and resistance.
2. Levels from the lower timeframe – I use them while I am looking for pullback and complex pullback trades in TTF trend on the first interaction. Not for CT trades. Never!!
3. Levels from the trading timeframe – For trend definition in TTF. Series of demand levels is uptrend. Series of supply levels is downtrend.
3. Range Boundaires:-
Apart from these, you already know how I define the range boundaries and when I’ll call it a range basically. So I am not going into that again in this article. If you miss that, you can read it here..
These are the three types (and only ) of supply/demand levels I use in my trading.
If the level is below the current market price, it is a demand level. If it is above, it is a supply level.
Understanding the concept of these levels forms the basis of my trading philosophy. You can see there is nothing complex in finding these levels. No complicated calculations like Fibonacci, pivot points of S/R and all. Everything is straight forward and from the market data. And it is well known that market respects it’s own levels.
