No matter how much knowledge you gain from supply demand zone trading, there is always so much more to learn in this area of the forex market. The knowledgebase can be made vast by knowing more about supply and demand zones, way to trade them and about variables such as resistance areas, trends, support and turning points. Knowing your supply and demand zones can really pay you off in the long run for forex trading.
Experts say that strong uptrend exists only if buyers outnumber sellers. During a trend, the price often moves up. This continues until there are enough numbers of sellers entering the market to absorb the buyers ‘orders. This is the origin of the demand zone.
On the other hand, when sellers outnumber the buyers, the price falls. This happens until a new balance is created in which buyers become interested again in the seller’s prepositions. This is the origin of the supply zone. You can identify both of these zones by taking the supply and demand trading course.
Here are a few facts you need to know about supply and demand zones:
- Supply and demand is driving all the price discoveries including local flea markets to the international capital ones
- When lots of people buy a certain item that is present in a limited number, price tends to go up
- The price goes up until the buying interest matches the items in stock or available
- If no one wants to buy a certain item, the seller often lowers the price
- This happens to make the buyer get interested in the item to enhance its sale
- If the seller doesn’t take these measures, there won’t be any type of transaction happening in the market
Here are our few picks that will help you explore your trade and supply zone in a better way:
The supply zone is related to the showcasing of narrow price behavior. Various candle wicks and strong back and forth may cancel a supply zone as far as future trades are concerned. When you have a narrower supply or demand zone, especially before a strong breakout, you have better chances of getting a good result in your next purchase. This moderate volatility might be sometimes risky but is worth playing for. Its importance has been discussed in various courses describing supply and demand trading strategy.
Make a timely exit
For a trader, it is never a good sight watching price spending too much in a supply zone. It is a fact that position accumulation does take some time but long ranges hardly ever show any type of institutional buying. We know how good supply zones are narrow and can’t hold their importance too long. Hence, a shorter accumulation zone works to find re-entries during various setbacks that are aimed at picking up an open interest in the market.
Spring is a term used to describe a price movement that is occurring in the opposite direction to the following breakout. The spring may look like a false breakout that happens after a fact. What actually happens is that it traps traders in the wrong direction. These are also termed as bull and bear traps by many forex experts. Informed traders often use the spring to load up to buy orders. Then, they drive the price higher to gain momentum in the market.
Mind the newness
When you are trading the supply areas, you should always ensure that the zone is fresh. This means that after the launch of the zone, the price has not reverted back to it yet. Every time the price of an item comes to supply zones, more and more orders that were previously unfilled are filled. This weakens the level, making it a risk supply zone for traders. This also related to the fact that when we do support and resistance trading, levels get weaker with every following bounce.
We hope that this piece of writing has given you some information on how to recognize and explore your supply and demand zone trading. Good luck trading.