The ONLY Supply & Demand Guide You'll EVER NEED

Summary

This video script delves into the fundamental concept of supply and demand in market movements, emphasizing the importance of understanding buying and selling pressure. It illustrates how market charts move based on the balance of buyers and sellers, highlighting sharp price movements as indicators of control by either party. The script introduces a hedge fund manager's perspective on identifying profitable trading opportunities by recognizing 'bad' traders' patterns. It concludes with practical advice on using supply and demand zones for profitable trades, suggesting that traders should buy from and sell to inconsistently profitable traders to be successful.

Takeaways

• 📈 The market moves based on the balance of buying and selling pressure.
• 🧠 Understanding the basics of supply and demand is crucial for market analysis.
• 🔴 A sharp downward price movement indicates sellers are in control.
• 🟢 A sharp upward price movement indicates buyers are in control.
• 🔄 The process of supply and demand is cyclical and continuous.
• 🤔 Traders should consider who is on the other side of their trade.
• 💡 It's beneficial to buy from less skilled traders and sell to them.
• 📊 Sharp price movements are key indicators of supply and demand areas.
• 🛒 The Costco analogy: Buy low (demand) and sell high (supply) to make profits.
• 🚫 Avoid buying when supply exceeds demand, as this is a sign of poor trading decisions.
• ❓ Ask where the majority of buyers and sellers are concentrated and identify where poor traders are active.
• 💼 Use supply and demand zones to time entries and exits in trades effectively.

Q & A

What is the fundamental concept behind market movement?

The fundamental concept behind market movement is the balance between buying and selling pressure. The market moves up when there is more buying pressure than selling pressure, and it moves down when there is more selling pressure than buying pressure.

Why is it important to understand the basics of supply and demand in trading?

Understanding the basics of supply and demand is crucial because it allows traders to comprehend the core reasons behind market movements, rather than just following strategies without knowing why they work.

What does the color red represent in the context of the script's market analysis?

In the script, the color red represents the sellers winning, indicating a period where selling pressure is greater than buying pressure, leading to a drop in price.

How does the presence of a large number of sellers affect the market price?

When there is a large number of sellers, as mentioned in the script, the price will drop fast and sharp because sellers are in complete control.

What does the interview with the hedge fund manager reveal about trading strategies?

The hedge fund manager emphasizes the importance of understanding who is on the other side of the trade. It suggests that traders should aim to buy from sellers who are inconsistently profitable and sell to buyers who are likely to be wrong.

What is the significance of a sharp move in the market according to the script?

A sharp move in the market signifies that there is a large group of either sellers or buyers in complete control. This indicates a significant supply or demand area.

How does the script suggest identifying areas of supply and demand?

The script suggests identifying areas of supply and demand by looking for sharp moves in the market. A sharp downward move indicates an area of supply, while a sharp upward move indicates an area of demand.

What is the role of the copytrading feature mentioned in the script?

The copytrading feature allows traders to automatically mirror the trades of top-performing traders, as tested by the script's narrator who used it with a $50,000 trading account and experienced positive results.

Why is it advantageous to buy from a bad trader according to the script?

Buying from a bad trader is advantageous because it implies that the trader is likely selling at a point where there is more buying pressure than selling pressure, potentially leading to a profitable trade.

What is the significance of a 'fair value gap' in the context of supply and demand zones?

A 'fair value gap' connected to a supply or demand zone indicates a significant imbalance between buyers and sellers, providing further insight into the strength of the supply or demand in that area.

How should a trader use the information about supply and demand zones to structure their trades?

A trader should use the information about supply and demand zones to enter trades when the price reaches their identified demand zone, set a stop loss below the demand zone, and a take profit at the supply zone.

Outlines

00:00

📈 Understanding Market Movements with Supply and Demand

This paragraph introduces the fundamental concept of supply and demand in market movements, emphasizing the importance of understanding why the market behaves as it does. It explains that market charts move up when there is more buying pressure than selling pressure, and vice versa. The narrator encourages viewers to think about the basics, rather than blindly following trading tips without understanding the underlying principles. A visual aid is used to illustrate the concept, showing the balance between buyers and sellers and how it affects price movements. The paragraph also includes a personal anecdote about the narrator's experience with a copy trading feature, which they tested with a $50,000 investment and found to be profitable.

05:04

🔍 Identifying Profitable Trading Opportunities

The second paragraph delves into the strategy of identifying supply and demand zones to find profitable trading opportunities. It discusses the concept of always having a seller on the other side of a trade and the importance of understanding who that seller is. The paragraph explains how to identify areas of significant buying or selling pressure by looking for sharp price movements. It also touches on the idea of 'bad traders' and how to avoid trading in the same way they do. The narrator provides a step-by-step guide on how to analyze a chart to find these areas and use them to make profitable trades. Additional tips are offered to strengthen the identification of supply and demand zones, and the paragraph concludes with a recap of the perfect supply and demand trade scenario.

Keywords

💡Supply and Demand

Supply and Demand is a fundamental economic concept that describes the relationship between the quantity of a good or service that producers wish to sell (supply) and the quantity that consumers are willing to buy (demand). In the context of the video, it refers to the forces that drive the price movements in financial markets. The video emphasizes that understanding these forces is crucial for predicting market trends and making profitable trades. For instance, the video states that 'the only way a chart will move up, is if there is more buying pressure than selling pressure', illustrating the basic principle of supply and demand in action.

💡Buying Pressure

Buying Pressure refers to the intensity or force exerted by buyers in the market, which can drive the price of an asset up. The video uses this term to explain how increased buying activity can lead to an upward movement in a price chart. It is mentioned in the context of explaining why the market moves, emphasizing that 'the only way a chart will move up, is if there is more buying pressure than selling pressure'.

💡Selling Pressure

Selling Pressure is the force exerted by sellers in the market, which can lead to a decrease in the price of an asset. The video discusses selling pressure as the counterpart to buying pressure, stating that 'the only way a chart will move down is if there is more selling pressure than buying pressure'. It is a key factor in identifying market trends and potential reversal points.

💡Market Moves

Market Moves refer to the fluctuations or changes in the price of financial instruments such as stocks, currencies, or commodities. The video script delves into why markets move, suggesting that understanding the dynamics of supply and demand is essential for grasping these movements. It is used to explain the basic mechanism behind price changes in trading charts.

💡Chart

A Chart in the context of the video refers to a graphical representation of historical price data and volume changes over time for a security or a commodity. Traders use charts to analyze market behavior and make predictions about future price movements. The video mentions charts to illustrate how buying and selling pressure can cause the price to move up or down.

💡Bullish

Bullish is a term used to describe a market condition where prices are expected to move higher or when a trader has a positive outlook on a security. The video uses the term 'bullish' to describe a scenario where there are more buyers than sellers, leading to an upward price movement, as seen in the phrase 'this can cause little pullbacks on the chart'.

💡Bearish

Bearish is the opposite of bullish and indicates a market condition where prices are expected to move lower. In the video, 'bearish' is used to describe a scenario where there are more sellers than buyers, causing the price to move downwards, as indicated by the statement 'the chart's momentum is still overall bearish'.

💡Pullbacks

Pullbacks refer to a temporary reversal in the trend direction of a security's price. In the video, pullbacks are mentioned as small upward movements in a chart that occurs even when the overall trend is bearish. They are used to illustrate how the market can have minor fluctuations within a larger trend.

💡Momentum

Momentum in trading refers to the rate of change in price, indicating the strength or weakness of a current trend. The video uses the term to describe the overall direction of the price movement, stating that 'as more and more buyers are entering, this can cause little pullbacks on the chart. But the chart's momentum is still overall bearish'.

💡Copy Trading

Copy Trading is a social trading feature that allows traders to automatically copy the trades of another trader, often a more experienced or successful one. The video mentions a sponsored platform, hankotrade, which has a copy trading feature. The speaker tests this feature by funding an account and automatically copying the trades of a high win-rate trader, illustrating a practical application of social trading.

💡Fair Value Gap

A Fair Value Gap is a term used in the video to describe a significant price movement that indicates a clear imbalance between supply and demand. The video uses this term to highlight areas where there are more buyers or sellers, as indicated by the statement 'Notice how there is also a fair value gap connected to this demand zone'.

💡Profitable Trader

A Profitable Trader is someone who consistently makes money in the markets. The video emphasizes the importance of identifying and learning from profitable traders, suggesting that understanding their strategies can lead to better trading decisions. It is mentioned in the context of buying and selling, stating 'If you start thinking like this when trading, it will change the way you take trades'.

Highlights

Supply and demand are fundamental to understanding market movements.

Markets move up when buying pressure exceeds selling pressure, and vice versa.

The importance of understanding the basics rather than blindly following trading tips.

Visual representation of buyers and sellers in the market, with red for sellers winning and green for buyers winning.

Price drops sharply when sellers are in control, indicating a potential area of supply.

Buyers start to fight back as price drops, potentially causing pullbacks but overall bearish momentum.

Price reversal occurs when there is a large majority of buyers compared to sellers, leading to an area of demand.

The process of supply and demand repeating itself is a continuous cycle in the market.

A hedge fund manager's perspective on focusing on who is on the other side of the trade.

The concept that there is always a seller on the other side of a buy order, implying differing market views.

The idea of buying from inconsistently profitable traders to improve one's own trading success.

Identifying supply and demand zones by looking for sharp price movements.

Costco's business model as an analogy for buying low and selling high in trading.

The necessity of selling to a losing trader to be a winning trader in the market.

Asking where the majority of buyers and sellers are to identify profitable trading opportunities.

Bad traders are likely to buy when supply exceeds demand, which is a key point to avoid.

The two critical questions to ask when trading: where are the major points of supply and demand, and where are the bad traders operating?

Using supply and demand zones to structure trades with stop losses and take profits.

The importance of waiting for price to reach demand zones before entering trades.

Tips for strengthening supply and demand zones in trading strategies.

Recap of the perfect supply and demand trade, emphasizing the importance of identifying strong moves and fair value gaps.

Transcripts

Supply and Demand absolutely everybody is talking about it.  

Including this hedge fund manager that explains  exactly how he uses it in an interview. But we  

ll get to that in a little bit. But why should we learn supply  

and demand in the first place? To understand that, we have to dive deeper  

into the core concepts of why the market moves Why does the market move in the way that it does?  

Now I really want you think about this. The only way a chart will move up, is if there  

is more buying pressure than selling pressure. The only way a chart will move down is if there  

is more selling pressure than buying pressure. Now I know what you re thinking.  

oh tradinglab that is so obvious. Why are you  wasting our time and even telling us this  

Because a lot of people don t really  sit down and think about the basics.  

A lot of people will watch a youtube video,  get told to draw some fancy rectangle on their  

chart by a random trading guru because  they say it works, but in reality the  

viewer has no idea why it works. They are just doing it because they  

are told it works. But not my viewers!  

You guys are smart. You actually want to learn. So look at this picture.  

Here we have all the buyers  and sellers in the market.  

The red, represents the sellers winning. The green, represents the buyers winning.  

When you have a ton of sellers. Like in  this area, price will drop fast and sharp.  

Something like this. Because sellers are in complete control.  

As price starts to go down, more and more  buyers will start to fight against the sellers.  

Slowly gaining back control. Now as more and more buyers are entering,  

this can cause little pullbacks on the chart. But  the chart s momentum is still overall bearish.  

Price will only fully reverse once there is a  large majority of buyers compared to sellers.  

Like in this area. And once this happens there  

will be fast sharp move to the upside. Then the whole process repeats itself.  

Going on forever in the future. But we are really just scratching the surface on  

how the market moves. You see, one day I got bored  

and read a financial article. Yeah, I know. I read financial  

articles when im bored. I m a nerd. Anyways, I was reading an article that  

interviewed a hedge fund manager  and how he looks at the market.  

And he said something that  really stuck out to me.  

But before we get to what he  said, let me show you something.  

One of my sponsors, hankotrade.  Has a copytrading feature.  

Before sharing it with you guys, I wanted to test  it out for myself to see if it actually worked.  

So I funded my trading account  with $50,000 for testing.  

I check the top traders leaderboard  to see who had the best win rate.  

I Found the guy, who seemed to be  pretty good and had a high win rate.  

So all I had to do was click this follow and my  account would automatically take all the trades  

this specific trader took automatically. The analyst has taken 5 trades since  

I have followed them. All 5 of them were winners.  

So far my account is up $7,646 Not bad for just clicking a follow button.  

Not saying this system is perfect and  you will only get winning trades.  

But ill proceed to update you guys through out the  weeks to let you know how my account is doing.  

If you would like to copy trade as well,  ill leave a link in the description so  

you can check it out. Okay back to the video.  

So when reading this financial article.  This hedge fund manager said something  

that really stuck out to me. you need to focus on who is on  

the other side of the trade Whenever you buy a position.  

There is always a seller on  the other side of that trade.  

Which means, there is always someone who  thinks the chart is going to go in the  

opposite direction than what you think. Now this is a very VERY important  

concept to understand. If you are always buying  

from someone who is selling. Would you rather  buy from a good trader or a bad trader?  

When you are buying a position,  you want to be buying from  

someone who is inconsistently profitable. If you start thinking like this when trading.  

It will change the way you take trades. if you don t know where these profitable  

traders are selling, you might just be one  of those bad traders they are selling to.  

But how do you know where these profitable  traders are buying and selling?  

Going back to this chart. The only way we know a large  

group of sellers or buyers are in complete  control is if there is a sharp move.  

So take this chart for instance. When I look at this chart. I m not  

trying to predict the future. I m just looking  at where the majority of buyers and sellers are.  

Here, the chart had a sharp downwards move from  this point. Meaning there were way more sellers,  

than buyers from this point on. In other words, an area of supply.  

You may ask. How do we know  there are more sellers?  

If there wasn t drastically more sellers  at this point. Price would just continue  

to move sideways here. But that didn t happen. It  

moves sharp to the downside. Here the opposite is true.  

there was a sharp move to the upside. Meaning, there were way more buyers  

than sellers. Or an area of demand. Another way to look at this is like this:  

You know the company Costco? Ahhh I love that company.  

You can buy anything from there. But what is costco s business plan?  

They buy a large amount of  inventory in bulk at a cheap price.  

Them what do they do? They sell it to a retail  

buyer for a higher price. The only way Costco can make  

money is if they sell to a quote on quote  bad buyer or someone who is willing to  

pay more than what they did for the product. You should look at trading the exact same way.  

If you re Costco where are you  buying your inventory in bulk?  

Obviously at a low price. Where are you selling to  

the retail buyer? At a high price. Now remember that statement I made before?  

In order to be a winning trader, you  have to sell to a losing trader.  

When you look at this chart. Where will the losing trader  

be buying most likely? A lot of retail traders  

will buy in this area, maybe because they see  some momentum building up, an indicator tells  

them to enter, or whatever the reasoning is. But they are missing a very important key point.  

Supply exceeds demand in this area. Meaning there are drastically more  

sellers than buyers here. Only a bad trader would  

buy when there are more sellers. So when looking at this chart you should  

be asking yourself two questions. Where are the major points where  

there are drastically more buyers and sellers. And where are the bad traders buying and selling.  

If you answer these two questions  correctly, you will be a profitable trader.  

So where are the majority of buyers and sellers? Well we can see from this point on,  

there was a sharp move to the upside. This could only happen if there were  

drastically more buyers then sellers. So we mark the beginning of this move.  

Where are there more sellers than buyers? Here we have a sharp downwards move.  

Which could only happen if there  were more sellers, than buyers.  

So we mark the begging of this move. I want to make this very very clear.  

The only reason these areas are supply and demand  is because this was the begging of a sharp move.  

If the chart looks something like this. We don t have a clear area of supply and  

demand because there are no sharp movements. Sure, the chart moves down from this  

area. But that just shows there are  slightly more sellers than buyers.  

Which we are not really interested in. We want to know areas where there are  

drastically more sellers than buyers. Which we can only tell, if there  

is drastic, sharp move. Please take note of this,  

because its very important. Then we have to ask the final question.  

Where are the bad traders most  likely to enter and exit?  

A bad trader is going to sell when  there are more buyers than sellers.  

So we have our supply and demand areas. Wait for price to come to our demand.  

We buy from the retail trader who  is inconsistently profitable.  

Set our stop loss below the area of demand. Set our take profit at the area of supply.  

Watch the trade play out. Price eventually hits the area of supply.  

And we sell to the inconsistently  profitable trader who buys up here.  

So whenever you take a trade. Ask  yourself the two simple questions.  

Where are major points where there are  drastically more buyers and sellers.  

And where are the bad traders buying and selling. If you answer these questions correctly,  

you will become a profitable trader. Since you made it this far in the  

video. Here s two extra tips to make your  supply and demand zones even stronger.  

So heres a final recap of the  perfect supply and demand trade  

Here we have a strong move to the upside starting  from this candle so we mark our demand zone.  

Notice how there is also a fair value  gap connect to this demand zone.  

Giving us insight there are  buyers than sellers in this area.  

We wait for price to see what it does next. A similar thing happens up here.  

Price is starting to reverse.  With a strong downwards move.  

This is our area of supply. This move also has a fair  

value gap connected to it as well. Which is showing there are a lot more sellers  

than buyers up in this area. Perfect.  

Next we want price to slowly come  down to our area of demand.  

Slowly being the key word. Once it hits our zone. We enter.  

Set our stop loss below the area of demand and  set our take profit at the area of supply.  

And just like that, you got a winning trade. Start looking for areas where bad traders are  

buying and selling and it will change  the way you trade forever.