The ONLY Supply & Demand Guide You'll EVER NEED
Summary
TLDRThis 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
- š The market moves based on the balance of buying and selling pressure.
- š§ Understanding the basics of supply and demand is crucial for market analysis.
- š“ A sharp downward price movement indicates sellers are in control.
- š¢ A sharp upward price movement indicates buyers are in control.
- š The process of supply and demand is cyclical and continuous.
- š¤ Traders should consider who is on the other side of their trade.
- š” It's beneficial to buy from less skilled traders and sell to them.
- š Sharp price movements are key indicators of supply and demand areas.
- š The Costco analogy: Buy low (demand) and sell high (supply) to make profits.
- š« Avoid buying when supply exceeds demand, as this is a sign of poor trading decisions.
- ā Ask where the majority of buyers and sellers are concentrated and identify where poor traders are active.
- š¼ 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
š 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.
š 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.
Mindmap
Keywords
š”Supply and Demand
š”Buying Pressure
š”Selling Pressure
š”Market Moves
š”Chart
š”Bullish
š”Bearish
š”Pullbacks
š”Momentum
š”Copy Trading
š”Fair Value Gap
š”Profitable Trader
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. Ā
Including this hedge fund manager that explainsĀ exactly how he uses it in an interview. But weĀ Ā
ll get to that in a little bit. But why should we learn supplyĀ Ā
and demand in the first place? To understand that, we have to dive deeperĀ Ā
into the core concepts of why the market moves Why does the market move in the way that it does? Ā
Now I really want you think about this. The only way a chart will move up, is if thereĀ Ā
is more buying pressure than selling pressure. The only way a chart will move down is if thereĀ Ā
is more selling pressure than buying pressure. Now I know what you re thinking. Ā
oh tradinglab that is so obvious. Why are youĀ wasting our time and even telling us this Ā
Because a lot of people don t reallyĀ sit down and think about the basics. Ā
A lot of people will watch a youtube video,Ā get told to draw some fancy rectangle on theirĀ Ā
chart by a random trading guru becauseĀ they say it works, but in reality theĀ Ā
viewer has no idea why it works. They are just doing it because theyĀ Ā
are told it works. But not my viewers! Ā
You guys are smart. You actually want to learn. So look at this picture. Ā
Here we have all the buyersĀ and sellers in the market. Ā
The red, represents the sellers winning. The green, represents the buyers winning. Ā
When you have a ton of sellers. Like inĀ this area, price will drop fast and sharp. Ā
Something like this. Because sellers are in complete control. Ā
As price starts to go down, more and moreĀ buyers will start to fight against the sellers. Ā
Slowly gaining back control. Now as more and more buyers are entering,Ā Ā
this can cause little pullbacks on the chart. ButĀ the chart s momentum is still overall bearish. Ā
Price will only fully reverse once there is aĀ large majority of buyers compared to sellers. Ā
Like in this area. And once this happens thereĀ Ā
will be fast sharp move to the upside. Then the whole process repeats itself. Ā
Going on forever in the future. But we are really just scratching the surface onĀ Ā
how the market moves. You see, one day I got boredĀ Ā
and read a financial article. Yeah, I know. I read financialĀ Ā
articles when im bored. I m a nerd. Anyways, I was reading an article thatĀ Ā
interviewed a hedge fund managerĀ and how he looks at the market. Ā
And he said something thatĀ really stuck out to me. Ā
But before we get to what heĀ said, let me show you something. Ā
One of my sponsors, hankotrade.Ā Has a copytrading feature. Ā
Before sharing it with you guys, I wanted to testĀ it out for myself to see if it actually worked. Ā
So I funded my trading accountĀ with $50,000 for testing. Ā
I check the top traders leaderboardĀ to see who had the best win rate. Ā
I Found the guy, who seemed to beĀ pretty good and had a high win rate. Ā
So all I had to do was click this follow and myĀ account would automatically take all the tradesĀ Ā
this specific trader took automatically. The analyst has taken 5 trades sinceĀ Ā
I have followed them. All 5 of them were winners. Ā
So far my account is up $7,646 Not bad for just clicking a follow button. Ā
Not saying this system is perfect andĀ you will only get winning trades. Ā
But ill proceed to update you guys through out theĀ weeks to let you know how my account is doing. Ā
If you would like to copy trade as well,Ā ill leave a link in the description soĀ Ā
you can check it out. Okay back to the video. Ā
So when reading this financial article.Ā This hedge fund manager said somethingĀ Ā
that really stuck out to me. you need to focus on who is onĀ Ā
the other side of the trade Whenever you buy a position. Ā
There is always a seller onĀ the other side of that trade. Ā
Which means, there is always someone whoĀ thinks the chart is going to go in theĀ Ā
opposite direction than what you think. Now this is a very VERY importantĀ Ā
concept to understand. If you are always buyingĀ Ā
from someone who is selling. Would you ratherĀ buy from a good trader or a bad trader? Ā
When you are buying a position,Ā you want to be buying fromĀ Ā
someone who is inconsistently profitable. If you start thinking like this when trading.Ā Ā
It will change the way you take trades. if you don t know where these profitableĀ Ā
traders are selling, you might just be oneĀ of those bad traders they are selling to. Ā
But how do you know where these profitableĀ traders are buying and selling? Ā
Going back to this chart. The only way we know a largeĀ Ā
group of sellers or buyers are in completeĀ control is if there is a sharp move. Ā
So take this chart for instance. When I look at this chart. I m notĀ Ā
trying to predict the future. I m just lookingĀ at where the majority of buyers and sellers are. Ā
Here, the chart had a sharp downwards move fromĀ this point. Meaning there were way more sellers,Ā Ā
than buyers from this point on. In other words, an area of supply. Ā
You may ask. How do we knowĀ there are more sellers? Ā
If there wasn t drastically more sellersĀ at this point. Price would just continueĀ Ā
to move sideways here. But that didn t happen. ItĀ Ā
moves sharp to the downside. Here the opposite is true. Ā
there was a sharp move to the upside. Meaning, there were way more buyersĀ Ā
than sellers. Or an area of demand. Another way to look at this is like this: Ā
You know the company Costco? Ahhh I love that company.Ā Ā
You can buy anything from there. But what is costco s business plan? Ā
They buy a large amount ofĀ inventory in bulk at a cheap price. Ā
Them what do they do? They sell it to a retailĀ Ā
buyer for a higher price. The only way Costco can makeĀ Ā
money is if they sell to a quote on quoteĀ bad buyer or someone who is willing toĀ Ā
pay more than what they did for the product. You should look at trading the exact same way. Ā
If you re Costco where are youĀ buying your inventory in bulk? Ā
Obviously at a low price. Where are you selling toĀ Ā
the retail buyer? At a high price. Now remember that statement I made before? Ā
In order to be a winning trader, youĀ have to sell to a losing trader. Ā
When you look at this chart. Where will the losing traderĀ Ā
be buying most likely? A lot of retail tradersĀ Ā
will buy in this area, maybe because they seeĀ some momentum building up, an indicator tellsĀ Ā
them to enter, or whatever the reasoning is. But they are missing a very important key point. Ā
Supply exceeds demand in this area. Meaning there are drastically moreĀ Ā
sellers than buyers here. Only a bad trader wouldĀ Ā
buy when there are more sellers. So when looking at this chart you shouldĀ Ā
be asking yourself two questions. Where are the major points whereĀ Ā
there are drastically more buyers and sellers. And where are the bad traders buying and selling. Ā
If you answer these two questionsĀ correctly, you will be a profitable trader. Ā
So where are the majority of buyers and sellers? Well we can see from this point on,Ā Ā
there was a sharp move to the upside. This could only happen if there wereĀ Ā
drastically more buyers then sellers. So we mark the beginning of this move. Ā
Where are there more sellers than buyers? Here we have a sharp downwards move. Ā
Which could only happen if thereĀ were more sellers, than buyers. Ā
So we mark the begging of this move. I want to make this very very clear. Ā
The only reason these areas are supply and demandĀ is because this was the begging of a sharp move. Ā
If the chart looks something like this. We don t have a clear area of supply andĀ Ā
demand because there are no sharp movements. Sure, the chart moves down from thisĀ Ā
area. But that just shows there areĀ slightly more sellers than buyers. Ā
Which we are not really interested in. We want to know areas where there areĀ Ā
drastically more sellers than buyers. Which we can only tell, if thereĀ Ā
is drastic, sharp move. Please take note of this,Ā Ā
because its very important. Then we have to ask the final question. Ā
Where are the bad traders mostĀ likely to enter and exit? Ā
A bad trader is going to sell whenĀ there are more buyers than sellers. Ā
So we have our supply and demand areas. Wait for price to come to our demand. Ā
We buy from the retail trader whoĀ is inconsistently profitable. Ā
Set our stop loss below the area of demand. Set our take profit at the area of supply. Ā
Watch the trade play out. Price eventually hits the area of supply. Ā
And we sell to the inconsistentlyĀ profitable trader who buys up here. Ā
So whenever you take a trade. AskĀ yourself the two simple questions. Ā
Where are major points where there areĀ drastically more buyers and sellers. Ā
And where are the bad traders buying and selling. If you answer these questions correctly,Ā Ā
you will become a profitable trader. Since you made it this far in theĀ Ā
video. Here s two extra tips to make yourĀ supply and demand zones even stronger. Ā
So heres a final recap of theĀ perfect supply and demand trade Ā
Here we have a strong move to the upside startingĀ from this candle so we mark our demand zone. Ā
Notice how there is also a fair valueĀ gap connect to this demand zone. Ā
Giving us insight there areĀ buyers than sellers in this area. Ā
We wait for price to see what it does next. A similar thing happens up here. Ā
Price is starting to reverse.Ā With a strong downwards move. Ā
This is our area of supply. This move also has a fairĀ Ā
value gap connected to it as well. Which is showing there are a lot more sellersĀ Ā
than buyers up in this area. Perfect. Ā
Next we want price to slowly comeĀ down to our area of demand. Ā
Slowly being the key word. Once it hits our zone. We enter. Ā
Set our stop loss below the area of demand andĀ set our take profit at the area of supply. Ā
And just like that, you got a winning trade. Start looking for areas where bad traders areĀ Ā
buying and selling and it will changeĀ the way you trade forever.
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