Supply & Demand Zones That Work Hosted by Sam Seiden

Summary

In this session on supply and demand zones, Samam explains how these zones are key to trading decisions, often surpassing historical market data. He demonstrates how price movement between supply and demand zones can signal buying or selling opportunities, using recent market examples, like the Dow Jones, to illustrate. By focusing on price action rather than external factors, traders can better predict market movements. Samam emphasizes the importance of understanding risk and cautions that most active traders lose money. The session offers a strategy to identify high-probability opportunities based on supply-demand principles, with a focus on structure and location analysis.

Takeaways

• 😀 Supply and demand zones are crucial for decision-making in trading and investing, trumping historical data in importance.
• 😀 Historical trends, such as September being bearish, can complement supply and demand analysis but should not replace it.
• 😀 Combining supply and demand analysis with historical data (e.g., September's performance) can increase the probability of successful trades.
• 😀 Understanding supply and demand zones provides a higher-probability strategy for identifying buy and sell opportunities in the market.
• 😀 The market reflects all external influences, like news and events, within the price itself, making those factors irrelevant to trading decisions based on supply and demand zones.
• 😀 Risk management is essential, and traders should take their time to understand the risks before entering trades.
• 😀 Double demand zones are considered more reliable than single demand zones, offering higher probability setups for price reversal.
• 😀 Market movements are driven by order flows, with price moving from one stack of buy or sell orders to the next until one side is exhausted.
• 😀 Technical analysis based on supply and demand zones helps eliminate biases that could distort trading decisions.
• 😀 Patience and a methodical approach are key to trading success, focusing on high-probability setups rather than reacting to emotions or market noise.
• 😀 Real-world trading is not random; every price movement can be traced to the interaction between buyers and sellers, driven by supply and demand.

Q & A

What are supply and demand zones in trading?

Supply and demand zones are areas on a price chart where buying (demand) or selling (supply) pressure has historically been strong. A supply zone is a price level where there is more selling than buying, causing price to fall. Conversely, a demand zone is a price level where buying pressure exceeds selling, leading to price increases.

Why are supply and demand zones considered more important than historical stock returns?

Supply and demand zones focus on the current market structure and price action, which are more relevant to trading decisions than historical returns. The primary decision-making factor should be the supply and demand scenario, not past market performance.

How do historical stock trends, such as the bearish month of September, influence trading strategies?

While historical trends like a bearish September can provide context, they are not the primary decision-making factor. However, they can help inform trading strategies. For example, if the market enters a demand zone during a historically bearish month, it could present an opportunity to take on more risk or invest in additional positions.

What is the importance of combining both supply/demand analysis and historical trends?

Combining supply and demand analysis with historical trends creates higher-probability trading opportunities. For example, a market entering a demand zone during a bullish month may increase the likelihood of a successful trade, as long as it aligns with the identified demand/supply dynamics.

How do double demand zones impact trading decisions?

Double demand zones occur when two demand zones overlap, creating a higher-probability area for price to reverse and move higher. Traders may be more confident in entering positions at these zones because they represent stronger buying pressure.

What is the significance of a 'gap-up' after price reaches a demand zone?

A 'gap-up' after price hits a demand zone indicates strong buying pressure and a potential continuation of the price movement upward. It suggests that demand is overwhelming supply, and the market may continue to rally from this point.

Why does the speaker say the 'why' behind buying or selling decisions is irrelevant?

The speaker emphasizes that the reasons behind buy and sell decisions, whether due to news or sentiment, are irrelevant because they are already reflected in the price. The focus should be on the price action itself and the balance of supply and demand, not the motivations of individual market participants.

What does the speaker mean by saying there is 'no randomness' in the market?

The speaker suggests that market movements are not random. Every price change is driven by the competition between buy orders and sell orders. When one side (buy or sell) outnumbers the other, the price moves accordingly, which creates predictable patterns in price action.

How does the speaker relate market behavior to their personal experience on the trading floor in the 90s?

The speaker compares modern trading to their experience on the trading floor in the 90s, highlighting that the market works in the same way, with buy and sell orders dictating price movements. While the tools may have changed, the fundamental mechanics of trading remain the same.

What is the takeaway about how external events like wars or economic factors affect trading decisions?

While external events like wars or economic news influence market sentiment, they are already reflected in the price. The speaker stresses that these events are not directly considered in the supply and demand zone strategy. What matters is how these events influence the balance of supply and demand, which is shown through price action.