Which Order Block Should You Use?! (Supply & Demand Tips)

Summary

In this video, the speaker helps traders navigate the challenges of identifying the best supply and demand zones for trading. Key strategies include focusing on imbalanced zones with unfilled orders, prioritizing extreme zones in price moves, analyzing the strength of impulse moves, and using higher time frames to determine higher probability zones. By emphasizing these techniques, traders can avoid common mistakes, reduce unnecessary losses, and increase their chances of executing higher probability trades for better risk-to-reward outcomes. The speaker provides valuable insights for more effective decision-making in the market.

Takeaways

• 😀 Focus on identifying imbalanced supply and demand zones that have not been retested, as they have higher probability for trade success.
• 😀 Extreme zones, or the furthest imbalance from price, hold significant weight in decision-making and should be prioritized for potential trades.
• 😀 In cases of multiple imbalanced zones, the extreme zones often carry the highest potential for profitable trades, especially when using limit orders.
• 😀 Confirmation entries (waiting for a shift in the smaller trend) can help increase trade success and are useful when targeting non-extreme zones.
• 😀 Strong impulse moves in a trend should be prioritized over slow, choppy price action when selecting a supply or demand zone for a trade.
• 😀 The strength of the impulse move is important as it indicates the highest buying or selling pressure, making those zones more likely to lead to a successful trade.
• 😀 Focus on higher time frames (e.g., 4-hour) to assess the validity of a zone, as they provide a clearer, less noisy view of the market and increase the probability of success.
• 😀 Lower time frames may introduce unnecessary noise and false moves, making it harder to identify high-probability zones, so avoid focusing on them exclusively.
• 😀 Trading efficiently means filtering out less significant zones and focusing on the ones with the highest probability of yielding a successful trade.
• 😀 Consistently applying these principles of identifying imbalanced zones, prioritizing extreme zones, analyzing impulse strength, and using higher time frames will lead to a higher win rate and improved overall trading performance.

Q & A

What is a common struggle for traders when using supply and demand or smart money concepts?

Many traders struggle with identifying the right zone to buy or sell from, especially in trending markets where multiple supply or demand zones form.

What can happen if traders fail to focus on the right zones?

Failing to focus on the correct zones can lead to avoidable losses, as traders might execute trades from the wrong zones or even attempt to trade from every zone, resulting in multiple losses.

How can traders identify the best zones to focus on?

Traders can identify the best zones by focusing on imbalanced zones, extreme zones, the strength of the impulse in a trend, and using higher timeframes to assess the probability of a zone.

What does the term 'efficiency or inefficiency' refer to in the context of zones?

Efficiency refers to zones that have been retested, while inefficiency refers to zones that have not yet been retested and are likely to be filled. Inefficient zones are often higher probability zones.

Why are imbalanced zones considered to be high probability zones?

Imbalanced zones are considered high probability because the buying or selling orders in these zones have not been fully filled, making them more likely to generate significant reactions when revisited.

What is an extreme zone, and why is it important in trading?

An extreme zone is the furthest imbalance zone from the current price within a trend's leg. Extreme zones typically hold a lot of weight because they may be the next point the market targets to fill unfulfilled orders.

How should traders approach trading multiple imbalanced zones?

When multiple imbalanced zones appear, traders should prioritize the extreme zones, as these are more likely to be targeted. They can also use confirmation entries in other zones to manage risk and increase the likelihood of success.

What does a confirmation entry look like?

A confirmation entry occurs when price reaches a zone, and traders wait for a shift in the smaller trend—such as a reversal from lower lows to higher highs—before executing the trade. This aligns the smaller trend with the larger trend, increasing the likelihood of a successful trade.

How does the strength of the impulse in a trend affect zone selection?

Zones that are formed from strong impulse moves tend to have higher probability because they are associated with significant momentum. Weak, choppy price actions are less likely to generate reliable zones for trades.

Why should traders focus on higher timeframes when identifying trading zones?

Higher timeframes offer a clearer picture of the market by averaging out price action and reducing noise. Lower timeframes may present multiple smaller zones, leading to confusion and missed opportunities. The higher timeframe provides a clearer, more reliable zone to focus on.