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  1. #1
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    SnD and SnR Trading Strategy

    Hello all, let me share material about how to trade using Supply/Demand (SnD) and Support/Resistance (SnR). Before practice, I will talk a lot about SnD and SnR concepts. Perhaps some of us have tried to learn about supply demand analysis in many sources, but until now we have difficulties to understand it and YES !!! that's what I feel too. But finally I found learning materials that make me feel easy in understanding supply demand analysis. One of them is learning from this forum, I found some threads about supply/demand in this forum, but I don't need to mention who is the author of those thread. I will only say thank you to him/her.

    What is Supply/Demand? What is Support/Resistance? You can get the answer from many sources, there are tons of sources you can find to learn Supply/Demand, and Support/Resistance.
    I don't need to talking about the definition of both, this is just pure my own mindset about Supply/Demand and Support/Resistance on forex technical analysis. If you think that my mindset about Supply/Demand and Support/Resistance is different from the others, you don't need to ask me again. Because this is really pure my own understanding of SnR and SnD. I have never read a book about Supply/Demand and Support/Resistance, but I know a little about the theories of both. And maybe I have a different understanding with the others for both.

    Relationship between Supply/Demand and Support/Resistance
    Do you ever think what is the difference of SnR and SnD in forex trading technically? Or maybe you have asked other traders what is the difference between SnR and SnD? Many traders say both are the same, or at least SnD and SnR are similar. And also many traders say that Support/Resistant is a level, while Supply/ Demand is an area. As seen in the picture below:

    Attachment 23506

    We see on the picture above, Red boxes is area of supply, Blue boxes is area of demand, Green lines as support levels, Yellow lines as resistance levels.

    Zone A and Zone B : According to economic theory, prices can only move due to an imbalance between Supply and Demand and no other cause. The basic principle causes the price to move down is, because there is a sale, then the supply in the market increases, and based on the law of economic balance, if supply increases, then the price will fall. If the price goes up, then it means there are many buyers so demand in the market increases.

    Then why do we make an area of supply/demand only near support/resistance levels? : Often when we watch the chart, the price just moves up/down to a certain point, then rebounds, then rises again, rebounds again, etc, like there is a wall at that price level. Why did it happen? Why are they selling/buying at that price? Why not at another price level?
    Support is a certain point where psychologically many people will buy the instrument, simply, where the price will rebound after it goes down.
    Resistance, is the opposite of support, a point where psychologically many people sell the instrument, simply, where the price will rebound after rising.
    Usually most of buyers/sellers enter the market near the support/resistance. However, that does not mean there is no buyers/sellers in zone A and B. In fact many traders also enter the market in zone A and B.

    Simple analogy :
    Supposing you want to hoard coconut oil. The price on January 1 is $ 1 per bottle. On January 3, the price rose to $ 1.2 per bottle. Of course you don't immediately buy at the price of $ 1.2 (unless forced or other reasons). You will wait for the price to fall slightly,. It turned out that on January 5, the price dropped to $ 1 again. So psychologically, you'll think .. well, it's down to the same level as January 1st, then you're thinking of buying at this price.

    This principle is more or less the same as what happens in forex. At a certain level (support), traders (both small and big) will think this price is good enough to buy.

    Every Banks, financial institution, etc. has a research team that estimates the value of support & resistance. There is no definite formula for calculating support, quite a lot of things that can be used as support, for example:
    - Figures round (0.20,50,80-for example EURUSD 1.2320, 1.2600, etc.) because most companies like to buy at round numbers
    - Lowest price since last x minutes, last x hours, last x days, etc.
    - From indicators such as moving averages, etc.
    - Order volume at a certain price.
    For resistance, then the reverse, the highest price since x minutes, hours, and so on.

    Well, the values ​​released by analysts and research teams are usually followed by many traders. The more that follow, the greater the effect on the price.

    For example, X analysts expect EURUSD support at 1.2500, so if many read and follow, there will be a lot of buy at 1.2500 which makes the price hard to break.

    Support & Resistance is just information, not a trend, more helpful, where we should start to enter the market, or where we should get out of the market.

    For trend analysis, we can use Technical Analysis or Fundamental, or both.

    Now I don't want to talk more about that, you can make definitions based on your own ideas and understanding, I won't take it seriously as long as your mindset doesn't deviate too far from those theory.

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  2. #11
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    I think the use of both supply and demand with support and resistance makes sense, after all there is a good similarity between the both of them, I have a friend that uses supply and demand to trade, I just spoke with him a while back and he said that he discovered from his simulation trading that he can get as much as 1:8 risk reward per trade, the best part is that the stop loss is usually minimal, maybe 20 pips at most can you beat that?

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  3. #12
    Trader ara's Avatar
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    Quote Originally Posted by Leonvic View Post
    I think the use of both supply and demand with support and resistance makes sense, after all there is a good similarity between the both of them, I have a friend that uses supply and demand to trade, I just spoke with him a while back and he said that he discovered from his simulation trading that he can get as much as 1:8 risk reward per trade, the best part is that the stop loss is usually minimal, maybe 20 pips at most can you beat that?
    No, I can't beat that, I am not a master or guru , now I trade this method on my real account for 4 years, but I don't want to beat the others, I just trade for myself, not to show off, and I don't teach the others, I just shared my knowledge and ideas based on my own experience.

    Mate..., if you trade with 1:8 risk reward ratio, please you use that with no analysis or strategy, I'm sure you will be profitable if you take 8 reward and risking 1 only even though you don't use analysis (random trades).

    I did a lot of backtest with various risk reward ratios, and I've a forward test documented on my trading journal by using 1:7 risk reward ratio. You can visit this my trading journal here.

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  4. #13
    Trader ara's Avatar
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    Balance and Imbalance

    Explaining about balance and imbalance is not difficult, because it is related to supply and demand.

    1. Balance

    Sideway / Consolidation is a picture of a balance between supply and demand.
    There are 3 type of balance market:

    Sideway
    There is no dominant pressure between the buyer and seller (both are stable) between horizontal support and resistance in the narrow space. Volatility is stable.


    Symmetrical triangle
    There is no dominant pressure between the buyer and seller (both are weakened) between sloping support and resistance till meet on one level. Volatility decreases.


    Inverted Symmetrical triangle
    There is no dominant pressure between the buyer and seller (both are strengthened) between sloping support and resistance horizontal support and resistance until both of them stay away on the same scale. Volatility increases.

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  5. #14
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    first of all thank you so much for such a great sharing, i really got a lot of knowledge from it, actually before this i was trying to use support and resistant but this is something new concept of me, i know you are best in trading i know your trading history it was amazaing , keep sharing best things like this

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  6. #15
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    supply and demands and support and resistance are good for trading and the success with them depends on the ability of the trader to use any of them or both of them and so he can be able to trade well and make some money of them, i prefer trading with support and resistance levels as i trade with them more perfectly than supply and demand.

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  7. #16
    Trader ara's Avatar
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    2. Imbalance

    Market trend is a picture of a imbalance between supply and demand.
    There are 2 types of imbalance market:

    A. Bullish
    There are 3 bullish patterns as I wrote in old post.
    - Uptrend
    Buyers dominate the market in bullish trend channel. Upward pressure is in line with the bullish trend channel, the price has not yet reached the goal resistant or has not yet formed a new level of resistance.


    - Ascending triangle
    Buyers giving pressure to the resistance level.


    - Inverted Descending triangle
    Buyers put pressure on support levels.

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  8. #17
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    Hello ara, i am sure with this understanding of demand and supply and support and demand that you have, you are suppose to be a millionaire in this business by now because your understanding of it is just perfect having gone through your thread again looking into all the explanations and the various charts you have presented to back up your thread for proper understanding LOL!.The importance of demand and supply with support and supply is very vital for all forex traders to understand.Forex is al about learning all the time.

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  9. #18
    Trader ara's Avatar
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    B. Bearish

    There are 3 bearish patterns as I wrote in old post.
    - Downtrend
    Sellers dominate the market in bearish trend channel. Downward pressure is in line with the bearish trend channel, the price has not yet reached the goal support or has not yet formed a new level of support.


    - Descending triangle
    Sellers giving pressure to the support level.


    - Inverted Asscending triangle
    Sellers put pressure on resistance level.

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  10. #19
    Trader ara's Avatar
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    Create market patterns by using lines

    If we already understand the pattern above, then we can apply it simply to the chart, the goal is to create some scenario, we can paint the pattern on the chart with the lines for the market under any circumstances, there will be many patterns that can be formed as the basic framework in the analysis.

    As an example. I made a lot of patterns from the current situation on EUR/GBP, H4 time frame.



    After I made many patterns in the chart above, then I can create a plot from it.

    Initially the market formed a consolidation area, and then breakout from resistance, then formed a bullish trend channel as a major trend, accompanied by some triangle pattern and consolidation as a minor trend.

    Broadly speaking, this is a bullish pattern as a major trend, we can apply elliot wave theory in this case, we just need to expect 5th wave if we used elliot wave theoru, or it is up to you, I am not limited by raw theory, I apply many theories into this strategy so it looks flexible.

    In essence, we will easily create a scenario on the market if we have made this kind of pattern as the storyline. Therefore, the first thing to do is to understand the pattern and paint it on the chart.


    Quote Originally Posted by glory3 View Post
    you are suppose to be a millionaire in this business by now because your understanding of it is just perfect having gone through your thread again looking into all the explanations and the various charts you have presented to back up your thread for proper understanding LOL!.
    LOL..., I think you are praying for me for my success. So I must thank you. All the best for you my mate

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    Entry by using triangle patterns on the trend and consolidation

    As we know there are many ways for entry points in the market consolidation and the market trend. Here I use triangle patterns in the consolidation area and trend area. Its usefulness is to determine whether the market will be reversal or breakout. Quite simple.

    Consolidation :
    Here we can use descending triangle in the support level, and ascending triangle in the resistance level.

    Example :


    From the above image, first triangle show a valid reverse signal, and the second triangle show a valid breakout signal.

    Trend
    Here we can use symmetrical triangle pattern in the support level of bullish channel.

    Example 1 (bullish)


    From the image above, if we used elliot wave theory, then we should take a chance to entry on the wave 5 as usual wave 5 is the longest.
    And the triangle pattern on those image show a valid wave 5 signal.

    Example 2 (bearish)
    I take the current market condition on GBPUSD, H4 time frame.


    From the image above, I put 3 symmetrical triangle patterns, if we used the elliot wave theory then the impulse wave has been completed after the last wave (wave 5) has been formed. But just wait..., lets we see what will happen on the third symmetrical triangle pattern, if we used elliot wave theory, now is the time for consolidation waves.

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