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Thread: SnD and SnR Trading Strategy

  1. #1
    Trader ara's Avatar
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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. #21
    Trader ara's Avatar
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    Transition

    Here I make my own definition of transition, that is the change in trend from the bearish trend to the bullish trend or vice versa from the bullish trend to the bearish trend.
    I divide this into 2 types: direct transitions, and indirect transitions.

    1. Direct transition
    Direct transition is the transition from bullish to bearish or bearish to bullish without any price consolidation.



    Usually the direct transition was identified by the symmetrical triangle pattern.



    If we only use a triangle pattern, maybe we can get stuck with fake break out.



    But if we combine it with trend lines channel, this fake break out is just a reTest.


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  3. #22
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    support and resistance or supply and demands are good for trading and the trader can choose between them or trade with both of them but supply and demand needs more study and the trader should depend only on the indicators that give supply and demand zones only and so with more study the trader will understand it better.

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  4. #23
    Trader ara's Avatar
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    1. Indirect transition
    Indirect transition is the transition from bullish to bearish or bearish to bullish with price consolidation.

    In the image below there are indirect transition from bullish trend to bearish trend



    Based on my personal observation, indirect transition patterns are common patterns that occur in the market (observe on past market data). Especially for long-term trends in the market, so this is a warning for traders who use averaging techniques (including myself) on long-term trends.

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    Last edited by ara; 08-11-2018 at 09:54 AM. Reason: change image

  5. #24
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    Hello dear ara,i like to say that the concept of demand and supply is really not a new topic for many of us here trading the forex market because at one point or the other in our elementary or higher institution days in school, we have learn so much about the demand and supply, but the problem most traders seems to be having is the proper way to apply the concept of demand and supply to the forex market to take a good advantage of the market . And i am very sure that the thread has done a lot of justice to the topic now.

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  6. #25
    Trader ara's Avatar
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    Used multiple time frames to trade with SnR / SnD patterns. I think this method seems very simple. Painting the SnR and SnD pattern on the daily time frame, then used it on H4 and / or H1 time frames. This method can improve the accuracy of the analysis for the intraday trading system.

    I apply it in eur/chf for current conditions.

    Daily time frame


    H4 time frame


    H1 time frame

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  7. #26
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    there is no doubt that trading with support and resistance levels will make difference for the trader because it is strong tool and let the trader to analyze the market well and knows when to enter the market and when to exit and so the trader will be able to trade better and improve his trading style always and make good and consistent profits.

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  8. #27
    Trader layigold's Avatar
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    Thank you for nice presentation and careful analysis of the subject matter but support and resistance levels are not different from demand and supply. In the first place , it is the forces of demand and supply that determines the price in any free market and forex happens to be one . There is an area the sellers will be comfortable to come in and possibly bring down the price and this reflect on a chart as resistance zone . I used the word "zone" because it is more of neighborhood that just an horizontal level. On the other hand , the buyers have a particular price zone in mind where they are comfortable to come in and push up the price . Looking at the chart, you can easily locate various levels of support and resistance levels where meaningful trade decisions can be taken.

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  9. #28
    Trader maryrosi's Avatar
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    Quote Originally Posted by layigold View Post
    Thank you for nice presentation and careful analysis of the subject matter but support and resistance levels are not different from demand and supply. In the first place , it is the forces of demand and supply that determines the price in any free market and forex happens to be one . There is an area the sellers will be comfortable to come in and possibly bring down the price and this reflect on a chart as resistance zone . I used the word "zone" because it is more of neighborhood that just an horizontal level. On the other hand , the buyers have a particular price zone in mind where they are comfortable to come in and push up the price . Looking at the chart, you can easily locate various levels of support and resistance levels where meaningful trade decisions can be taken.
    yes, supply and demand and support and resistance are not different, the difference is, if supply abd demand, is the zone / area that occurs there is a bargain between the seller and the seller, in this case the sideway market can be said, and to support and resistance is the highest and lowest points in a price in the forex market, both of them have different advantages and disadvantages too, many professional traders use it.

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  10. #29
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    The concluding part of your thread has summarize everything about this great thread my dear, the resistance and the support levels are some very crucial points in the forex market and just like tou have said, a lot of traders who understood this concept always wait for those zones to do a lot of things in the market . Personally, i use those areas to open and to close trades. If i do not see a resistance or support levels, it is always hard for me to do anything in the forex market either to enter or to exit the market.

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  11. #30
    Trader ara's Avatar
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    Actually this kind of strategy is a general strategy, there are many traders (price action traders) who use this simple strategy, but it does need a good understanding of market characteristics related to the theory of support resistance and the law of supply demand.

    Because basically forex trading is as simple as this.



    But the fact is not as easy as what I painted from the chart above, because the forex market is full of tricks that affect psychological factors. But I think the forex market is an art in managing investment, here is not only about trading strategies, but also the art of managing our deposits. And the art in managing our psychology.

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