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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. #31
    Trader Rylai's Avatar
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    Quote Originally Posted by ara View Post
    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.
    Drawing trendlines manually or using the help of channel tool is simple to do. let's just ignore the complexity of market and focus on the strategy because market is always tricky all the time and that's the advantage of this business. if this business is easy to do, everyone would have been rich nowadays and money flow in the world will be increased, making our huge money has no value anymore. what we must focus about this example from you is the market price.

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  3. #32
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    There is a great similarity between the support and resistance with supply and Demand, they both use same principle in determination of the direction of price movement, the only difference is that one uses the zone principle while the others sort of uses a series of candlestick tail to connect each other, however, the important thing is for any user of either tool to be patient for the right trade before entry is done.

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  4. #33
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    Your strategy is very comprehend to understand the strategy and it is what i see on chart that market always shift its support and resistance level in market so we use them and learn to use the better shape of line how e draw them because a trader if fail to apply them on right time so may be we face failure of strategies .

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  5. #34
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    This is a very deep and detail analysis on the demand and supply in its relationship with the resistance and the support levels of the market .The numerous number charts you have attached to explain your points has really been a great way to understand every point you were trying to make. But personally,i do not always see any difference between the resistance and support levels when you put them side by side with the concept of demand and supply in the forex market.The point i am trying to make is that they are both the same thing.

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  6. #35
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    With demand and supply strategy, one is meant to make money by trading with pending orders, as a matter of fact that is one very intriguing thing that I live about this strategy, the fact that you don't need to be in the market and manually pull the trigger yourself when an opportunity comes to trade, that is am appreciable thing.

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  7. #36
    Trader simpleman's Avatar
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    What a good information you have provided here in this thread, more grease to your elbow, this is going to help all of us here in a long way, tray to keep the flag flying, well done brother.

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  8. #37
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    we can trade with either support and resistance or supply and demands or trade with both of them if he knows how to combine between them properly, the trader should differentiate between them to be able to know how to trade with then properly and make good and effective trading without making of mistakes mostly.

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  9. #38
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    The chart representation we see when we open our trading gets to show us the demand and supply levels in forex. In economics we are been taught that when demand is higher than supply, cost of goods rises and when supply are higher than demand, automatically price of good will fall. That's what we see in our forex chart everyday because when the market is in a bullish direction, it means the demand to get that currency is high as many will be buying them until it reach a point where they have bought enough which will trigger excess supply of that currency. This will now bring about fall when the demand start decreasing.

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  10. #39
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    When trading supply and Demand, there is a concept that is known as valley and peaks, these are the areas that determine what your zone is going to look like, if you don't get the interpretation of these valleys and peak well, the whole analysis that you wish to do will just be messed up with losses, support and resistance is similar in some manner to the demand and supply with just small delineation between them, the more profitable strategy is still the supply and Demand because it gives more room to target profits.

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  11. #40
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    This is awesome my dear friend and i really have a nice time going through your chart one by one because what you have here is highly educative and it is something that we traders can learn from.One thing i have always known about business is the forces of demand and supply which you have laced so much emphasis upon here because forex market is a business market and what determine what we see in the forex market from time to time is the forces of demand and supply because forex is all about buying and selling.

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