Keeping It Simple With Supply And Demand

The approach I have to trading is a simple one and those of you who have been following Maximum Lots for a while will know that my trades are pretty much all the same. This time is no different. Another 100 pips profit simply trading from one level to another. Demand to Supply in this case.

EURAUD

Daily

Now the EA is not a pair that I have traded much before but when I was scanning through pairs months ago, I noticed a high quality demand level on the daily chart that really caught my attention. You’ll notice in the image below that after the base formed, price rallied strong, engulfing opposing levels and breaking highs as it went. I’ve had this marked up for a long while now and when price dropped back into the zone earlier this month with nothing but red candles I was even more interested.

2014-06-13 EA Long D1

H1

I marked up the nearest H1 supply as usual and waited for price to engulf it from a strong demand level but that didn’t quite happen. Price did engulf the supply level, albeit by a few pips, but there was no demand from which to go long and hence no trade yet. It wasn’t until the next week that the pair started showing signs of opportunity for me.

After price went deeper into the daily demand zone another H1 supply level formed. This was then engulfed by a strong rally from a demand level on the same time frame so I waited for an opportunity to get long on the return.

2014-06-13 EA Long H1

2014-06-13 EA Long 30m

5m

Price engulfed the nearest 5m supply and there was a little demand level which I went long from. My entry happened to be on a Friday just before the weekend and whilst some traders won’t enter trades at this time for fear of gaps, there’s nothing in my trade plan to stop me from doing so. If I’m in a trade around a weekend I’ll stay in and if I want to get into a trade at this time then I will.

I was confident given the high quality of the daily demand level that I was trading from. Having said that, price did creep down below the H1 demand level but fortunately this was just a fake out. Price came very close to my stop but it did not stop me out.

2014-06-13 EA Long 5m v01

Result

Price rallied for a couple of days before hitting a H1 supply level I had marked. I exited after price engulfed the closest 5m demand level for just over 100 pips. Price then fell heavily from that level all the way past where I had initially placed my stop. I clearly came out at the right time.

2014-06-13 EA Long 5m v02

2014-06-13 EA Long H1 dukas

If your trading seems complicated try to simplify it. Ensure you have solid rules for entry and exit with an understanding of supply and demand and engulfs, then and let the market handle the rest.

I hope you found this useful

Happy trading

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6 Comments

  1. Sharon on June 27, 2014 at 07:41

    Thanks for another great article Joe. I really helps to be reminded that trading can be simple if we have the right approach.

  2. Jimmy on June 30, 2014 at 14:18

    great trading lessons
    i thouroughly enjoy the cleanliness of your methodology
    it does help me to refocus on my own trading plans, therefor my thanks
    jimmy

    • Joe Wright on June 30, 2014 at 18:41

      Hi Jimmy! I’m glad you find them useful

  3. Junior Maia on August 25, 2014 at 16:14

    Hi Joe, your analysis is very powerfull…. i’m a beginner on SD… can you a explanation about this tradings?

    • Joe Wright on August 27, 2014 at 19:42

      Hi Junior. Many of the articles on the site explain the things I look for with SD trading. Can you be more specific about what type of explanations you’re looking for?

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