Wysetrade
Learn how to trade supply and demand like banks to gain a profitable advantage, with tips on key trading tools and identification of demand and supply zones. The big boys and smart money are always watching and looking to take action, so following their moves is essential in achieving two key things: knowing the correct direction the market is moving in and trading with directional momentum to maximize gains and limit loss. A bonus smart money concept is that big news about companies or assets are often released suspiciously when price is at very key demand or supply zones, which can sway the market easily. Accumulation and distribution are key concepts to understand when it comes to supply and demand in trading.
Trading Supply and Demand Zones: A Guide for Traders
Introduction
Understanding how to trade supply and demand zones is crucial for traders who want to succeed in the markets. In this article, we will cover the basics of supply and demand zones and explain how to identify them on the charts. We will also explore the importance of following the big players in the market and entering trades with directional momentum. Finally, we will discuss the concepts of accumulation and distribution and how they can affect the price action in the markets.
What are Supply and Demand Zones?
Supply and demand zones are areas on a chart where the price has reversed in the past. They represent areas where there is a high probability of the price reversing again in the future. Supply zones are areas where the price has reversed down, while demand zones are areas where the price has reversed up.
It’s important to note that supply and demand zones are not fixed lines or levels on a chart. Rather, they are more like general areas where the price has reversed in the past, and where there is a high likelihood of the price reversing again in the future. This is why we refer to them as “zones”.
Why are Supply and Demand Zones Important?
Supply and demand zones are important because they give traders valuable information about the market psychology and the driving market forces behind support and resistance levels. The big players in the market, such as big banks and institutions, are often watching these zones closely and looking to take action. By following these big players, traders can ride their momentum for explosive gains.
The big players aren’t just going to move money around at any random area on the chart. They want to get in at the best price and get out at the best price to maximize gains and limit risk. They will manipulate the market to achieve these goals. Traders who follow the big players can achieve two key things: 1) predict the future market direction, and 2) trade with directional momentum.
How to Identify Supply and Demand Zones
Identifying supply and demand zones on a chart is relatively simple. Look for areas where the price has reversed in the past. Demand zones are areas where the price has reversed up, while supply zones are areas where the price has reversed down.
It’s important to note that not all areas of supply and demand will result in a sharp reversal in the price. Often, the price will chop sideways first before making a significant move. This can be due to the concept of accumulation and distribution.
Accumulation and Distribution
Accumulation and distribution refer to the buying and selling of assets by large traders, such as big banks and institutions. When a large trader wants to accumulate a position, they will often buy the asset slowly over time, rather than all at once. This can create a sideways price movement, as the buying pressure is balanced by selling pressure. Eventually, when the large trader has accumulated enough of the asset, they will start to push the price up.
When a large trader wants to distribute a position, they will often sell the asset slowly over time, creating a sideways price movement, and eventually pushing the price down.
Conclusion
Identifying and trading supply and demand zones is an important skill for traders who want to succeed in the markets. By following the big players and trading with directional momentum, traders can achieve explosive gains. It’s also important to understand the concepts of accumulation and distribution, as they can affect the price action in the markets. By understanding these concepts, traders can make better-informed trading decisions and increase their chances of success.
