This is a Japanese candle sticks 3 minute intraday price-volume chart.
what we have to do?
we need to develop a system with our method which include techniques to enter and exit our trades to be consistantly profitable. in other words we need to have a complete system which include trade plan (what to do before entry, entry/skip and exit plan),risk and money management,rules and limitaions, pshycology,performance review,trading journal etc to identify the signals of right trade (short or long) opporthunity at supply demand imbalance points.
In simple words when supply is more than demand , price will decrease and when demand is more than supply,price will increase(see fig 2).
we need to sell at areas where supply is morethan demand and we need to buy when demand is morethan supply, we need to make profit from supply and demand imbalance. now you may think that even every fool know that. what actually we need to know by our analysis is where will be the saturation area of supply demand imbalance?.
we need to know and develop our system to give signals of when to go short(sell) ,when to go long(buy) and even very important is to know when to do nothing.
In the above chart (fig 1),
1. price opened gap up ,what the reason? may be due to global markets cues and overnight positive sentiment.
2. After open at point A area supply increasing then demand, here supply increasing means more traders selling than buying, we need to look for short(sell) signal with risk: reward,we can entry short or skip based on R:R ratio .risk is our initial stop loss (where it proves our trade is wrong)and reward is our target(where we book profits).
3. If we entered short we need to manage the trade, at area B demand increasing than supply. we need to book profits of earlier short(sell) and look for other trade signal.
4. We may go long(buy) at B if all other factors of our system favourable and book profit at C area, where supply and demand seems to be balance
5. In that rectangle area the supply and demand are almost balanced, that is equilibrium stage(see fig 3). This is where we need to stay out.
its very easy to identify trades hindsight. we need to do this on live charts, which needs time,effort,practice ,knowledge, expereince , patience and much more.........but its very much possible, this is what basically i do and try to do every day and for every trade. so many are doing it, we can(will) do it.
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| fig 1.* These are not actual live trades ,this is a hindsight analysis for explanation. |
we need to develop a system with our method which include techniques to enter and exit our trades to be consistantly profitable. in other words we need to have a complete system which include trade plan (what to do before entry, entry/skip and exit plan),risk and money management,rules and limitaions, pshycology,performance review,trading journal etc to identify the signals of right trade (short or long) opporthunity at supply demand imbalance points.
In simple words when supply is more than demand , price will decrease and when demand is more than supply,price will increase(see fig 2).
 |
| fig 2. supply and demand relation |
we need to know and develop our system to give signals of when to go short(sell) ,when to go long(buy) and even very important is to know when to do nothing.
In the above chart (fig 1),
1. price opened gap up ,what the reason? may be due to global markets cues and overnight positive sentiment.
2. After open at point A area supply increasing then demand, here supply increasing means more traders selling than buying, we need to look for short(sell) signal with risk: reward,we can entry short or skip based on R:R ratio .risk is our initial stop loss (where it proves our trade is wrong)and reward is our target(where we book profits).
3. If we entered short we need to manage the trade, at area B demand increasing than supply. we need to book profits of earlier short(sell) and look for other trade signal.
 |
| fig 3. effect of supply, demand & quantity on price. |
4. We may go long(buy) at B if all other factors of our system favourable and book profit at C area, where supply and demand seems to be balance
5. In that rectangle area the supply and demand are almost balanced, that is equilibrium stage(see fig 3). This is where we need to stay out.
its very easy to identify trades hindsight. we need to do this on live charts, which needs time,effort,practice ,knowledge, expereince , patience and much more.........but its very much possible, this is what basically i do and try to do every day and for every trade. so many are doing it, we can(will) do it.
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