Supply and Demand in Currency Market-part 03

By the last post Supply and Demand in Currency Market-part 02 we know the formation of supply and demand in Market.Now we start the next part in below.Hope its help you to understand the best things.

                      How to draw zones?

There may be different approaches on this but I like how supply and demand indicator draws them.

The key point to watch when drawing a supply or demand zone are HH [higher high] or LL[lower low] as they are starting points of a zone.

  1. Bull candle at opening starts printing a bear candle [wick] then retraces making new HH. We take HH and the opening point of the bull candle draw the supply zone as shown on the chart 5. Before drawing the zone at least we have to wait for the close of following candle. Without it we wouldn’t know our HH is HH as next candle easily can make new HH.
  1. In situation like this, where LL is made by an engulfing candle we start drawing our demand zone from LL [which is bull engulf candle] to close of previous bear candle instead of close of bull engulf candle. Unlike most other zones with cases like this we use two candles to draw a zone instead of one. Similar situation applies when drawing a supply zone with HH engulfing bear candle. We take HH of the bear engulf candle and opening of the previous candle [please see 2b]
  1. We see a usual one candle demand zone drawn. However, if you are using supply and demand indicator you will not see the demand zone printed until after candle c closed. Zone is not valid until a candle closed and not touching to zone. So it’s always better to wait for confirmation before drawing a zone.

Chart 5

supply-and-demand-trading-chart-05

Supply and Demand in Currency Market-part 04 upcoming……….

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