My strategy is so much more than simply drawing supply and demand zones and when you’ve stared at the charts for 10 years, certain aspects of price action ring alarm bells and signal that a trade should be passed.
In this article I’m going to show you one of my very simple price action filters that I call the “V return”. You’ll see it on every instrument and every timeframe.
So let’s take a look at how it works with some examples.
When the market makes a “V” shaped return to a supply zone, it is highly likely the zone will not hold. This also holds true for an upside down V approach to a demand zone. We want to see either a flagging return or rounded return to a zone in order to be a high probability trade.
This is a slide from my course on Udemy.com which shows in diagrammatic form what we are looking for:
Now let’s look at a trade that I should have known better not to take because my “V” filter had signaled against it! You can see the market made an upside down V return to two demand zones (the upper two yellow boxes) where I went long. Price briefly paused at each zone – it often does when giving a false confirmation that it may turn. But eventually it made it’s way to the 3rd and final zone below (see next chart). On both trades I took a loss, which was unnecessary if I had stuck to my rules!
By the time we got to the 3rd zone (lower yellow box), the effects of the V return were weaker and we also had a major support level in confluence with demand.This zone gave a winning trade.
Finally, sometimes the market will throw a “curveball” and a V shaped return to a zone will work. Don’t let this fool you because the probabilities of the zone not holding are a lot higher. I’m going to leave it as an exercise for the reader to work out the probabilities for this filter across various instruments, timeframes, etc.
I hope this article has helped you. If you enjoyed it, please use the social media buttons below to share – thank you!
Supply & Demand Course On Udemy
We’ve really only skimmed the surface when it comes to trading strategy.
Once you add advanced concepts and specific price patterns, your understanding of these markets will really come together!
Head on over to my Udemy course and learn the full strategy, including advanced supply & demand concepts, market structure, how the smart money manipulates the market and how to apply these concepts to Forex, Stock Indices, Commodities and Crypto Currencies. Find out more here: https://www.udemy.com/course/professional-trading-with-institutional-supply-demand/