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0:03 hey guys welcome back to the channel supply and demand is one of the most popular trading systems among Traders it can be regarded as one of the most profitable strategies that one can use to trade the market if done right as you all know the stock market is where traders buy and sell assets the movement of the prices is due to supply and demand forces now once you understand the Dynamics of these two forces namely supply and demand you will be able to anticipate almost every price movement on any price chart you will be able to track the smart money without doing extensive quantitative analysis and crunching all those data in your Excel this video aims to give you all the necessary tools you will need to master

0:49 supply and demand in the market this topic will have two video paths in this video you will learn the core ideas on how to identify draw and trade market imbalances like professional Traders and in the upcoming video we will learn how to filter supply and demand zones using odd enhancers which will help you eliminate low probability zones and keep only those with high odds of success now the objective of this video is to help you implement this particular trading concept correctly so that you can become profitable in the long run now the video will cover the following topics we'll start with what exactly is supply and demand and we will understand what a market balance and imbalance is then we will talk about how to identify supply

1:34 and demand zones in the chart and what are the different structures of supply and demand zones that you will see in the chart then we will learn how to draw the supply and demand zones and how to trade these zones and finally we will identify the supply and demand curves and also learn about why it is important to identify the curve in the first place so without wasting any time let's jump right on it so what exactly is supply and demand the supply and demand concept states that if the supply of a stock or a commodity is high and its demand is low this will generate excess Supply which will drive the prices down and if the supply of a stock or commodity is low and the associated demand is high then this will create a scarcity in the supply which will push the prices even

2:21 higher for example during times of uncertainty and fear similar to one with Ukraine Russia War the investors will reduce their exposure in the equity markets and start buying safe haven currencies or they turn to low risk investment options like gold Convent bonds Etc to protect their investment so in such a situation the demand for these asset classes like gold and Safe Haven currencies will drive their prices even higher another example is when the fed or the Federal Reserve decides to increase the interest rates what it does is that it will make the US dollar more attractive to the investors because of the The increased interest yield this is also known as a carry trade where traders buy the currencies with high interest rates and sell those currencies

3:07 with low interest rates we have seen this recently when Indian rupee traded against USD at an all-time high now having understood the supply and demand concept we need to Define supply and demand zones and understand how prices moves on the chart basically a supply zone is located above the current price where there is a strong selling interest at a supply Zone sellers exceeds buyers and price moves down as unfilled orders get absorbed so when price reaches this level or Zone the orders get filled and the prices starts to move down and Traders are usually selling at these Supply zones and as you can see on the chart the price rallies to a certain level or a Zone then it pauses for a little time and then retraces back down

3:52 so as long as unfilled orders are sitting in this Zone prices will keep coming back to the supply zone until all these orders are filled now talking about a demand Zone a demand zone is a price area below the current market price where there is a strong buying interest and at the demand Zone the buyers exceeds the sellers and the prices goes up as unfilled orders get absorbed so we can see a lot of buying interest in the demand Zone this is most likely caused by a large number of buying orders at that level and the Traders are buying at demand zones most often when the price reaches the demand Zone some of these orders get executed and what you will see in the chart is a sharp move towards the upside as these orders get filled now when it comes to trading the market many Traders rely

4:39 heavily on technical indicators and Market sentiment to spot the shift in momentum while there are other traders who simply trade the market imbalances by searching for supply and demand zones now this term is very important in Balance I will talk about it in a short while now these songs that I have discussed are actually price levels created by Banks and institutions where unfilled orders are waiting to get filled now the whole concept of supply and demand is centered around finding the smart money orders on a price chart it is simply because they have the power to move the prices and they are the ones you should trade with the basic pattern associated with stock market is balance imbalance balance imbalance Etc and the market trades

5:25 between an established excessive level until it trades above the high of the excess that is a breakout above the resistance level or it trades below the law of the excess that is a breakdown below the support level now it may seem confusing but we will clear it out as we move further in this video so talking about a balance area if the market is balanced it means that there are equal amounts of buying and selling activities and the prices keep moving up and down within a particular sideways range now when it comes to an imbalance area it is when the buyers or sellers are in control and the market is imbalanced and it will move in the direction of the predominant players so if the sellers are in control the market will move down and if the buyers are in control the

6:11 market will move up now to understand this concept of balance and imbalance let's move to the chart and see how we can apply these key points as you can notice in the chart the blue colored boxes show balanced areas and these areas are areas where both buying and selling activities occur at the same time or simply the supply is equal to the demand because both the buyers and sellers are comfortable around this particular price range and you can notice the price move horizontally or in a sideways range now once the market moves from a balanced state to an imbalance State the price leaves the area with large candles and this represents an imbalance which means that one of the players either the buyers or the sellers exceeds or dominates the

6:57 other so on the chart we can see that the sellers exceeds the buyers and the prices drop with a very quick momentum and with strong candles once again the market enters a balanced date waiting for the price to take a directional move to either the upside or the downside area and this cycle will continue over time so in general the size title of the market is associated with balance imbalance balance imbalance Etc so in a supply and demand strategy we will be focusing on sporting these areas of balance the reason being we want to place our buy or sell orders in these areas and we want to profit from the imbalance that will move the price in a directional point of view but in order for you to trade the market imbalances

7:43 you first need to identify the supply and demand zones correctly and to do that there are a set of rules that you have to follow that will help you find these zones on any assets that you want to trade but before that let me talk about the different patterns associated with this strategy that we need to be aware of actually there are two types of structures or patterns that we need to learn the first type is reversal patterns and the second type is continuation patterns so when it comes to reversal patterns as you may already know reversal patterns are chart patterns that are formed when the trend reverses its direction that is from an up to down or a down to uptrend now when it comes to reversal patterns we have two structures the first one is a drop base rally structure in this structure

8:29 the price is moving in a downtrend creating a drop in price which is followed by a base structure and then a rally in the price towards the upside the second structure associated with reversal pattern is the rally base drop structure so in this structure the price rallies up and it creates a base structure and it is followed by a big drop in price towards the downside actually these reversal patterns are very strong and the price tends to respect them over time the second category includes continuation patterns which actually signals a trend continuation here also two price structures are formed the first type is the drop based drop structure in this structure the price drops and then it forms a base structure and then it continues moving down breaking through

9:15 the base and second structure is a rally base rally here the price rallies up at first and then it forms a base structure which will then continue moving a forming another rally now these continuation patterns are found inside the trend and most of the time when the price tests these structures the price tends to break through them and that is why we will focus only on reversal patterns because they have good odds of success compared to the continuation patterns now with that information let us move on to identifying the supply and demand zones on the chart following a simple three-step process the first step is to identify the current market price level so this is the easiest step all we have to do is to start off by identifying the current market price the second step is to look to the left from

10:02 the current market price to find extended range candles in the last drop or rally so in this step we need to find ERC type of candles so ERC stands for extended range candles and it is actually a candle that has a very large body with little or no weeks so if the body's length is equal to the length of the Wicks it is not actually an ERC candle and then we have to find the origin of the move so once we have identified an ERC type of candle we have either a drop or a rally in price now we have to find the origin of that move the origin will actually from the base of our supply or demand Zone and the base is what we require to draw the zones as we will see later on this video now let us look an example of the entire

10:47 identification process so in this example we will start at the current price and we will look to the left to find a drop or a rally in price with at least one ERC type of candle and once we identified an extended range candle we will have to identify the origin of the move the origin is actually what we call the base now that we know how to identify the supply and demand zones we need to learn how to draw our supply and demand zones but before that since the market these days is highly volatile and on most days we see the market gaps up or down in the morning it is important to include gaps in our training Market gaps are extremely useful price action structures that enables us to identify the supply and demand zones so they can act as if they are indicators of the

11:34 market imbalances as they indicate clearly where the market is going so that we can trade accordingly so from my point of view gaps are actually leading indicators for trading supply and demand imbalances so I have made a video on how to trade gaps from a price action perspective in my free Price action trading course you can check that out to know in depth about Market gaps so a general reminder a gap is an empty space between two candlesticks where the price either Rises or falls from the previous candles close with no trading occurring in between them what this represent is a big supply and demand imbalance where either the supply exceeds the demand or the demand exceeds the supply this is extremely important for us as it shows exactly where the market imbalance is

12:19 located on a price chart so for your information a gap up is a gap that occurs when the lowest price of a candle is above the highest level of the previous candle similarly a gap down develops when the highest price of a candle is below the lowest price of the previous candle now when we talk about Gap fill a gap is considered to be closed or filled when the price comes back and fills the entire range of the Gap and once the price fills the Gap it generally reverts to the direction of the prevailing Market Trend now based on the types of gaps we can anticipate either the beginning of a new trend or a reversal of a previous Trend so in supply and demand there are actually two types of gaps that are important to us number one is the professional Gap and number two are the novice caps now

13:06 talking about the professional Gap it is a gap that occurs in the opposite direction of the prevailing Trend take a look at this example we have a professional Gap that is formed in the opposite direction of the prevailing trend and the price retraces back to fill the professional Gap and we can see the price reverses up from there now this kind of Gap signals a market imbalance is created by professional Traders and it gives us a great demand Zone to trade once the price returns to fill the Gap now the second category of gaps are novice Gap it is a gap that occurs in the direction of the prevailing Trend itself so on a wise cap tends to form at the end of the trend which will in turn lead to a reversal of the trend for example in this chart it shows how the noise gaps are formed on the chart you can see the price rallied

13:52 creating a gap in the same direction of the prevailing Trend but then suddenly it reverse back down and as we have mentioned now ice caps are located at the end of the move and in the chart we can clearly see that the move ended and the price moved in the opposite direction we can also notice that there is a Zone where the reversal actually started now it is very important to understand these two types of gaps when trading supply and demand because they give us important piece of information as to where the market is willing to go next and finally we will now learn how to draw the supply and demand lines on the chart in order to draw the supply and demand zones we use two lines that we place around the base of the zones the first line is called as a distal line and the second line is called as a proximal line as I have mentioned both

14:37 these lines are placed around the base to form our supply and demand zones the digital line is the outer line of the Zone which is placed away from the current price and the proximal line is the Inner Line Of The Zone which is placed near the current price now let me talk about a few things that you should keep in mind when drawing the supply and demand zones the first and foremost thing is that you should have an idea about the structure of the base the base must actually have less than six candles and the candle's body should be less than or equal to 50 percentage of the candles total range and the price leaving the base should have at least two extended range candles and the base should not have the following things that is it should not have more than 6 candles it should not only have doji

15:23 candles and we won't accept candles with very long tails or Wicks and we don't accept tear step candles in our base so there are reasons for this for example if the base has more than six candles or only has doji candles we ignore it the reason being more than six candles and only doji candles can simply mean that the supply is equal to the demand and most of the orders are getting filled now having less than 6 candles and not a lot of doji candles shows a great imbalance and more unfilled orders are still waiting for the price to retrace back and fill them so the Zone will remain valid for them now what will happen if the base has candles with very long tails or Wicks it simply means that the level is a reaction to the previous Supply or demand zone now these Tales

16:09 shows that the market participants went all the way down to look for unfilled orders and they kept going back and forth until they got enough trying to push the prices higher so most of the liquidity in that area would have already been absorbed also a base structure that has a stair-step candles is actually a low probability Zone what I mean by a stair stepping structure is that one candle is closing below the close of the previous candle in case of a supply Zone and one candle is closing above the close of the previous candle in case of a demand zone now when it comes to drawing supply and demand zones there are a lot of different options to choose from depending upon a person's risk appetite in general there are three methods of drawing your proximal and digital lines based on your risk appetite and how conservative are you in

16:56 your trading I will show you all the three methods that you can use to draw the supply and demand zones properly and you can choose the right method that better suits your trading according to your risk tolerance we have already discussed that Supply zones can either have a rally based drop or a drop based drop structure to correctly identify a supply Zone we have to start and leave from the current market price to find strong bearish candles with large bodies or bearish ercs in this chart we can see the price rallied up in a nice uptrend and it posed for a short time creating a nice base structure with a few candles then the price dropped creating long bearish ERC scandals conforming to a strong Market imbalance around this Supply Zone and once you identify the

17:43 zones you want to trade you can now draw your lines around the base or the origin of the move now as I have mentioned there are three ways of drawing your supply Zone the first is the conservative method where the digital line is placed at the highest week of the base and the proximal line is at the lowest of the body in the pacing structure the second method is the high risk method where the digital line is placed at the highest weak of the base and the Proxima line is placed at the lowest week of the basing structure now if you decide to include both the high and low of the week you have in turn increased your risk by making your stop losses larger than it should be now the third method is the lowest method where the digital line is placed at the highest week of the base and proximal line is drawn at the highest body in the

18:29 basing structure so in a similar manner you can draw the lines on a draw based drop structure but Frankly Speaking I am not a great fan of it so I leave it up to you for the study now as the price keep retracing back to the supply Zone we can take advantage of these three tracements to place our trades around the base area you will notice how the price retraces up and drops as soon as it approaches the supply Zone without even piercing the proximal line this means that large piles of unfilled orders are placed around the supply zone now the idea is to place your orders and wait for the price to return and Trigger them now in order to identify a demand Zone we need to start from the current market price and move to the left to find a nice rally in the price or a group of bullish ERC candles and also a

19:17 base with less than than 6 Candles now we are going to do the same thing as we did for Supply zones but in the opposite manner we will start by identifying the basic structure to draw our Zone then we draw the proximal line and the digital line using the three methods of drawing in the conservative method the digital line is placed at the lowest of the week of the base and the proximal line is placed at the highest body in the basing structure in the higher risk method the digital line is placed at the lowest week of the base while the proximal line is placed at the highest week of the basing structure and finally in the low risk method the digital line as usual is placed at the lowest week of the base while the proximal line is placed at the lowest body in the basing structure now as the price keeps retracing back up to

20:04 this demand Zone we can take advantage of these retracements to place our trades around the base area and you will notice how the price retraces down and rallies as soon as it approaches the demand Zone without even piercing the Proxima line this means that a large piles of unfilled orders are placed around this demand Zone and the idea is to place your orders and wait for the price to return to trigger then and if you decide to include only the highest weeks for Supply Zone and only the lowest weeks for the demand Zone we are decreasing your odds of getting your orders filled by the market price now that is why we include a second line which largely improves our roads of entering into a position as well as keeping an eye on the risk factor also again when drawing supply and demand zones you have to keep in mind both your

20:51 risk exposure and your roads of making money now when I talk about gaps gaps are actually strong price action structures so when it comes to drawing supply and demand zones that have gaps it is important to know where we need to place our digital and proximal line now as a rule of thumb we always throw our zones at the origin of the Gap and not after it that is we place the digital and proximal lines at the highs and lows of the previous days closing prices accordingly now we come to the most important part how do we trade supply and demand zones we buy at the demand zones and we sell at the supply zones this strategy is pretty straightforward all you have to do is to identify fresh supply and demand zones to trade then place your limit orders either buy or

21:37 sell orders at or beyond the proximal line and set your stop losses at or beyond the digital line and then wait for the price to return to your supply or demand Zone to trigger your orders now take a look at this chart for the supply Zone the price rallied up post for a little while and dropped with big ERC candles so we have a great imbalance at this price level we draw our supply Zone and we wait for the price to come back and re-test this Zone and we also place our order when the price comes back the second time into the Zone our sell order gets executed and as you can see it will be a great success now take a look at another example where the price drop then pose for a while and rallied again with big ERC candles

22:22 thereby creating a demand Zone on its way up now we place our buy orders in the proximal line expecting the price to return back to the demand Zone to absorb the unfilled orders now each time the price tested our demand Zone it triggers our buy orders we can see how the price is attracted to the Zone like a magnet now there are times when you're not sure if the Zone will yield a successful trade so what you can do is to wait for the price to test the zone and give you some bullish or bearish evidence before placing your order by that way you could decrease your chances of entering a losing trade again I prefer reversal structures for trading because they are powerful and the chances of success are high compared to the continuation Trend structures

23:09 we will talk about the supply and demand curves how to identify Supply supply and demand curves and how to trade profitably using the curve so I need at least 500 likes on this video because it takes a lot of time and effort to provide quality content free of charge and if you are new to the channel make sure to subscribe and enable the Bell notification so that you won't miss out on any upcoming videos okay then let's get started supply and demand are the two Dynamic forces that establish market prices these forces are driving prices up or down based on who's in control over the market for instance if Supply exceeds the demand prices tends to go down as more sellers are interested in selling

23:55 instead of buying the asset on the contrary if the demand exceeds the supply prices tend to go up as more buyers are interested in buying instead of selling the asset or stock so the curve is basically a tool that Traders can use to determine whether the price is located near a higher time frame Supply or demand zone now this is very important as we want to buy low and sell high in order to make a profit now you may ask me why I should take the trouble of drawing the curve when I can just trade using the zones and odd enhancers to get a high probability trading setup as I have mentioned just now the reason why we determine the curve is to avoid buying high and selling low or in other words to avoid avoid buying at the supply zone or selling at a demand zone

24:40 now this step is very crucial and trading the markets using supply and demand because our goal is to trade with the trend and not against it so let's start off by identifying the supply and demand zones first to identify the supply and demand zones we will use yet another simple three-step process first we will use a larger time frame to draw our zones in control and then determine the location of the current market price on the curve so the first step is to choose your higher time frame as you may know by now that multiple time frame analysis or multi-time frame analysis is a method of analyzing at least two or three different time frames of a particular stock or an instrument to construct a bigger picture of the long term Trend now the whole idea is to trade with the trend and the multi-time

25:26 frame analysis allows us to align our trades with the higher time frame Trend now always remember that the larger the time frame the better the chances of a successful trade I have already made a video on the selection of time frames and multiple time frame analysis so if you want you can check that out now in that video I stated a rule on how to select time frames based on trading Styles the rule says that when you choose your time frame combination the higher time frame needs to be at least three to six times greater than your intermediate time frame and so on for example if you want to take a swing trade your higher time frame would be a weekly chart the intermediate time frame would be a daily chart because there are 5 days in a trading week and when considering a factor of 5 the time frame

26:12 becomes one day the even lower time frame would be the one hour chart however in this video we are going to take a positional trading approach and we are going to use the monthly chart as our higher time frame the weekly chart will be our intermediate time frame and finally the daily chart will be our lower time frame now you can use any combination of time frames based on the type of trading style that you follow the Second Step however is to add identify the supply and demand zones under control now the idea of the second step is to determine who's in control of the market is it the buyers or the sellers now after we open the monthly chart we have to start by locating the current market price then we need to identify the closest supply and demand zones to the current market price in this chart we can clearly see that the

26:58 price is near the higher time frame demand zone now take a look at another chart where the current price is located almost in the middle of the supply and demand Zone under control the reason why we look for the location of the price with respect to the zones is that we can still take a trade entry as long as the longer time frame gives us a good profit margin to make money otherwise we don't generally look to take a trade in the middle of the zone and one of the reasons being the difficulty in the placement of a proper stop loss now moving on the third and final step drawing the curve so the third step is to divide the area between the proximal lines of the supply and demand zones under control into three equal areas now the idea is that after identifying the closest supply and demand zones you have to divide the distance between them by 3

27:44 and we will get a high area a low area and an equilibrium area there are two methods to divide the curve area the first option is simply to count how many points there are between the two proximal lines of the zones which are under control and divide them by three now the second option is to use a Fibonacci retracement tool to identify the supply and demand curves without having to divide the area manually to draw the curve areas using the Fibonacci tool you have to modify the settings to get exactly three equal areas on the chart so all you have to do is to change the Fibonacci levels to the following that is zero percentage 33 percentage 66 percentage and 100 percentage and you can uncheck all other levels now that you have changed the Fibonacci settings you can draw the curve from the proximal

28:30 line of the supply Zone to the proximal line of the demand Zone the Fibonacci tool will divide the area into three equals phones automatically I hope things are clear now you may ask me why is it important to identify the curve in the first place now this is actually what separates the winners from losers in the big game the professional Traders know that when the price is high on the curve they need to sell to the retail traders who are actually excited to see an uptrend move continue so the retail Traders jump onto the trade and start placing buy orders and professional Traders actually use this High liquidity provided by the retail traders to actually short the market and move the prices even lower now similarly when the retail Traders see the prices dropping very rapidly they think this is a great

29:17 chance to short the market once again the professional Traders jump on to the opportunity to place their buy orders as the price enters new loader trees on the curve signaling a nice bullish reversal to the upside this is why it is important to identify the curve before placing any order now let's move to the more most important section that is how to trade using these curves so on the larger time frame that we have analyzed the curve serves as an indicator as to whether the price is high low or in the Middle with respect to the supply and demand zones in control now based on this information we can decide whether to buy sell or do nothing there can be different trading scenarios based on the curve when the price is very high in the curve usually inside the supply Zone our

30:04 trading bias is to sell only now if the price is high in the curve that is just below the supply Zone but higher than the equilibrium Zone we will still look to sell only on the opposite when the price is very low in the curve typically inside the demand Zone we will look to buy only and as you may have already guessed when the price is low in the curve that is just above the demand Zone but lower than the equilibrium area we will still look to buy now what happens when the price is at the equilibrium area then we will have two options that is either to trade with the prevailing Trend or do not trade at all now it actually depends on how aggressive you are with your trading style now let's put everything together and see how we can identify the supply and demand curves and plan our trade accordingly so

30:50 the first thing we do is to begin with the larger time frame to determine the location of the current market price within the supply and demand zones in the control this will actually use the framework to look for trading opportunities once we have identified the supply and demand zones in control you can use the Fibonacci tool to divide the area into three equal levels or zones as shown in the monthly chart so as a general rule of thumb we buy when the price is low on car and at the demand Zone and we sell when the price is high on the curve and at the supply zone so when the price is at an equilibrium we either trade with the prevailing Trend or we don't trade at all now in the chart the current market price is located between the low and the equilibrium areas of the curve which means that our bias is only to buy as

31:36 long as the trend is up but when we zoom in on the weekly chart we can observe how the price broke the trend line and created a new Supply Zone the price then moved down and created a new demand Zone which is actually nested inside the monthly demand zone so what we have on the monthly chart is that the price is at the low or the equilibrium area and the curve and the overall Market is uptrending but on the weekly chart the price is moving sideways with a weekly demand Zone nested inside a monthly demand zone so if you think of selling when the price test the weekly Supply Zone then you are actually trading against the higher time frame Trend which is not our objective so as we said in the beginning the higher time frame always prevails hence we should avoid selling from the weekly Supply Zone because the trend is up trending and on

32:23 top of that the reward to risk is not satisfactory instead the ideal thing to do is to wait until the prices hit the monthly or the weekly demand Zone and then look to go along at this level the buyers will be interested in buying more and hence pushing the prices higher and as we can clearly see the prices went back down to the weekly or monthly demand Zone and then rallied to the monthly Supply Zone which actually provided a low risk High reward trade so as long as we trade with the long-term Trend we are safe now let's take a look at another example on the monthly chart the current market price is high on the curve this means that our bias is only to sell from the Fresh Supply zones on Lower time frames now zooming in on our weekly chart we can observe that the

33:09 price is moving up and creating new higher highs and new higher lows we can also draw a trend line connecting the two higher lows together which indicates that the trend is towards the upside on the same weekly time frame chart we will draw our supply and demand zones to align with our views with the monthly chart which is the higher time frame here so when we do that we get a weekly Supply Zone which is nested inside the monthly Supply Zone this means that this weekly Supply Zone will have a higher probability of success because it overlaps with a higher time frame zone now the same thing applies to the demand Zone down at the bottom of the chart now these nested or overlapping zones have a higher probability of success because the higher time frame zones are more powerful than the lower ones now that we

33:55 know the price is high in the curve and the trend is up we need to find a supply Zone to place our entry and stop loss accordingly so we don't just buy in the demand Zone because the price is high in the curve also we have to notice that the price is near the monthly Supply Zone which means that soon the price will reverse down and Pierce all the demand zones that are up in the curve so in order to buy we can either use the weekly chart or use an even lower time frame like the daily to find a suitable entry zone so if the weekly zone is obvious as in this example we can just stop our analysis here and place our entry right at the proximal line of the weekly Supply Zone but if the weekly Supply Zone gives us a larger stop loss that we cannot handle or if the zone is not giving us a clear entry point then

34:41 moving down to a lower time frame is the ideal thing to do so on the lower time frame chart we have a nested daily Supply Zone within the weekly Supply zone now this has become a high probability Zone to trade-in you can place our entry at the proximal line and place our stop loss above the digital line to exit the trade we can place our Target at the opposite demand Zone the profit margin is good as we have at least a three to one reward to risk ratio in this particular trade and as you can see the price hit her entry level at the proximal line and dropped all the way down to our Target giving us a very good trade from this particular example you can also notice how the risk changes from monthly to daily Supply zones so if you were to trade the monthly Zone we would have placed a

35:28 larger stop loss and the price would almost appears half of the Zone before reversing back down compared to the weekly and daily Supply zones so it is always a great idea to use multiple time frames and trade on a particular time frame that gives you the best trading setup you can use any set of time frame as you wish so if you are an intraday Trader you can use a combination of daily hourly and 15 minute charts to conduct the analysis and find the zones in control draw the curve and identify if there is a trade opportunity in the direction of the existing Market trend in the first part of the video series we discussed the supply and demand zones in Greater detail from identifying drawing and trading these zones in this video we

36:14 will fine tune all what we have learned to make a proper setup with a higher probability of success and a better risk management in that sense we will talk about the odd enhancements and the scoring of these supply and demand levels so in order to trade the market with supply and demand strategy you must use some essential order enhancers to help you select only those zones that have a higher probability of success remember that not all supply and demand zones work you can't just buy every demand Zone and sell every Supply zone for that you need to learn how to filter them properly using odd enhancers to evaluate your zones so basically there are 21 ordin answers that have to be considered but all of them are not important to make a note of but I will

37:01 still post a link in the description of this video if you want to learn more about it in this video however I will talk about 5 important odd enhancers that you can make use of this will definitely increase your odds of success and minimize your potential losses in the market if you have been trading the markets using supply and demand for a while or you have just started with it you probably found yourself stuck not knowing which zone to choose especially if you have at least two zones which are very close to each other and you know that it's either this one or that one but which one to choose and based on what criteria you make your decision to stick to one often this will lead you to enter a trade earlier than you should or you might even place an order in a zone that the price won't visit at all this

37:47 can really be frustrating because sometimes you have to wait for a long period of time for the price to return to your Zone and Trigger your orders by choosing the wrong supply and demand zones you are leaving some of the good trades on the table so how can you filter out these supply and demand zones you have identified fight so that you only pick those which presents a high probability of success remember the goal is always to stack the odds in your favor and not the other way around the solution is to have a scoring system or a filtering system now the scoring system is based on analyzing four or five major odd enhancers that I will discuss and to give a final score to each one of them so that it all adds up on a scale of 1 to 10 in total and this system will help you score the supply

38:34 and demand zones to let you decide which ones to trade okay now let us visit each of the five odd enhancers one by one and set a criteria for scoring on each one the first and foremost code enhancer is the strength of price move from the base now the first thing to look at is the strength of the move out of the origin or the basing structure in other words we look at how the price leaves the supply or demand Zone was it actually a strong move or a weak move a strong move is one that is comprised of big candles and sometimes even gaps are formed as the price leaves the Zone on the contrary a weak move has many small candles and the drop or the rally doesn't go far from The Zone itself or

39:19 simply the price action is weak in this chart you can see that the price left the supply Zone with strong bearish candles to the downside making them very strong zones to trade you will also notice how the price did not go all the way up to test the supply zones to move down in a strong manner this shows how great an imbalance is at this Supply zone now let us take a look at an example where the move out of the base is weak this demand zone is considered week because the price left the song with very small candidates the move out of the demand zone is actually weak and as a Trader you should avoid trading such weak zones because the price will ignore it and most probably the price will pass through it the next time it test it in short if the price leaves the

40:04 Zone with long candles this means that the imbalance is strong and more unfilled orders are still available at their Zone but if the move from the zone is weakly represented by small candles this means that probably no more unfilled orders are still there for us to trade now based on this first order enhancer we can give a score from 0 to a maximum of two points so when we have a supply Zone where the price leaves the Zone with big candles this Zone shows a high probability of success because of the strength of the price move out of the basing structure now the score we will give to this zone is actually two points which is the maximum score and you will notice how the price drops when it returns to test the Zone again now when it comes to a weak Supply Zone where the price left the supply Zone

40:50 with weak and small candles what this means is that there are no more unfilled orders that are left to be traded and the sellers are losing interest in selling at this price level soon they will be outnumbered by the buyers who will take the control of the market and move the prices beyond the supply zone so this Zone will attract a score of zero based on our first criteria now the same is applicable to the demand zones also now coming to our second odd enhancer that is the time spent at the base here we will look at how many candles are in the basing structure in general the best zones have between one two a maximum of Six Candles in the base now Beyond six scandals the zone is considered weak and the price might ignore it the next time and therefore it

41:37 can result in a losing trade so this clearly means that if the imbalance is important enough to generate a directional move the price has to spend less time at the basing structure that is why we should limit the number of candles between 1 to a maximum of 6 at the pace now take a look at this chart we have a rally based drop structure but with only one basing candle at the supply Zone this is a very strong basing structure so we will give a maximum score of 2 for this Supply Zone while in case of this demand Zone the price spend a little more time and created a few more candles at the basing structure so we can give a score of 1 to this demand zone now another thing to consider while analyzing your basic candles is the Tails of the Wicks now basing candles

42:22 with long Wicks or tails are a sign of a weak zone so in this example the price spent too much time at the base creating more than 6 candles this is a weak Zone because the price did react but failed to move higher and finally it went through the song to look for another demand imbalance now the score for this demand zone is therefore zero now let us move on to the third odd and hand answer that are fresh zones now a fresh zone is a supplier demand Zone that the price has not tested yet the first retracement tends to be the strongest and the most reliable one to trade so as a Trader you should always choose fresh untested zones to stack the odds in your favor after a second retracement to the Zone it is better known to consider it

43:08 because there might not be enough Supply or demand to move the prices as most of the orders might be absorbed during the two initial retracements now look at this chart we have supplies on that the price has not tested yet these are actually good zones to short once the price retraces back to this zone now the same thing goes for a fresh demand Zone if the price returns to test it we look to go long in the first retracement the price tested the supply Zone and moved down the same thing happened in the second and the third retracements but after the third retracement the price broke above the supply Zone which indicates that no more Supply was found there similarly you can notice how the price left the supply Zone after the second and third retracement the strength of the last two moves are

43:54 weakening which in turn signals a potential shift in the market imbalance as more buyers are stepping in thereby creating a breakout Above This Supply zone now consider another example where the price broke the demand Zone after the second retracement you can notice how the price penetrates deeper inside the demand Zone with each retracement this is a very good signal that the supply zone is no more valid and a potential breakthrough is expected now after the second retracement the demand zone is no longer valid as the market imbalance shifted from demand to supply now in terms of scoring a fresh Zone that has not been tested you can give a score of Maximum three points this is the one we need to focus on when trading supply and demand zones in the market we

44:41 need to stack the odds in our favor by choosing fresh untested zones to trade now if the price retraces back to our zone for a second time we can give it a score of 1.5 points now we can still consider this Zone but again we will always be looking for high probability trading setups now if the price retraces back again for a third time we will give it a score of 0 as it has less probability of success at this point most of the unfilled orders are already gone and the price might Pierce The Zone and move away to find another Supply or demand Zone the fourth odd enhancer is reward to risk ratio the reward to risk ratio as you may already know gives us a good idea of whether we have a chance of making money trading on a particular supply of demand zone or not so we need

45:28 to choose those trading opportunities that offer us at least a three to one reward to risk ratio a ratio of Threes to 1 is a perfect ratio because we are risking one point to gain three times for example if a trade has a 10 point stop loss then the target should be at least 30 points away from my entry point so if the market does not give you a three is to one ratio then it is better to stay away from this trade and we will look for another opportunity which offers us a three to one reward to risk ratio but you can also scale it down if you want a two is to one ratio is also a good ratio and the trades could work just fine but again we are always looking for high probability setups and we leave those with a low rate of success and a one is to one Ratio or less is considered a known valid entry

46:15 since the market does not offer a good opportunity to make money if the Zone gives us at least a three to one ratio we give a score of three points which is the maximum score to this particular zone now if the Zone gives you a 1.5 is to one or a 2 is to one ratio then we will give it a score of 1.5 points and finally if the Zone gives us a ratio of 1 is to one or less then we will give it a zero score because we will ignore the zone and we will wait for another opportunity now the last and final order answer that I will be talking about are the overlapping zones these are also called as nested zones now the idea here is to look for overlapping zones from different time frames for example if you have a supply Zone on a daily time frame that is located inside a monthly Supply

47:02 Zone this daily Supply zone is considered strong and it presents a high probability of success so as a thumb rule higher time frame zones are much more powerful than smaller ones so if your long over time frame zone is nested inside a higher time frame one it is actually a strong zone so here in this example we have a daily Zone indicated in blue that is nested inside a higher time frame monthly Supply Zone which is represented in red but how to find them and draw them to find the nested zones you start with the higher time frame now in this example the higher time frame is monthly so we draw the monthly Supply Zone then we will move to the Daily time frame to look for Supply zones within the monthly Zone that we we have already Mar you can also have a daily demand

47:49 Zone nested inside a weekly demand Zone and so on and so forth I hope you get the basic idea now I won't be including this odd enhancer in my scoring criteria because not all levels present such an opportunity and the chances of missing out will be higher if we make it a strict criteria to follow now that we have a scoring system in place to help us score the supply and demand zones we need to interpret the final score to either execute the trade or wait for more confirmations now let us say a Zone has a score of 10 points so a final score of 10 point mean that we can place a limit order at the supply or demand Zone that we want to trade beforehand so that you will not change your mind for some reason now this order will get executed once the price reaches 10

48:35 pointer level namely the proximal level of the Zone but make sure you place the stop loss order at or beyond the digital line to protect your position now this score of 10 shows that the zone is a strong Zone fresh with less than six candles at the base and giving us a good reward tourist ratio to make money now what if a Zone has a score between 8 and 9 bonds now if the score is between 8 and 9 points we can think about a confirmation order actually a confirmation order is an order placed when the price first dips into the zone of interest and Crosses above or below the proximal line of the supply of demand zone so the idea is to confirm that the price is moving in our preferred direction of trade so any one

49:21 candle has to close inside the Zone first and the second candle on its way out has to pierce the proximal line of our zone now the moment the price pierces the proximal line replace a market order here we don't place a limit order because the odds are not completely in favor of us the stop loss order setting is standard as always and finally what if we get a score of less than 8 points now if the final score is below 8 points it simply means that there is no trade the supply or demand Zone with a score below 8 points is actually weak soon that has a low probability of success so it is better you avoid taking the trade as I have mentioned earlier you can read more about other odd enhancers in the link provided in the description and you can

50:07 be flexible enough to change the criteria and scoring according to your convenience now with that being said the odd enhancers we discussed here are very important tools to help you filter the supply and demand zones in addition to that the four odd enhancers used in this filtering system are what you need to score your supply and demand zones this will further help to fine tune your filtering system but remember that these odd enhancers don't guarantee the success of your trade instead what it does is that they give you a better chance of taking the right trades when they show up and leaving the ones that have a low probability of success so it is up to you to do your research learn more back test on multiple charts and finally implement it in your trading to see if it really works for you so if you

50:54 have learned something new please do like the video subscribe to the channel and enable the Bell icon so that you won't miss out on the upcoming videos I will see you guys in the next video till then see