Original subtitles

Alright, let's talk about supply and demand. So,

basically, supply and demand is how the market moves. When

demand is taking control of the market, prices trading higher

and when supply is taking control of the market, prices

trading lower and this is basically how our entire

economy works really. Uh we could use the housing market as

an example when when there's a lot of demand for buyers in the

housing market but there's not enough supply, that's typically

when housing prices rise and vice versa if there's a ton of

supply in the market but nobody's really buying then

supply takes control and that's when prices usually take a dive

right so it's a very basic concept it's really present in

our everyday lives even as simple as something as going to

the grocery store supply and demand is is in everything that

we pay for it's how the world works basically so let's take a

look at how it affects us with our trading and how we can use

it to our advantage in incongruence with everything

else we're learning within this video especially market

structure and things like that. So let's dive into it. I have a

few notes here that I'd like to go over before we start talking

about the actual price chart in front of me. So again supply

and demand zones are the consolidation phase before the

impulsive phase in price. So most of you may already know

this but let's let's go over it anyway. So the consolidation

phase is when price is moving sideways. Not really making

much progress. Not really going up or down. A lot of small body

candles very indecisional in their nature small wicks to the

upside and downside just no directional no directional bias

overall and the impulsive phase is when price explodes in one

direction in this in this case on GBP USD on the 15 minute

time frame we've exploded to the upside okay so knowing that

supply and demand zones are the consolidation phase before the

impulsive phase in price let's map out one right here with

current price so looking at this this bullish leg here

price made an impulsive phase came down made a little low

broke that broke the recent high here created a new high

came back down again and then impulsively took off once again

so within that price action there we have a significant

demand zone that I'm going to highlight for you guys I'm just

going to use the rectangle tool I'm going to explain exactly

how I'm doing this in one second. So I'm going to label

it D for demand. And just extend it to right a bit. Just

so we got some room. So after price impulsively broke through

this recent high right we have a high we have a low price

impulsively made a break of structure as we learned in the

previous video about market structure so we broke that

structure and made a new high and then a new low and then

price impulsively took off again okay so let's look at the

next point that I've written down here the zone can only be

identified after the impulsive phase takes place so this is

our most recent impulsive phase those three bullish candles

right there and what that left behind is this clearly

identifiable demand zone so that's why I've highlighted it

from wick to wick with this rectangle tool so basically

it's from where the sorry consolidation started that very

top wick of the bearish candle and then I've dragged my tool

down all the way to the bottom wick of the next bearish candle

because that's the full range in which price was

consolidating within okay so that is our demand zone Now,

these zones can sometimes be used for entries but me

personally with my specific strategy, these zones are best

utilized as profit taking areas for existing trades. We're of

course going to learn about my entry techniques in further

videos because we do have a much more precise way to enter

trades than this but this is a very fundamental lesson and

it's important that we go over it. So, we've now identified

the demand zone and typically when this happens, price reach

back to it at some point, okay? So let's play price forward a

bit and see if that happens here. So we're still

consolidating up here, creating a new demand zone actually. And

there we go. So price trades back into it. So if you really

wanted to have just nice safe entries without too much

precision you could use supply and demand zones for entries.

You could for example set a limit order right at the top of

the demand zone. Place your stop loss just below the demand

zone. In this case that would be 15 pips. And as far as

targets go as I mentioned in the last part here these zones

are best utilized as profit taking areas for trades. So you

can use instead of a demand zone you can look to your left

and find a supply zone and you can set your target there and

your trade will automatically close out once you reach that

area, right? So, let's look to the left and see if we can find

a supply zone, a significant supply zone that has been

unmitigated and by unmitigated, I mean, price has not traded

back into it just yet, right? So, when price was back here

still, This demand zone was unmitigated. Now, as soon as

price traded into it, That is confirmed as a mitigated zone.

That means it's it's no longer of interest. It's no longer a

point of interest. Uh prices already mitigated it. So we can

now move forward and equilibrium has been restored

in the market between buyers and sellers right? So again

let's look to the left and find an unmitigated supply zone.

So we have supply in a lot of areas here right like there's a

lot of places that that we could look at but one that

stands out to me the most is actually this right here

going to label it supply the reason that stands out to me

the most is because it was never mitigated you see price

pushed away impulsively from that consolidation phase right

here we pushed away from it very impulsively and then

traded back up but didn't quite reach that zone so this is

still an unmitigated supply zone So this could provide a

great area for taking profit. So if I just drag that over to

the right just so we can visualize it a bit better we

can then set our target from to the beginning of that zone

right now again this is a very small trade it's only 3. 38

return usually my trades are double or triple than that we

we get much tighter entries with our entry system but this

is just an example right so you have a 15 pips stop loss just

over 50 pips of a take profit target and a 3. 38 risk reward

ratio As you can see the trade would have been triggered in

with very minimal drawdown. Let's just play it forward. And

there you go. Would have been a nice quick and easy profit

within a very short amount of time. So it's just a very basic

concept. Um some people trade this just on its own to be

honest. Like I said before we have a much more precise way of

doing things. So we're going to go over that in future videos.

Um this video is going to be quite short. So there's really

not too much to cover because our entry system is is going to

go over much more in depth ways to enter trades. And yeah. So

let's go over one more example in a in a bearish market. And

then we'll move on to the next video. Alright so let's take a

look at a bearish example now. So we're still on GBP USD on

the 15 minute time frame. And in most recent price action

what we can clearly see is this very impulsive high momentum

movement to the downside. So first things first we can mark

out a break of structure because we had a a low point

here that has clearly been violated. So let's just label

that on.

So, now that we've located a proper break of structure,

we're looking for a retracement in order to look for a trade

entry, right? So, what occurred directly before this high

momentum move? Well, there was a very tight range of

consolidation just above it, right? This was the last point

of supply before price gained enough bearish momentum to head

to the downside and break market structure prompting us

to look for a pullback and bearish continuation it. So if

we use our handy rectangle tool use the supply template we can

mark out this consolidation range as our supply zone okay

so I'm going to start from the very top wick of that bullish

candle because that's where price first started

consolidating and started moving downwards upwards

downwards upwards downwards in a very tight range and I'm

going to drag it to the bottom of that bullish wick right

there because that's the lowest point within the consolidation

range so it's very simple you literally just cover the top

and the bottom of the consolidation range that is

your supply and demand zone right in this case supply so

drag it to the right just so it's very visual and like I

said we had an impulsive movement now we're going to

anticipate a pullback into our supply zone and we'll see what

happens from there so let's play price forward Okay so

we've tapped into our supply zone. Now again this isn't my

entry style but let's just put a risk entry here which is

basically when you set a limit order and place your stop loss

just above so as soon as price enters that zone you're

triggered into the trade so 20 pips stop loss much larger than

I would prefer but this is just an example of how you can

utilize this knowledge if the supply and demand entries is

what you'd prefer. So we can target the most recent lows for

three and a half three and percent or three point five

risk reward ratio because down here that didn't work down here

we also have a very tight consolidation range so we do

have a demand level within that so if we break out the

rectangle tool again change the template to demand we can map

out our demand zone now just to keep things a little tighter

I'm going to go from the bottom of the wick here which is the

absolute bottom of the consolidation and I'm just

going to take it to the top wick of this candle here so

that's a a tighter consolidation right we don't

want to I'm not going to extend it all the way to the top here

because that would be crazy we'd have a very poor risk

toward ratio trade so we're certainly hoping that price

makes it down towards the most recent lows but you know if you

really wanted to be safe in this kind of scenario you could

put your take profit level right there at the top of the

demand zone now that again that be a very poor risk reward

ratio in future videos we'll teach you how to get much much

tighter entries with a much tighter stop loss such as like

a five pip stop loss or sometimes even less but just

for example sake we're going to have a 20 pip stop loss entry

at the beginning of the supply zone or sorry at the lowest

point of the supply zone and we're actually going to take

the take profit at the most recent low point here okay

let's just rein this a little bit so it doesn't get in the

way and let's play Price Forward. Okay, so the zone is

respected. We have another break of structure to the

downside.

Which indicates that the bearish trend is healthy at

least for the time being and headed towards the next level

of demand.

Another break of structure,

right because as we went over in the market structure section

of this course we're in a downtrend market right now a

bearish market so we need to see lower lows and lower highs

it's a lower low lower high another lower low lower high

price breaks again and creates a lower low and that new lower

low hit the take profit level as well let's just drag that

over yeah there we go So hit the take profit level. Again

not a very good risk reward ratio. 3. 5% is extremely

small. That's not what I'm aiming for. Um within my entry

parameters I have much much tighter stop losses. I'd

probably be targeting the same area. But with you know more

than half of this stop loss size. Uh so it'd be much

smaller and a much better risk reward. But again we'll go over

the exact entry types in later videos. This video is basically

just to grasp the concept of supply and demand so you can

start mapping it out on your charts. And in further videos

we're going to go over refined ways to look for supply and

demand and also better entry systems to do with supply and

demand as well so let's continue to put play price

forward I want to see what happens here with it okay so we

go much much further much further down so technically we

could have targeted another demand zone probably on a

higher time frame it would be more visible to the left but

that's completely okay for this example and as we're going on

the way down here we can see that there's more supply zones

being created because remember supply is when bearish momentum

is in control right prices head to the downside so we have many

supply areas created on the way down

Got another one here. Right, supplies being created, created

all over the place. Let's keep playing price forward and see

what happens.

Okay, we start trading higher. Slight reaction to this supply

zone right here but not significant enough.

Okay so right here this is a very interesting very

interesting zone right here. So I'm going to place this supply

zone back on the chart.

And this is another great example of supply zone

mitigation because price was just moving along and then it

tapped into that supply zone and started to drop off from

there so again if we go through this exercise one more time

even if we just use a limit order at the beginning of the

supply zone stop loss just above

even if we wanted to just target the recent lows for

another 3. 25% to add to the 3 1/ 2% over here we could easily

do that and is it respected let's see yes it sure is

alright so there's a few good examples of how to utilize

these supply and demand zones and it's within the supply and

demand zones that we actually further refine and get much

much more accurate precise very tight entries with tight stop

losses and massive risk reward. So with the with these sort of

trades they should be anywhere from 10 to 20 like a one to

10one to twenty risk reward ratio. So this is just an

example to go over the basics and I hope you guys got a good

understanding of it. Uh supply and demand is a very important

concept to grasp and it's the foundation for things that

we're going to learn a little further on within this course.

So again hope you guys enjoy this video and stay tuned for

the next one. I'll talk you soon.