A beginner's guide to trading - Chapter 2

vanathi Mod Updated   
In Chapter – 1, we have seen about candlesticks. Today we are going to see about supply & demand concept with candlesticks. Lets first see about the normal concept people follow for supply/demand zone. I have used numbers 1,2,3 and 4 to mark supply and demand zones in this post.
In the above chart 1 acts as demand zone as price had good upside move from it. When price reach 2, as per normal demand zone concept, people think there will be pending orders to buy from big institutions at that level and we can buy. At 2 buyers were trying to take charge and we had a big bull candle. That was not institutional buyers, but from retails traders. It was proved as price did not move much from that. At 3 price was broken downside by a big bear candle. And at that level demand zone became supply zone. At 4 price had a nice fall. This is an example about how a demand zone becomes supply zone. Trend strength determines whether a particular level will act as supply or demand zone. Now we will see another example to understand trend strength.
In the above chart, price had good move from 2 and becomes demand zone. When price reach 3, there was small upside move, but price fall from 4. Look at the arrow marks.
When bearish strength increases, the demand zone becomes supply zone. Simply buying whenever you see a demand zone wont work. It wont give you consistent money. But understanding the trend strength and trading according to it will help you to make consistent money.
In the chart above, at 3 price showed bearish strength & there was not even a small fight from bulls, instead bears won without much competition and price fall down.
In the chart above, before price break down @ 3, note how bull strength was reducing which I have marked.
Always trade with the knowledge of trend strength.
Always trade with stop loss.
Always trade with the knowledge of trend direction.


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