High accuracy Top Supply Demand Trading and Analysis (Case Study: February 4-7, 2020 ) – The supply and demand concept is a core component of economic theory. The Supply and Demand rule states that if the supply of a commodity is high and the demand is low, this generates excess which drives the price down.
And conversely, if the supply of a commodity is low and the demand is high, this creates a scarcity, pushing the price higher.
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The rules of supply and demand analysis in Forex are quite simple.
You should BUY when the price action approaches a demand level and bounces upwards.
You expect the price to increase as a result of the aggregated buy orders in the demand zone. Therefore, you have the opportunity to ride an upcoming price swing.
You should SELL when the price reaches a supply level and bounces downwards.
You assume that the price action will begin to trigger the aggregated sell orders in the area, which is likely to lead to a price drop. Thus, this creates an opportunity to ride a bearish move on the chart.
You would put a stop loss order right below the demand area when you are long in the market. Conversely, put your stop loss order right above the supply area.