Trading on Supply Demand (1)

Trading on Supply Demand Arjun Bakshi

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Introduction • Charts represent filled orders over a period of time. • Our job is to find the areas where maximum unfilled orders are located. • Some candles represent accumulation of orders & others represent consumed orders.

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• Boring candles – Supply-Demand in Balance. Institutions are most probably accumulating orders • Exciting Candles- Imbalance between Supply & Demand found at the origin of these candles. • Institutions DON’T CHASE PRICE. So, there is less institutional activity in these candles. • Boring candle -> Body of candle<= 50% of Range of candle • Exciting candle -> Body > 50% Range Arjun Bakshi

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Arjun Bakshi

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How do prices turn? • Prices turn when there is an imbalance of Supply & Demand • Our job is to locate these areas of imbalance • An explosive move followed by a base followed by an Explosive move represents this area of imbalance • How do these look on the chart?

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Setups • • • •

Rally Base Rally Drop Base Drop Rally Base Drop Drop Base Rally

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Rally Base Rally

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Drop Base Drop

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Drop Base Rally

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Rally Base Drop

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Multiple Timeframes • Multiple time frames are necessary to provide a correct perspective of the overall market. • Higher time frame - Range • Intermediate Time Frame - Trend • Lower Time Frame - Execution • Use a factor of 5 approximately

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For Equity Markets Trading Style

Timeframe

Positional

Swing

Intraday-1

Intraday-2

Range

Monthly

Weekly

Daily

60 min.

Trend

Weekly

Daily

60 min.

15 min.

Execution

Daily

60-240 min.

15 min.

5 min.

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Higher Timeframe RANGE • Look for untested Demand & Supply Zones on the Range Timeframe. • Demand zone will be below CMP • Supply Zone will be above CMP • Divide the area between the Demand & Supply zones into 3 equal parts

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ONGC Example

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Intermediate Timeframe – Trend • Check the trend on intermediate time frame. • Can be based on whatever you are comfortable with. • Ex:- Moving Averages, ADX +DI/-DI, Price action, etc. Just be consistent with whatever you are using

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Lower time frame – Execution • If price is Hi or very Hi in Range time frame, look for opportunities to short in good quality Supply zones • If price is Low or very low on Range time frame, look for opportunities to go long in good quality demand zones • If price is in equilibrium, trade in direction of trend of Intermediate timeframe. • Example, if price is in equilibrium & trend on intermediate timeframe is Up, then look for going long in good quality demand zones. • Target- Opposing level of Demand/ Supply. Can also look at monetary tgts or R:R tgts. Arjun Bakshi

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ONGC Example Execution Timeframe

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Good Quality Zone • Will have less than 5-6 base candles • Will have a very powerful leg out Wide body candles, gaps. • Ideally should be untested or very faint test of the zone

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Nifty Day trade for 10/8/2015

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Nifty Trend 60 min.

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Nifty Trade-1

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Nifty Trade-2

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More stuff to Read/Watch • http://www.set-andforget.com/supply_demand_beginners • http://www.fxstreet.com/search/contributors/ authors/author.aspx?id=5766b88a-1a31-41028221-e9bf77216d2f&contenttype=w

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Thanks for Reading

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