Quickly Improve Your Supply And Demand Trading With This Simple Trick

Want to find the best zones to trade, and make more money with supply and demand (S & D)?

Then you should definitely keep reading today’s post!

Improving your S & D trading usually involves finding better zones to trade. That’s where everyone tends to focus. But hey, while it’s important to aim for top-quality zones, here’s one of my best tips: You can improve your results not just by finding higher quality zones or waiting for more confirmation, but by trading a specific type of zone.

Curious to know what it is?

Then let’s get started…

If You Want To Improve Your Trading, Focus On These Zone ONLY

Let me cut to the chase:

The fastest, simplest way to improve your supply and demand trading? Focus on trading rally-base-drop/drop-base-rally zones over rally/base/rally – drop/base/drop zones.

It’s that simple. Why, you ask?

Let’s break it down:

One misconception in supply & demand trading is thinking RBR/DBD zones hold the same power as RBD/DBR zones. It’s easy to think, since all zones look similar, they all behave the same. But the level of supply or demand available at both zones differs greatly due to the previous price action.

The base of the RBR zone forms after price has already shot up. This makes everyone feel more bullish and excited, which means there’s increased demand floating around.

But the smart money doesn’t need that demand.

They must buy to set off the next rally, remember?

Even though price declines during the base, it’s swift and short-lived; supply is weak! With so many eager buyers, smart money have a smaller pool of supply (selling) to match against their buys (demand), resulting in a weaker RBR zone – SM hold less incentive to make price reverse

Now, let’s compare with a Drop-Base-Rally zone…

Market sentiment before the Drop-Base-Rally (DBR) zone formed was clearly bearish, with masses of traders shorting Eur/Usd to capture the downtrend (on all timeframes, too!)

Compare this to the RBR zone seen earlier.

Night and day, right?

The sheer amount of selling pressure (supply) available to the smart money before they started buying was way higher during the formation of the DBR zone compared to the RBR zone. Smart money had to execute a much larger buy position (demand) to reverse the downtrend, making the DBR zone more powerful. The stronger the opposing force before the zone forms, the more powerful the zone itself is likely to be.

Supply and demand zones preceded by a flood of opposing orders (selling before a demand zone, buying before a supply zone) are more likely to trigger reversals for this reason.

RBD/DBR Zones: Represent areas where the smart money placed large orders to initiate a trend reversal. This concentrated activity increases the likelihood of a strong reaction when price revisits the zone.

RBR/DBD Zones: These zones might be formed by smaller, profit-taking orders or by retail traders getting caught up in the trend. Less order flow can lead to weaker reactions and less reliable reversals.

Why Rally-Base-Drop And Drop-Base-Rally Zones Perform Better

I bet you’re starting to get this, right?

If you want to improve your supply and demand trading skills, forget about RBR/DBD zones. Instead, focus on making trades from RBD and DBR zones.

Here’s the difference:

• RBD/DBR Zones: Always form turning points, where the smart money is actively working against the prevailing market sentiment. They’re buying when everyone else is selling (DBR) or selling when everyone else is buying (RBD). This counter-trend force requires significant investment, making the smart money more likely to reverse price when it returns to RBD/DBR zones.

The stronger the prevailing trend or market sentiment before the zone formed, the more significant the shift in supply and demand, and the more likely the zone will cause future reversals.

• RBR/DBD Zones: Usually form mid-trend, often due to profit-taking. The smart money is essentially going with the flow, which requires less investment and results in a lower chance of a reversal.

Pro Tip: How To Quickly Asses Market Sentiment (Easy!)

Gauging market sentiment before the zone forms is key. This helps you understand the potential power of the zone and the likelihood of a reversal.

Here’s the simplest way to do it:

Zoom In and Look Back: Bring the right-hand side of your chart window to the candlestick just before the lowest swing low (for demand zones) or the highest swing high (for supply zones). This gives you a clear view of what was happening right before the zone formed and how bullish/bearish market sentiment was; both for general traders participants and the smart money.

See the difference in persective?

Put yourself in the typical trader’s shoes: price had been relentlessly falling, creating a sense of doom and gloom. Most likely, you’d be feeling pretty bearish too, along with the majority of the market.

Did You Know: When price breaks a significant swing high or low to form an RBD or DBR zone, it can trigger a psychological shift in the market. Traders who were riding the previous trend might panic and close their positions, adding to the momentum of the reversal.

This can lead to more explosive price movements and better trading opportunities.

RBD and DBR zones tend to outperform RBR and DBD zones because they represent areas where the smart money is actively fighting against the prevailing market sentiment and potentially entering or exiting large positions. This creates more significant imbalances in supply and demand, leading to stronger and more reliable reversals.

The Bottom Line

For now, focus your energy on RBD and DBR zones.

The zones represent areas where smart money countered the prevailing market sentiment, leading to stronger and more reliable reversals. Sure, RBR and DBD zones can still offer some decent trades, but they’re trickier. You need more due diligence because they’re less likely to trigger dramatic reversals or trend changes.

So, play it safe and stick to RBDs and DBRs.

Your trading account will thank you!