Buyers want a certain amount (quantity) of a product or service, which is known as demand. The quantity demanded is the amount of a product that people are willing to buy at a given price; the demand relationship is the relationship between price and quantity demanded. The term “supply” refers to how much the market has to offer.
Sam Seiden’s concept of Supply and Demand Trading describes two types of zone entry:
They include Sell at Supply Zone and Buy at Demand Zone.
In trading SnD, there are five generally acceptable rules to follow:
These are essential movements to be aware of if you are trading SND.
Rally= Buyers outnumber Sellers;
Drop= Sellers outnumber Buyers;
Base= Sellers and Buyers in balance
A continuous base is a type of base in which the direction of an initial price trip is maintained before the base is formed. Drop base drop (DBD) as a Supply Zone and rally base rally (RBR) as a Demand Zone are the two types of continuous bases that we have.
The Supply and Demand zones appear in a variety of patterns. We have the Rally Base Rally, for example (RBR). This is frequently seen in a bullish market structure. The price rises (rally) and then falls into a base (where the price has just been retraced). You will often see an indecision candle on which we draw our zone. It climbs higher after the Base. (Applause.) Take a look at the illustration below.
You can see it on the chart in the example below. It is pretty crystal clear. And I will say it again: if you place your stop loss 5-10 pips below the zone, you can get some really lovely entries.
We will look at this in more detail in the following chapters because you will need to search the Supply and Demand Zones in different ways. However, keep in mind that you are drawing your zone on an indecision candle.
In supply and demand, the base is also crucial. The stronger the base, the less traffic there is.
In conclusion, the stronger the zone is, the faster you get out of it. I recommend that you only trade the stronger zones initially, especially if you are new to Supply and Demand.