Levels of supply and demand

Supply and demand levels also known as supports and resistances are very effective and often used tools for trading. I would say that probably every successful trader uses supports and resistances. Even if they no longer draw them on charts somewhere in their head they are still there visually.

What is it ?

as the name implies, these are points where the market reacts quite often. Here the price often goes up or down depending on who is winning at the moment(buyers or sellers).

There are different ways of marking supply and demand levels. Some use simple straight lines, others take the point as a larger area and not just a line. As we can see in the first picture I used a line to mark the support. On the other hand in the second picture as an area.

In both cases the support was broken to the downside and a price crash ensued. once the support is broken it becomes resistance.

Trading levels

I will show you and describe the main idea of level trading, of course it will never be that simple, there are many traps lurking in the market and all you need to perfect this technique is experience, watching the market day by day. Nothing is without work and trading is definitely not easy.

Trading from resistance to support

The main objective of this strategy is to buy at the support level, sell at the resistance level and vice versa.

and since it’s easier to understand when you see it, let me show you.

Keep in mind that this is a very simplified description, but the following is how trading proceeds from support to resistance and vice versa.

Brakeouts and Fakeouts

It is also very popular to trade brakeout levels.

A level breakout means that the market decides to break through a level, whether it is resistance or support.

I deliberately chose this picture because we can see fakeout and brakeout at the same time.

You can see an aggressive breakout to the upside and purely green candles which most of the time also may not be the rule and the market will give you a hard time. Here is just an example of what such a breakout looks like, unfortunately it doesn’t always succeed.

Even before the actual breakout, you can see the fakeout which is a very common event in the market and especially when you trade levels. There are many strategies to successfully spot a fakeout, but I bet none of them are 100%. Because if the market wants your liquidity it will always come back. That’s why I also enforce the rule to always trade with the trend because the trend is your friend.

I hope I’ve shed some light on the levels, of course it’s not even close to everything, it’s just the basics and we’ll dive deeper into this later.

But that’s all for today, thank you for your time and have a good day on the markets.

Leave a Reply

Your email address will not be published. Required fields are marked *