Friday, 18 January 2019

Supply & Demand zone validation

Today we are going to focus on supply and demand zone validation. hopefully we will answer the important question of how long a zone can remain unvisited and still be considered valid. It is important to remember that in order to be a profitable & consistent trader we have to trade with the market makers & not against them.

To understand whether the banks will cause the market to return to a point where they have already opened trades; requires a timer to be set and monitored on how quickly the market price should return to the area after momentum has caused price movement to take place up or down.
 The rule I always use is the market should return to the area where you have suspected the banks have been placing their trades within 45 days. The 45 day rule applies only to supply & demand zones which you identified on the daily chart. For the 1 hour chart the market should return to the supply & demand zones within 24 hours after it has been created. You can have a little bit of a cushion because nothing in the market is dead set in stone.
It can happen that the price returns to an area 27 hours after it has been created and work out exactly as planned, just make sure the market doesn't take a significant amount of time to return to an area like 40 hours for an area found on the 1 hour chart or 60 days for an area identified on the daily chart. The banks want to get all of their trades placed as soon as possible, but because they operate off different time-frames it means we have to use different rules as their time horizons are not the same.

It is all due to the way the market structure will react once the banks have got some of their trades placed. It doesn't occur as numerous as the typical reversal when all of the bank trades will be placed at a very similar price, but it occurs often enough that it should be taken into consideration when drawing areas based off where the banks have placed their trades.


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