Supply and Demand Bounce Forex Trading Strategy

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Supply and Demand Bounce Forex Trading Strategy

Supply and Demand trading is probably one of the most overlooked trading strategies, especially among newbies. New traders often gravitate to trend reversal strategies, breakout strategies, crossover strategies and etc. Now, I have nothing against these strategies. With the right trade setups, these strategies could work very well. However, it could also do us well if we could look into one of the better types of trading strategies that successful traders use, which is Supply and Demand.

Supply and Demand is brought about by the idea that certain reversal points in the market is an area where pending orders are left unfilled and where price could reverse. These are based on points where price took off from with strong momentum. No one knows for sure if there are indeed unfilled orders on such areas. However, if you would look at charts, these points where price previously reversed tend to hold as a supply or demand zone where price usually bounces off.

There are different ways to trade Supply and Demand trade setups. Some traders use pending limit entry orders to enter the market at a good price. Traders often place the limit entry orders on the supply or demand zones and hope that price would reverse. Not all trades would work however those that does tend to produce the best yields. Another approach is that traders would often wait for a reversal candlestick pattern to occur as price touches the supply or demand zone. This does provide a bit more confirmation but still is not as accurate as most traders hope it would be.

Supply and Demand Bounce Forex Trading Strategy provides a confirmed reversal entry setup based on bounces off the supply or demand zones. These entries give up a bit of the yields in exchange for more confirmation on the reversal setup.

Supply Demand

Supply Demand is a custom technical indicator which helps traders identify supply and demand zones.

One of the reasons why many newbies skip learning about Supply and Demand strategies is that they are unsure whether they are plotting the correct supply or demand zones. It is not easy to identify such zones. In fact, some professional traders and gurus claim it takes about a year to be proficient in identifying supply and demand zones correctly.

This indicator solves this dilemma by plotting the zones automatically for the traders. The zones are based on fractals. Not all fractals are considered as a supply or demand zone. Only fractals that show a quick reversal from the area identified as a supply or demand zone. Once a supply or demand zone is breached it is invalidated and removed from the chart.

Mega Trend

Mega Trend is a trend following indicator which is a modified version of a moving average. It is basically a moving average line based on the Hull Moving Average (HMA)

There are many types of moving averages. The most basic among the moving averages is the Simple Moving Average (SMA). Moving averages are great tools for traders because it helps traders identify trends, trend reversals and retracement areas. However, most moving average lines are either lagging or are very erratic. There are many attempts to smoothen out the moving average line. Some gravitate towards removing the lag and making the line more responsive. Others try to smoothen out the line to make it more reliable and less susceptible to price spikes. However, these two are often opposites. You either get one or the other.

Mega Trend is a moving average line that significantly reduces the lag while managing to smoothen out the line at the same time. This gives traders a good balance between a responsive moving average line and a smooth moving average line.

The Mega Trend line also has a feature wherein it changes color whenever it detects a trend reversal. This helps traders identify objectively if the trend has reversed.

Trading Strategy

Supply and Demand strategies have two common disadvantages. One is that newbies would often find it difficult to identify supply and demand zones. Second is that most entries when trading supply and demand zones are unconfirmed. This strategy helps traders identify supply and demand zones and enter trades with confirmation.

The Supply Demand indicator will be used to plot the zones automatically. It will plot a red zone to represent a supply zone, and a blue zone to represent a demand zone. Traders should wait for price to show that it is bouncing off the zone. We will then be using the Mega Trend indicator to confirm the reversal. This will be based simply on the changing of the color of the Mega Trend line.

Indicators:

  • Mega trend
    • Period: 90
  • SupplyDemand

Preferred Time Frames: 30-minute, 1-hour, 4-hour and daily charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should touch a demand zone area represented by a blue box.
  • Price should bounce off it to the upside.
  • The Major Trend line should change to blue confirming the trend reversal.
  • Enter a buy order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss below the Mega Trend line.

Exit

  • Close the trade as soon as the Mega Trend line changes to red.

Supply and Demand Bounce Forex Trading Strategy

Supply and Demand Bounce Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price should touch a supply zone area represented by a red box.
  • Price should bounce off it to the downside.
  • The Major Trend line should change to red confirming the trend reversal.
  • Enter a sell order on the confirmation of these conditions.

Stop Loss

  • Set the stop loss above the Mega Trend line.

Exit

  • Close the trade as soon as the Mega Trend line changes to blue.

Supply and Demand Bounce Forex Trading Strategy 3

Supply and Demand Bounce Forex Trading Strategy 4

Conclusion

Supply and Demand trading strategies are some of the better type of trading strategies. However, it is also very difficult to master.

Supply and Demand Bounce Forex Trading Strategy simplifies things by helping traders identify a possible supply or demand zone and by providing trade entries based on a confirmation.


Forex Trading Strategies Installation Instructions

Supply and Demand Bounce Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.

The essence of this forex strategy is to transform the accumulated history data and trading signals.

Supply and Demand Bounce Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.

Based on this information, traders can assume further price movement and adjust this strategy accordingly.

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How to install Supply and Demand Bounce Forex Trading Strategy?

  • Download Supply and Demand Bounce Forex Trading Strategy.zip
  • *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
  • Copy tpl file (Template) to your Metatrader Directory / templates /
  • Start or restart your Metatrader Client
  • Select Chart and Timeframe where you want to test your forex strategy
  • Right click on your trading chart and hover on “Template”
  • Move right to select Supply and Demand Bounce Forex Trading Strategy
  • You will see Supply and Demand Bounce Forex Trading Strategy is available on your Chart

*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.

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