5 Mistakes You're Making With Supply & Demand Trading

Name: 5 Mistakes You're Making With Supply & Demand Trading
Uploaded: 2023-06-25T17:00:11.000Z
Duration: 56 min 31 s

Common Mistakes in Trading Supply and Demand Concepts

In this section, the speaker discusses five common mistakes traders make when trading supply and demand concepts. These mistakes can negatively impact trading results and confidence in one's strategy. The speaker aims to help traders overcome these mistakes.

Mistake #1: Trading from Weak Structure

Trading from weak structure is a common mistake.

It is important to zoom out and consider the bigger picture.

Weak structure occurs when trying to trade against the overall trend.

Traders often get caught shorting from weak highs or longing from weak lows.

Mistake #2: Trading Against the Objective

The opposite of trading from weak structure is trading from strong structure.

Traders should aim to trade from strong structure and target weak structure.

However, there are situations where it may not be advisable to trade from strong structure.

Mistake #3: Ignoring Contextual Factors

Ignoring contextual factors can lead to poor trading decisions.

Traders should consider factors such as market conditions, news events, and economic data.

Mistake #4: Overcomplicating Analysis

Overcomplicating analysis can hinder trading success.

Keeping analysis simple and focusing on key factors is crucial.

Mistake #5: Lack of Discipline in Trade Execution

Lack of discipline in trade execution can undermine profitability.

Traders should follow their predefined rules and avoid impulsive actions.

Conclusion

The speaker concludes by emphasizing the importance of avoiding these common mistakes when trading supply and demand concepts. By addressing these mistakes, traders can improve their results and confidence in their strategies.

Understanding the Internal Structure

In this section, the speaker discusses how to analyze and trade based on the internal structure of price movements. They emphasize the importance of identifying strong and weak structures and how to use them for trading opportunities.

Analyzing Internal Structure

The internal structure refers to the smaller price swings within a larger trend.

When the internal structure shifts bullish, it indicates strong support levels.

Buying from strong internal lows and targeting weak highs is a viable strategy.

Conversely, when the internal structure shifts bearish, it indicates potential resistance levels.

Identifying Objectives and Mitigated Areas

It is crucial to determine the current objective of the internal structure.

If the objective has been completed or mitigated, it may be time for a shift in trading strategy.

For example, if a swing pullback has reached its target area, expect a potential reversal in direction.

Trading from Strong to Weak Structures

The general principle is to trade from strong structures (support) towards weak structures (resistance).

However, it's essential to consider whether an objective has been completed or mitigated before entering trades.

Applying Concepts in Trading

This section focuses on applying the concepts discussed earlier in real trading scenarios. The speaker provides examples on charts to illustrate how to identify strong and weak structures for effective trading decisions.

Example 1: Zooming Out for Larger Swing Structure Analysis

By zooming out on a chart, you can observe larger swing structures that form part of an overall trend.

Within these larger swings, there are still opportunities to trade based on internal structures.

Example 2: Trading Within Internal Structures

When analyzing internal structures within larger swings, look for higher lows as potential buying opportunities.

However, be mindful of the objective and whether it has been completed or mitigated.

Once the objective is fulfilled, expect a shift in the internal structure and potential reversal.

Example 3: Understanding Probabilities and Mitigated Areas

It's crucial to understand that probabilities change as objectives are completed or mitigated.

When a strong internal low has broken previous highs but the objective is complete, expect a potential reversal.

Many traders make losses by not recognizing when an objective has been fulfilled.

Trading Strategies Based on Internal Structure

This section delves deeper into trading strategies based on analyzing internal structures. The speaker emphasizes the importance of identifying premium supply areas and understanding how they affect price movements.

Identifying Premium Supply Areas

Premium supply areas refer to levels where previous swing ranges have been mitigated.

These areas indicate potential resistance and can be used to determine trade entry points.

Trading Within Internal Structures - Continued

When trading within internal structures, focus on buying higher lows until reaching the premium supply area.

Once at the premium supply area, probabilities of a swing pullback completing increase significantly.

Recognizing Objective Completion

When an objective is complete (e.g., reaching premium supply), expect a shift in the internal structure.

Traders should avoid buying from strong internal lows after objectives have been fulfilled.

Understanding Probability Shifts

This section further explores probability shifts based on completed objectives. The speaker warns against assuming continued bullish movement after an objective is met and provides additional examples for clarity.

Probability Shifts After Objective Completion

After completing an objective (e.g., reaching premium supply), expect a shift in the internal structure towards bearish movement.

Many traders mistakenly assume continued bullishness without considering changing probabilities.

Example: Break of Swing Structure

When a swing structure is broken, it indicates a potential shift in the internal structure.

Recognize that objectives may have been fulfilled and adjust trading strategies accordingly.

Final Thoughts on Trading from Strong to Weak Structures

In this final section, the speaker summarizes the key points discussed throughout the video and emphasizes the importance of understanding objectives and mitigated areas for successful trading.

Importance of Objectives and Mitigated Areas

Understanding objectives and mitigated areas is crucial for effective trading decisions.

Recognizing when an objective has been completed helps avoid losses and adjust strategies accordingly.

Trading from Strong to Weak Structures - Recap

The general principle is to trade from strong structures (support) towards weak structures (resistance).

However, always consider whether an objective has been fulfilled or if probabilities have shifted.

These notes provide a comprehensive overview of the transcript, highlighting key concepts such as analyzing internal structures, identifying objectives and mitigated areas, recognizing probability shifts, and implementing trading strategies based on strong and weak structures.

New Section

This section discusses the importance of not trading against the objective and avoiding buying from strong internal lows that have completed their job.

Mistake #1: Trading Against the Objective

When a strong internal low has completed its job, buying from that level becomes less probable.

Pullbacks to premium supply after completing the objective indicate a higher likelihood of failure.

Avoid trading against the objective to increase probabilities of success.

Mistake #2: Having Wrong Expectations of Price

Understanding the expectations of price movement is crucial when trading supply and demand zones.

Demand zones during bearish order flow are only reaction points for pullbacks into supply.

Fresh demand zones may not be reached initially, as price can reject from other supply zones within the range.

Mistake #3: Incorrect Expectations of Supply and Demand Zones

When order flow is bearish, all demand zones to the left become reaction points for pullbacks into supply.

Old levels of supply become reaction points for pullbacks when order flow is bullish.

It is important to have realistic expectations based on the current order flow.

New Section

This section provides examples and further explanations regarding mistake #3 - having incorrect expectations of price movement in relation to supply and demand zones.

Examples:

Bullish Order Flow:

During bullish order flow, fresh demand zones can be traded as they break structure and are not mitigated.

When order flow shifts bearish, old demand zones become reaction points for pullbacks into supply.

Bearish Order Flow:

In bearish order flow, old supply zones become potential shorting opportunities as they act as reaction points for pullbacks into demand.

Weak highs should not be shorted; instead, look for pullbacks into demand before targeting past those highs.

New Section

This section continues to provide examples and explanations related to mistake #3 - incorrect expectations of price movement in relation to supply and demand zones.

Examples:

Bearish Order Flow:

When order flow is bearish, old levels of supply become reaction points for pullbacks into demand.

Shorting from these old supply zones should not expect new lows as the low is strong and demand is in control.

Bullish Order Flow:

When order flow becomes bullish, old levels of supply act as reaction points for pullbacks into demand.

Targeting past weak highs can be done after a pullback into demand.

These notes summarize the transcript by highlighting the three common mistakes traders make: trading against the objective, having wrong expectations of price movement, and incorrect expectations of supply and demand zones. The examples provided emphasize the importance of understanding order flow and how it affects trading decisions.

Fixing Mistakes and Understanding Frameworks

The speaker discusses the process of fixing mistakes and understanding frameworks in trading.

Getting Head Around Frameworks

Fixing mistakes and understanding frameworks in trading can be challenging.

Mechanical frameworks used in trading can help solve each other's problems.

Once you understand these frameworks, everything becomes easier.

Trading from Zones with No Inducement

The speaker explains the concept of trading from zones with no inducement and the importance of liquidity.

Zones with No Inducement

Zones with no inducement refer to areas where there is no available liquidity.

These zones may appear clean and have strong momentum, but they often fail.

Inducement is about encouraging market participants to generate liquidity in a certain area.

Finding areas with opposing liquidity is crucial for big market participants.

Low points or structural lows induce sell-side liquidity, while obvious double bottoms or lows that broke structure induce buy-side liquidity.

Big players want to transact where there are tons of sellers or buyers to minimize slippage.

Applying the Concept of Inducement

The speaker demonstrates how the concept of inducement applies to specific trading scenarios.

Applying Inducement Concept

In supply zones where big players step in to sell, opposing buy-side liquidity is needed for them to sell into. If there is no liquidity built below the zone, it will likely fail.

In demand zones where big players are buying, a structural low in front of them is needed. If there is no liquidity built below the low, it will likely fail.

Combining multiple confluences increases the probability of a zone playing out successfully.

The transcript provided does not contain enough information to create additional sections.

New Section

This section discusses the impact of selling pressure and the occurrence of long moves in trading.

Selling Pressure and Long Moves

When there is no structural support and price takes liquidity below previous lows, it creates selling pressure.

The presence of sufficient South Side liquidity allows big players to buy against this pressure.

Mechanical models are available to define strong liquidity and determine if an inducement is near enough to a zone.

New Section

This section highlights the fifth mistake in trading, which involves trading continuations after a break of structure.

Trading Continuations after a Break of Structure

After a swing break of structure, it is common to expect a pullback.

Traders often become bullish when highs are broken, but it is better to anticipate a pullback instead.

While it is possible to trade continuations after a break of structure, waiting for confirmation may be more beneficial.

Factors such as the start of a hard time frame reversal and clear internal structure on lower time frames can indicate favorable conditions for continuation trades.

New Section

This section focuses on avoiding trading against major supply zones and waiting for pullbacks.

Avoiding Trading Against Major Supply Zones

It is advisable not to trade against major supply zones as they can lead to pullbacks.

Look for opportunities where there are no nearby supply zones or mitigate their impact.

Quick targets with in-and-out trades can be effective to manage the possibility of a pullback.

Waiting for pullbacks and trading at high probability points of interest can increase success rates.

New Section

The speaker discusses five key mistakes to avoid in trading and provides insights on how to trade from strong structure, target weak highs, manage expectations from zones, avoid trading zones with no inducement, and avoid trading continuations after the break of structure.

Trading from Weak Structure

Avoid trading from weak structure.

Trade from strong structure instead.

Look for fresh supply zones as key levels.

Be patient and wait for pullbacks before entering trades.

Targeting Weak Highs

Target weak highs after pullbacks have been completed.

Weak highs often fail due to bullish overall trend.

Shift in internal structure indicates bearish shift.

Examples show how swing pullbacks to premium supply levels lead to bearish shifts.

Having the Wrong Expectations from Zones

Manage expectations based on current trend and order flow.

Old demand zones become reaction points for pullbacks, not new highs.

Order flow shifting bearish indicates reaction points to demand.

Trading Zones with No Inducement

Avoid trading zones with no available liquidity in front of them.

Straight pushes without built liquidity are risky.

Liquidity is usually behind the high or low itself.

Avoiding Continuations After Break of Structure

It is advisable to avoid trading continuations after the break of structure until consistently profitable.

Waiting for pullbacks and getting involved is generally safer than buying after highs.

New Section

The speaker shares personal strategies that have helped them succeed in trading, including focusing on hard time reversals, clear lower time frame internal structuring, targeting nearby weak pieces of structure, and having realistic targets rather than aiming for large gains. They also mention an end-to-end course available for those interested in leveling up their trading skills.

Strategies for Success

Focus on hard time reversals.

Pay attention to clear lower time frame internal structuring.

Target nearby weak pieces of structure for trading.

Set realistic targets instead of aiming for large gains.

Course and Additional Resources

An end-to-end course is available for those who want to level up their trading skills.

The course covers topics such as psychology, risk management, and more in-depth lessons on liquidity and backtesting.

Daily market content, meetups, and backtesting walkthroughs are also provided.

The transcript is already in English.