How To Be A Sucessful Forex Trader Using Market Logic.

In order to be a successful Forex trader you have to keep it simple. I have many profitable strategies that i use to make money from trading, but they are all based around simple market logic.

So what is market logic?

To understand market logic you have to understand the major forces that drive the market. What makes prices move up and down?

Most traders think that buyers and sellers move the market up and down. Now although that is true its not the only factor that drives price.

Other factors that influence price.

Think about this. When you enter a trade you buy or sell the market at a specific price. Now whether that trade is successful or not, you will have to exit that trade at some point in the future.

So say you buy the market, and set a take profit and a stop loss. Now in order for you to exit that trade, whether in profit or loss, your buy order will have to sell the market at some point to close out your position. So just by closing your trade you are influencing price.

The power of the majority.

If everyone is selling the market, why would you want to buy it? If everyone is buying the market why would you want to sell it?

This is a mistake that a lot of retail traders make. They try to catch tops and bottoms. I have done this myself when i first started out. How many times have you seen prices going down, and thought its going to reverse here, this is the bottom. So you pile in, only to see it go further down, and you think why is it going down, and down and down?

Well think about it logically. You buy at what you think is the bottom, and a few 100 others do the same, because lets face it, its not only going to be you that thinks its the bottom, there will be 1000s of other retail traders that think the same thing, who will also be buying at various levels.

So if all of these retail traders are buying, why is it still going down. Because the majority are still selling, and your buy orders are adding to that selling pressure.

How can buy orders add to selling pressure?

Well think about the other factors that influence price. Buy orders are seen as positive by the majority of traders, but when you have a strong downtrend they are negative. They are fuel for the fire of the downtrend. Why? because those buy orders are closed out with sell orders.

So as uninformed retail trades are trying to catch tops and bottoms, their stop losses are adding strength to the move, as those buy orders close as sell orders. Even if some traders do manage to catch a temporary bottom, when they close the trade for a small profit, their sell orders will send prices down again.

Major reversals in the market.

So if what im saying is true, and it is, what makes the market reverse, if its not buyers? Well if its not buyers that make the market reverse, it must be sellers right? Yes, but not just sellers. There are 3 main factors that will make the market reverse from a strong downtrend, or a strong uptrend. Buyers, sellers, and profit takers.

In this case we will work with the downtrend. As we have already established by trading against the majority you will lose your money.

The picture below shows how buyers, sellers, and profit takers affect the market.

Market Logic

In order to avoid losing money in the market, you always have to be on the correct side of the move, and trade with the majority. Following the trend is not always the answer though, as you can see how the buyers and sellers in that downtrend got smoked by entering at the wrong time. You have to enter and exit the market at key reversal levels in order to be successful.

My Forex training course will show you how to enter and exit the maket safely, and how to trade alongside the professionals.

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What Are No Supply And No Demand Candles?

How to identify no supply and no demand candles.

In past articles we have talked about pin bar reversal candles, and outside bars, as potential areas in the market where price can reverse. I now want to look at another candle formation that can also be an indication of a potential reversal signal.

No supply and no demand candles take into consideration the buying and selling volume within the candle formation. By studying the volume within a candle, you can establish where buyers and sellers are active or inactive in the market.

No Supply Candles. (No Sellers)

No supply candles indicate a potential long trade. The criteria for a no supply candle is as follows.

The Volume within the candle formation has to be lower than the volume of the previous 2 candles.
The candle has to close bearish (red body).
There has to be some sort of rejection (pin or wick) at the low of the candle.
If the candle closed at the bottom it would not be a no supply candle.

Below is an example of a no supply candle on a daily chart. The dotted line highlights the bearish candle with rejection at the low, and lower volume than the previous 2 candles.

As you can see it was a nice reversal level in the pair, and went on to produce some nice pips.

no supply candle

No Demand Candles. (No Buyers)

No demand candles indicate a potential short trade. The criteria for a no demand candle is as follows.

The Volume within the candle formation again has to be lower than the volume of the previous 2 candles.
The candle has to close bullish (green body).
There has to be some sort of rejection (pin or wick) at the high of the candle.
If the candle closed at the top it would not be a no supply candle.

Below is an example of two no demand candles on a daily chart. The dotted lines highlight the bullish candles with rejection at the high, and lower volume than the previous 2 candles.

The two no demand candles both produced nice trades, but more importantly they also formed a double top in the market, which is another good reversal signal in itself.

no demand candles

If you look at the second no demand candle, you will also see an inside bar next to it, which is a sign of indecision in the market. A nice 50% retrace entry on that too before the sell off πŸ™‚

Using no supply and no demand candles as potential reversal points within supply and demand areas is a trading strategy that can produce some nice results.

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Thanks for visiting and have a great day. πŸ˜‰

How To Identify Supply And Demand Areas

Knowing how to identify supply and demand areas on a chart will help you to make more informed trading decisions.

What are supply and demand areas?

Supply and demand areas are all over a chart on every time frame, supply and demand makes the market work, as it creates an imbalance in the market, and that imbalance is what makes the price go up and down.

For example: Prices move up and down on perceived value. Say Euro Dollar is trading at 13500. Some people may think that is expensive, some people may think that is cheap. The people that think its cheap are buying, and the people that think its expensive are selling.

Now, if you have an equal number of buyers and sellers on both sides, then price will stay at 13500. The currency has reached its fair value according to buyers and sellers. Price will stay at fair value until an new imbalance of buyers and sellers is found. As new buyers and sellers are continually coming into the market, fair value can last a few seconds, or price can literally trade around the fair value area for ever in theory. Until a new imbalance comes into the market, the price will not move from the 13500 area.

Its not just about the buyers and the sellers.

Now consider this, its not just about the buyers and the sellers in the market, its also about the price.

Price is the most important thing in Forex trading, and you should never forget that.

To create an imbalance you must have more buyers at a higher price than the current price, or more sellers at a lower price than the current price. You may have more buyers than sellers in the market, but the price could still go down. Or you may have more sellers than buyers in the market but the price could still go up. How does that work then? I will try to explain.

Say you have 1000 sellers around the 13500 area, but you have 100 buyers that are buying from 13480 up to 13520. Sellers out number buyers 10 to 1, but if the cumulative value of their sell orders, are not larger than the cumulative value of the 100 buyers orders, then price will still go up. The total value of the buy orders, are worth more than the total value of the sell orders, so the demand for Euro Dollar is outstripping supply, so the price continues to go up.

When the last of the buy orders are filled at 13520, and just another 50 sellers come back into the market at 13520, and the cumulative number of sell orders is outstripping the now very small amount of cumulative buy orders, you then have more supply than demand and the price will do down. So to recap, more cumulative supply and the price goes down, more cumulative demand and the price goes up.

How to identify supply and demand areas.

Now this is the tricky bit. How do you know when supply is outstripping demand or vise versa? And more importantly, how do you know when fair value has been reached? and how do you know when supply will change to demand, or demand will change to supply?

This is the holy grail as far as Forex trading is concerned. If you can identify when price will switch from supply to demand, or demand to supply, you are effectively identifying key reversal levels in the market. And if you can identify these reversal levels in the market with high probability, then you have a license to print money. A lot of what i teach in my Forex training course is about how to identify key reversal levels in the market.

Identifying these reversal levels is not as easy as it may look though. Well unless you have access to every brokers order book, which you don’t. So in the absence of every brokers order book, you have to study the chart to identify possible supply and demand areas from which to buy and sell. I cannot go in to detail about what i teach in my course, and how i identify reversal levels in the market, but you can use previous areas of supply and demand, as possible new areas of supply and demand, rather like a trader would use previous support and resistance levels, as possible areas to buy and sell.

The chart below shows you how previous supply and demand areas are respected, and how trading long and short from those areas would have produced nice profitable trades.
supply and demand

Rather like support and resistance levels, sometimes old supply and demand areas produce some nice trades, but also like SR levels they don’t always work. The skill is in knowing which ones will work, and which ones will fail, and i can teach you how to identify the supply and demand areas that will work, which will enable you to take high probability profitable trades from those areas.