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.

How To Make Money With Swing Trading.

Swing trading is a popular methodology used by many professional Forex traders, that can produce some very nice profitable trades.

To be able to consistently make money with swing trading strategies, you first have to understand what swing trading is, and how to identify a swing from which to trade.

What is swing trading?

Swing trading is identifying potential swing highs and swing lows within a market, sometimes called major reversal levels, and entering as close to the perceived high or the low of the swing as possible, and trading all the way up or down to the next major reversal level, or swing high or low.

Swing trading differs from day trading in the length of time a trade is held for. Typically swing traders can hold their trades for up to a week, whereas day traders are generally in and out of the market the same day.

I am primarily a day trader, as i like to enter a trade, make my pips, and look for another opportunity. I don’t like to have money in the market overnight, as the longer you are in a trade the more your money is at risk. And i don’t like taking risks, and i also like to get a good nights sleep. πŸ™‚

How to identify swings.

The chart below shows major reversal points in the market, or swings from which you can trade.
Swing Trading

Now its really easy to identify swings on a chart after they have happened, but how do you know that a level in the market is a major reversal level, or swing, before its happened?
How can you enter long or short at a particular level, with the knowledge that there is a high probability that it will be a major swing high or low?

I am not going to go into detail here about how identify major reversal levels in the market, but it is covered in detail in my Forex training course. But another way that you can potentially get into a swing trade is to look at supply and demand areas on a chart, and buy an sell at those levels.

For more on how to identify supply and demand levels in the market please click here.

What i teach in my Forex training course will show you how to make money from swing trading by identifying major reversal levels in the market, and enable you to day trade or swing trade them for them for big profits. For more information on my Forex training course click here.