I feel its important for even the most advanced traders to take the time once in a while to re-assess the fundamentals. For newer traders trying to learn this is how I create models of supply and demand.
I look on the daily or H4 chart for areas of consolidation followed by an engulfing candle and draw a line, if price returns to that line and doesn't break through it, I make it thicker. If it touches more than 3 times I redraw as a rectangle zone.
Notice the 2 green lines. I drew the first when price action started to act bullish and push up against the trend.
What I've identified are simple areas where there was an auction and one side clearly won and the price moved to a lower or higher fair value area.
What to do with this information is to notice prices that attract buyers and sellers. Use these levels as targets to increase your probability of being positioned on the profitable side of a movement. The further you enter away from these extremum points, the more often you will end up in positions that may win, but will draw down significantly before doing so. Save yourself the stress and let price come to you at a zone where it has hard reversed in the past.
I look on the daily or H4 chart for areas of consolidation followed by an engulfing candle and draw a line, if price returns to that line and doesn't break through it, I make it thicker. If it touches more than 3 times I redraw as a rectangle zone.
Notice the 2 green lines. I drew the first when price action started to act bullish and push up against the trend.
What I've identified are simple areas where there was an auction and one side clearly won and the price moved to a lower or higher fair value area.
What to do with this information is to notice prices that attract buyers and sellers. Use these levels as targets to increase your probability of being positioned on the profitable side of a movement. The further you enter away from these extremum points, the more often you will end up in positions that may win, but will draw down significantly before doing so. Save yourself the stress and let price come to you at a zone where it has hard reversed in the past.