Lecture Notes: Supply and Demand - Freshness and Originality in Trading

Introduction

• Video delay due to a busy schedule and upcoming OTC launch.
• Focus: Freshness and Originality in supply and demand trading.
• Freshness and Originality are inseparable, cyclical in nature.
• Practical application includes analysis on a Forex major.

Freshness in Trading

• Rule-Based Trading: Essential to have clear rules for freshness.

• Categories of Freshness:

  1. Category One: 100% fresh lower time frame (LTF) zone, never revisited since creation. High-quality zone.
  2. Category Two: Price has tested the wider version, not the preferred version. Lower quality due to some orders being filled.
  3. Category Three: Price has touched the preferred version; such zones are rejected as most orders would have been filled.

• Fresh zones have a higher probability of unfilled orders, indicating a better chance for successful trading.

• Higher time frames allow testing for freshness using the preferred version.

• Conservative trading rules may evolve as a trader gains experience.

Originality in Trading

• Originality Detection: Look left of the zone to identify its creation without reacting to a previous zone.

• Original and Non-Original Zones:

  • Original Zone: Not caused by another zone to the left.
  • Non-Original Zone: Reaction to a previous zone.

• U Shapes and Originality:

  • Rally-Base-Drop and Drop-Base-Rally are usually non-original, except at all-time highs/lows.
  • Rally-Based-Rally and Drop-Based-Drop: Typically original unless influenced by larger trends.

• Originality is a skill developed over time; no initial trading rules as it can be complex for beginners.

Practical Application

• Analysis on the New Zealand dollar as a case study.

• Zones can be fresh and original, fresh but not original.

• To measure freshness, look to the right of the zone; if no candle penetration, the zone is fresh.

• Measuring Freshness:

  • Preferred vs. Wider Version: More conservative to use the wider version as a measure.
  • Freshness dictates the probability of success based on the number of times the price has touched the zone.

• Concept of Freshness: Zones lose orders each time they're touched, affecting future trades.

  • Important: Fresh zones likely contain unfilled orders essential for trade success.

Originality vs Freshness Summary

• Freshness: Always look right; originality: look left.
• Chop-Base-Chop and Rally-Based-Rally are always fresh and original unless at all-time highs/lows.
• Importance for advanced traders to check multiple touches for zones.

Conclusion

• Freshness and originality are critical in identifying high-quality trading zones.
• Importance of adhering to rule-based trading to optimize success.
• Future lessons planned; engagement (likes) helps with content reach.
• Encouragement to continue learning and applying these concepts in trading practice.