Overview
This lecture covers key concepts in trading supply and demand versus support and resistance, including how to identify zones, enter/exit trades, and maintain consistency through disciplined strategies.
Consistency in Trading
- Consistency comes from genuine desire and discipline to pursue trading goals daily.
- Developing confidence and structure in trading setups helps maintain consistency.
Supply and Demand vs. Support and Resistance
- Support and resistance are used when price is ranging (moving sideways between a floor and a ceiling).
- Supply and demand are used in trending markets—bullish (upwards) or bearish (downwards).
- Support is often a price floor; resistance is a price ceiling.
- Supply zones indicate potential selling pressure; demand zones indicate potential buying pressure.
Time Frames and Trading Styles
- Strategies can be applied on any time frame; 5-minute candles are preferred for quick trades (scalping).
- Each time frame changes how much price movement each candle represents.
Identifying and Using Supply/Demand Zones
- Focus on the most recent supply or demand zone near current price for trade entries.
- Zones are valid only if price returns to "tap" them without being broken.
- If price misses a zone, wait for a new valid zone before trading.
Trend Following and Market Structure
- Trade in the direction of the trend (“trend is your friend”) until the trend breaks.
- Bullish trends form higher highs and higher lows; bearish trends form lower lows and lower highs.
- A trend break is signaled by failure to make a new high (bullish) or a new low (bearish).
Entry and Exit Strategies
- Three ways to enter: aggressive (immediate on tap), conservative (wait for candle close), or break of candle (enter after next candle breaks previous candle’s low/high).
- Use stop losses just outside your chosen zone or candle.
- Set take profit at a 1:1 risk/reward ratio initially, then adjust based on comfort and performance.
Confidence and Discipline in Trading
- Confidence increases by repeatedly taking the same setup and seeing positive results.
- Patience to wait for proper setups is crucial; avoid FOMO and unplanned trades.
Dealing with Invalid or Missed Zones
- If price does not tap your zone, do not enter the trade.
- Wait for setups that strictly follow your rules and strategy.
Psychological Aspects and “Aha Moments”
- Trading success depends on self-discipline, patience, and waiting for setups, not chasing the market.
- Success in trading, as in life, requires a consistent, structured system.
Key Terms & Definitions
- Support — A price level where demand is strong enough to stop price from falling further.
- Resistance — A price level where selling pressure prevents price from rising further.
- Supply Zone — Area where selling is likely to occur, causing price to drop.
- Demand Zone — Area where buying is likely to occur, causing price to rise.
- Break of Structure — When price moves past a recent high/low, signaling potential trend continuation or reversal.
- 1:1 Risk/Reward Ratio — Equal potential profit and loss on a trade.
Action Items / Next Steps
- Practice identifying supply, demand, support, and resistance zones on different time frames.
- Write and follow a clear trading plan, including rules for entries, exits, and risk management.
- Reflect on your own discipline and trading mindset; focus on waiting for valid setups.
- Prepare questions or topics for the potential part two session.