Key Mistakes in Trading Supply and Demand Concepts

Introduction

• Common mistakes in trading that negatively impact results and confidence.
• Focus on five mistakes and how to overcome them for better trading outcomes.
• Speaker: Matt Don Levy, founder of Photon Trading.

Mistake 1: Trading from Weak Structure

• Common issue: Traders often trade from weak supply or demand zones.
• Fix: Zoom out to see the bigger picture and identify the overall trend.
  • Example: A strong bullish trend indicates weakness in shorting attempts.
• Concept:
  • Bullish markets pull back and target weak highs.
  • Weak highs fail to break the previous swing lows.
  • Avoid getting caught shorting from levels that appear strong but are weak.

Mistake 2: Trading Against the Objective

• Follow-up to Mistake 1: Trade from strong structure, targeting weak structure.
• Avoid: Trading from strong levels when the objective has been achieved.
  • Example: If the swing trend is bearish and internal structure turns bullish, recognize when the objective is complete before placing trades.
• Key Points:
  • Identify when the internal structure shifts and understand the current market objective.
  • Premium supply should be mitigated before expecting bearish continuation.

Mistake 3: Wrong Expectations of Price

• Issue: Traders misjudge the expected price movement after hitting supply or demand zones.
• Understanding:
  • In bearish order flow, demand zones become mere reaction points, not areas for long-term trades.
  • Similar concept applies for bullish order flow with supply zones.
• Expectations:
  • Adapt expectations based on market direction—old zones become pullback reactions.

Mistake 4: Trading from Zones with No Inducement

• Definition: Zones lacking available liquidity in front of them.
• Why It Fails:
  • Without opposing liquidity (e.g., sell orders below a buy zone), the zones are less likely to hold.
• Key Concept:
  • Identify areas in the market where liquidity is present, especially around significant structural levels.

Mistake 5: Trading Continuations After a Break of Structure

• Common Mistake: Traders often jump into trades immediately after a break of structure.
• Recommended Approach:
  • Acknowledge possible pullbacks after breaking highs; patience yields better results.
• Tips for Continuation:
  • Look for strong time frame reversals and clear internal structures.
  • Avoid trading against major supply zones and set conservative, quick targets.

Conclusion

• Recap of the five mistakes:
  1. Trading from weak structure.
  2. Trading against the objective.
  3. Wrong expectations of price movements.
  4. Trading from zones with no inducement.
  5. Trading continuations after a break of structure.
• Emphasize patience and understanding market frameworks for better trading outcomes.
• Invitation to join Photon Trading for in-depth courses and resources.