We’ve recently received a few requests on how to properly use and understand the SupplyAndDemand Indicator used with The Professor strategy.
Presentation #1 – Understanding the Basics
Supply and Demand is the reason why the markets move. When Supply is larger than Demand –the price will drop (short)
When Demand is larger than Supply –the price will rise (long)
When Supply and Demand reaches a “balance” the price will not move either way or enter a period of what we like to call “consolidation”.
Let’s break things down to their simplest form
Here we see red (supply) and blue (demand) bars that define supply and demand.
Supply = Sell Zone
Demand = Buy Zone
When we add a 200 EMA or SMA to the chart, we choose to short (sell) only when price is below or go long (buy) when price is above. In the example above, we choose to only enter shorts.
Trend is your friend! Don’t forget this!
Ok, so now that you have the most basic portion down, let’s look at a few more inputs we use on a regular basis 🙂
Some of you have asked what the additional zone colors are…gray, and green to be specific. You do not have to keep these levels displaying, however we do like them on our charts.
The gray zone refers to the retouch level for demand and means that demand is in control.
The green zone refers to the retouch level for supply and means that supply is in control.
You do not have to display these if they clutter your chart and can be controlled under the SupplyAndDemand indicator Inputs section – recolorretouch is the variable, and you can set to false to remove these additional zones.
The other variables we like to keep set to true are the:
- drawzones – this displays all zones that are set to true if set to true
- solidzones – this displays solid zones vs weak zones (we do not recommend trading weak zones) if set to true
- solidretouch – this displays solid retouch zones if set to true
- recolorretouch – explained above
- zonestrength – this displays the strength of the zones if set to true
- noweakzones – this removes all weak zones if set to true
That sums up the basics of the SupplyAndDemand indicator that we use. Watch for our next presentation with more in-depth discussions with video tutorials in upcoming posts!