08_AM_Trade Set Ups - How to Deal With SD Levels_Vers01

Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading 1. 2.

Demand or supply levels in control don’t need to be original or fresh No pull-back trade without imbalance of 2:1 and consolidation away from the level If price returns to a just created level right away and doesn’t form a complete candle (OHLC) away from the level we don’t expect a pull!ac"# In the chart !elow the long !lue candle closes a!ove the level# $he next red candle right away closes in the level again# %y this the level is negated# $his applies not only on this wee"ly time frame& !ut for all lower time frames#

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! valid level needs consolidation above"below the level If the red candle would drop right away !ac" to the level& it would !e no im!alance and would !e 'O valid level# If price consolidate away from the level and then drops !ac" to the level& the expected re !ounce is a set  forget* trade#

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$etest trades with valid levels only

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Don’t trade non-fresh &ones

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading If an area has already !een touched !efore& it is used up# +ormerly unfilled !uy,sell orders have !een filled now# Im!alance is gone# -e!ounce of price cannot !e expected again#

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Drill down the level to lower the risk If the level is not well formed li"e showing spi"es or candles with long wic"s.

On /01 we see that the price gapped down which is an indicator for strong supply#

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No trade against higher timeframe demand or supply areas # 3ait for !rand new areas on entry time frame 40 and trade with the 30 and /' trend# 3ait for confirmation li"e !ro"en trend line also#

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading

5# 6 new demand or supply 7one cannot !e traded automatically when price retests this area # 3ith new 48 for example no !uy trade at retest if trend is down at this level# 9#

If the (D &one shows candles with long tails & then we don’t want to lean on this 7one# I#e# we don’t trade that 7one# :ven it is removing opposing 7one#

1). *rading compressed levels ;ituation. )#

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading

1%. haracteristic of strong demand level 48 removes (?) supply levels (yellow circles) and !rea"s $L (red circle)#

1'. *rend and counter trend trading with inherited levels 3e see an uptrend. two valleys have !een formed 6 $L can !e drawn#

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading Levels (%& C and 4) are not valid on their own# $hey do not remove either two supplies or ma"e higher highs# If a level a!ove these ma"es a HH or removes min# > supplies& this new level validates the lower  levels (%& C and 4)# If candle (0) would have dropped !ac" to 7one (%) right away& this would have negated level (%) and all inherited levels !elow (% and 4) and all L$+ levels !ased on this one# Level (%) inherits the level’s (C and 4) validity and invalidity# +or counter trend purposes. if level (6) would get invalidated& we wouldn’t rely for a retest on this (6)# 3e would have to wait for a retest of a valid level !elow of the invalidated level#

1. Do/i candle as a base Increase the levels height a !it a!ove the doji open,closepoint#

10. Don’t lean on used up compressed areas  6rea (0) is "ind of later flip level which price violated at (>)# =rice created several compressed demand levels in field (6) after a strong drop# 6ll demands then were used up !y following candles with long

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading wic"s# 3e cannot lean on those demands as we need im!alance# If there would have !een clearly more !uyers we would have seen price rising sharply# ;o we cannot !uy here#  6t (?) in the area of former level (0) a supply gets formed#  6rea (6) is !alance# 6s there is no resistance anymore& we can expect price to !ounce down from (?)#

1. 3hen to trade a used up area: (cenario 1

MN chart: Price has retouched monthly demand area three times (1, 2 and 3). The level is not fresh. No set  forget trade allo!ed. "f #rice forms a $rand ne! %& ' %1 level at (&) !ithin the grey demand level after a$sor$ing a #revious su##ly (in the former do!n move), then moves u#, !e can $uy trade the #ull $ac.

2). 3hen to trade a used up area: (cenario 2 3hen price drops to the original (!lue) level of demand (yellow ellipse) then one can !uy (set  forget)#

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading

21. 3hen to trade a used up area: (cenario  3hen price rises and ta"es out (green) level of supply solidly with momentum# 6 short shot a!ove the distal line is not enough#

22. !void supply &one with a hammer  ;upply 7one with a hammer is not a good trada!le area# 6lso the spi"es show danger of !rea"ing the 7one at retest# 3e prefer to see a hammer with a demand 7one#

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Supply and Demand by Alfonso Moreno – Rules for Position and Swing Trading

2. Don’t care about very wide &ones If a 7one is much wider than the average& it normally gets penetrated fully#

2#. Nested areas of demand or supply are high probability trade areas If you find daily levels nested in wee"ly and these nested in monthly levels& expect high pro!a!ility trades#

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