Summary of "Master Supply & Demand trading (Ultimate in-depth guide - 2024)"

Master Supply & Demand Trading (Ultimate In-depth Guide - 2024)

Key Finance-Specific Content

Concepts Covered

Supply and Demand in Trading:
- Supply: Sellers, typically big players with large share volumes.
- Demand: Buyers, including short-covering and passive buyers.
- Supply and demand differ from traditional support and resistance; they reflect shifts caused by big players and catalysts, often overriding support/resistance levels.
- Supply and demand manifest in two forms:
  - Passive: Subtle, early shifts.
  - Aggressive: Large, clear candle moves.
- Identifying early passive supply/demand is crucial, as waiting for aggressive moves often means entering late with lower probability trades.

Methodology / Framework for Supply & Demand Trading

Identify Supply/Demand Early:
- Look for subtle, passive shifts such as a 3:1 candle ratio (three small candles negating one large candle).
- Aggressive supply/demand is identified by three consecutive full-bodied candles in the same direction (red for supply, green for demand) on any timeframe (1m, 5m, 15m, hourly).
- Aggressive moves often occur during high volatility but can be prone to reversals.
Three Essential Steps for Trading Supply & Demand:
- Initiation: Identify where supply or demand started (passive phase).
- Reinitiation: Wait for the level to be taken out and then reinitiated (confirmation).
- Measured Targets: Use measured moves (distance from initiation to reinitiation) to set profit targets instead of relying on Fibonacci or prior support/resistance.
Applying Supply & Demand to Increase Trade Probability:
- Use supply and demand to enhance an existing edge.
- Trade alongside big players to increase the probability of success.
- Avoid entering trades that immediately move against you.
- Applicable across timeframes and trade styles (scalp, swing, hold).

Specific Trades Using Supply & Demand (4 Desk Trades)

Opening Drive Trade - “Gap Give and Go”:
- Setup: Gap up at open, followed by an aggressive pullback (“give”) caused by profit-taking supply. Consolidation near demand area follows.
- Entry: Break above consolidation after demand reinitiates.
- Stop: Below the low of the demand area.
- Target: Two measured moves (initial demand to supply, then reinitiation leg).
- Typically a two-leg trade expecting sustained demand.
Morning Trade - “Good Morning America”:
- Setup: Opening range develops slowly over 30-45 minutes (not a quick opening range break). Look for subtle shifts in supply/demand within the range, especially demand reclaiming prior supply areas.
- Entry: Break above the top of the range or extended range after reinitiation of demand.
- Stop: Below the consolidation low.
- Target: Measured move equal to the entire range size.
- Focuses on sustained passive demand that may turn aggressive later.
Midday Trade - “Backside Scalp”:
- Setup: Selling pressure in the morning, price puts in a low and consolidates. Look for a higher low and consolidation above prior supply that may have flipped to demand.
- Entry: Break of the consolidation range to the upside.
- Stop: Below the higher low.
- Target: VWAP (Volume Weighted Average Price).
- Quick scalp trade capitalizing on exhausted supply and emerging demand.
Afternoon Trade - “Above the Clouds”:
- Setup: Price breaks above a range with prior supply turning into demand (“clouds” = prior resistance area).
- Entry: Confirm price holds above this area for 10-20 minutes and breaks higher.
- Stop: Below the prior supply-now-demand area.
- Target: Measured move of the range or hold until close of day for potential high-of-day close.
- Expects aggressive demand from initiation, with quick movement.

Key Numbers & Timelines

3:1 candle ratio: One large candle followed by three smaller opposite candles negating it, used to identify passive supply/demand.
Aggressive supply/demand: Three consecutive full-bodied candles of the same color/direction.
Timeframes: 1m, 2m, 5m, 15m, hourly.
Morning range development: 30-45 minutes.
Midday scalp window: Approximately 11:30 AM to 1:30 PM.
Afternoon “Above the Clouds” confirmation: 10-20 minutes holding above prior supply.

Recommendations & Cautions

Avoid confusing supply/demand with support/resistance.

Do not wait only for aggressive moves; learn to identify subtle passive shifts early.

Use measured moves from initiation to reinitiation for target setting rather than standard indicators.

Be cautious trading aggressive supply/demand in high volatility as reversals are common.

Use stops below demand areas or consolidation lows to maintain good risk management.

Trading with supply and demand increases edge but does not guarantee success; discipline and patience are required.

This guide is educational and based on professional trading desk experience, but not financial advice.

Presenters / Sources

Jeff Holden – Head of Trader Development, proprietary trading firm.
Mike Bella Fury – Co-presenter.
Firm: Proprietary trading firm based in New York City, active since 2005, known for training seven and eight-figure traders.

Overall, this video provides a professional, structured approach to supply and demand trading with clear identification techniques, trade setups, and risk management principles designed to increase trading probability and align with institutional players.