Supply and Demand

Monday got off to an unusually slow start with sluggish price movements. 3 buy orders were placed on GBPUSD and 1 buy order on EURUSD. The EURUSD trade was triggered by a breakout of the previous days (Friday) high at 1.4936. Trade was entered at 1.4950. Even though price had already moved over 100 pips  since the weekly open, sufficient volume, liquidity and momentum was present to move price action to my pre-determined target of 1.5000. Of course, once again, I closed the trade too early at 1.4982 for only 32 pips.

On GBPUSD the price movement was uncharacteristically slow. The first trade placed was based on the break of the Asian opening range. The trade was closed for + 3 pips. A second trade was immediately entered as momentum picked up briefly at 1.6540 and closed at 1.9592 for + 52 pips. A third and final trade was then entered at 1.6600, the breakout of the London opening range and profit target hit at 1.6638 for an additional + 38 pips. After a very frustrating 9 hours of trading a total of 93 pips were earned on GBPUSD and 32 pips on EURUSD. I say frustrating, because what transpired during those 9 hours usually occurs with the first 2 to 3 hours of London open.

As discussed last week, my area of strength is precisely timing breakouts and eliminating false breakouts (whipsaws). The main area of weakness is closing trades too early. As such, I am on a new mission to find the most efficient way of staying in a trade for maximum profits and this consumed my weekend. So much to accomplish in so little time...

Some useful info...

Trading breakouts took on new meaning for me when I stopped looking at support and resistance levels as just lines on the chart and instead started to view them as dynamic supply and demand levels. Two things move the markets:

a. Price Orderflow
b. News - Fundamental data

Nothing more, nothing less!

One thing and one thing only causes the market to trend: SUPPLY and DEMAND. I could write a book on this..lol.

What are support and resistance levels?

A support level is an area where the market receives considerable buying pressure. An area where DEMAND overcomes SUPPLY. Buyers overwhelm sellers causing price to go up!

A resistance level is an area where the market receives considerable selling pressure. An area where SUPPLY overcomes DEMAND. Sellers overwhelm buyers causing price to go down!

Simply put, a support level is a demand level and a resistance level is a supply level. A thorough understanding of this concept will change your trading life. It sure did mine!

So what does this have to do with trading breakouts? Any responses would be appreciated. Thank you.

See trades for Nov 23. below.

GBPUSD
See entries in above text
+ 93 pips

EURUSD
See entry in above text
+ 32 pips