Day Trading & ScalpingTechnical Analysis

It’s on the Chart Right in Front of You, Open Your Eyes

I have always found it very interesting, how many different ways people look at charts and all the different pieces of information people try to attain from a price chart. How could so many people look at the same chart and have so many different opinions? Fascinating.

With all the different schools of thought on money, markets, charts and so on, what should we really be looking for on a price chart? I mean, conventional technical analysis books have hundreds of pages in them with information on so many indicators, oscillators, chart patterns and more. With all this, there must be some edge to be gathered, right? I speak with thousands of traders around the world and everyone is trying to make something “work”. This is where I see most people get it very wrong. They spend more time trying to make the latest strategy or indicator “work” instead of taking a moment and thinking about how money is made and lost in the markets, because after all, isn’t that what everyone is really trying to figure out?

Let’s go down the simple and logical path for a moment and ask ourselves a few questions to make sure we are very focused on what information we need to get from a price chart:

Q)       How are profits derived when trading or investing in a market?

A)       Buy low and sell higher or sell high and buy lower.

Therefore…

Q)      How do we buy low and sell high?

A)      Figure out where price will turn and where it will go.

Therefore…

Q)      How do we figure out where price will turn and where it will go?

A)      Identify where willing demand exceeds willing supply and vice versa.

Which leads to the final question…

          What does this look like on a price chart?

When we think in these simple terms, we see that the last question is all we need to focus on. The good news is, we have the answer. Beyond these questions, there is literally nothing else needed to consider when it comes to proper trading and investing, but most people don’t ever get to this level of simplicity because they are blinded by the illusion of complexity offered by the world of conventional technical and fundamental analysis, as well as so many opinions from various sources. Let’s look at a recent income trade.

Income Trade – 12th June 2017

Placeholder 

Notice the supply zone in the yellow box. Price was trading in a range and then fell from that level, telling me supply exceeded demand in that area (yellow box). I know this because the only reason why price would fall from that level is because supply exceeded demand; there can be no other reason.

The black line below is from that pivot low over to the left. While I would not call that a demand zone, there is likely some demand in that area which is why we have that low. So, I now know I have a profit zone from the new supply zone down to the black line. I gather all this information well before I enter the trade. Next, price rallies back up to that supply zone, meaning someone is buying after a rally in price and at a price level where the smart money is selling (supply/retail).

Like any smart buyer and seller of anything, I sold to whoever was buying at supply and profited from a decline in price. If this all sounds too simple, think again. From my experience, the biggest challenge people have is keeping it this simple. People, in general, are not comfortable with simple; we tend to over complicate everything. All the information you need to be a successful trader and investor is right in front of your eyes on the price chart, if you know what you’re looking for.

Sam Seiden  can be contacted by email on this link: Sam Seiden

Sam brings over 15 years experience of equities and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has traded equities, futures, interest rate markets, forex, options, and commodities for his personal interests for years and has educated hundreds of traders and investors through seminars and daily advisory services both domestically and internationally. Sam has been involved in the markets since 1991 both on and off the floor of the Chicago Mercantile Exchange. He has served as the Director of Technical Research for two trading firms and regularly contributes articles to industry publications. Sam is known for his trading, technical research, and educational guidance.Points of interest:• Chicago Mercantile Exchange Floor• Author of Market Advisory Letters• Fund Manager/CTA• Speaker to Investment Groups, Universities, and Private Seminars• Contributing Author for Stocks, Futures, and Options Magazine, Active Trader Magazine, and Futures Magazine• Trading and Investment Conference Speaker

Sam brings over 15 years experience of equities and futures trading which began when he was on the floor of the Chicago Mercantile Exchange. He has tr...

tomorton

Legendary member
7,371 995
I like an approach that gives absolute weight to what's important, and ruthlessly ignores everything else.

Sam's article has inspired me to spend a bit of time drawing boxes on my forex charts.
 

tomorton

Legendary member
7,371 995
Now I've got rectangles all over the ferkin' place. I've got fat ones, thin ones, rectangles in rectangles.....

I haven't yet found a price high or low that can't be a supply zone or a demand zone. Maybe that's the point?
 

tomorton

Legendary member
7,371 995
Not that I've seen/heard quoted. Sam Seiden and his OTA colleagues, also other commentators, do a fine good job of rationalising why it works - in any market and all time-frames. As ever, much hindsight charting is in evidence but I may pick up something more applied as I keep searching.
 

kalott

Established member
681 58
the most important thing is to identify the trend

if its trending upwards you can buy low or you can buy high or you can buy when the sun goes up and sell with profit

if the uptrend is stalling and starting to go sideways, its of course better to buy low and sell high

as long as you dont do it in a downtrend..
 

tomorton

Legendary member
7,371 995
the most important thing is to identify the trend

if its trending upwards you can buy low or you can buy high or you can buy when the sun goes up and sell with profit

if the uptrend is stalling and starting to go sideways, its of course better to buy low and sell high

as long as you dont do it in a downtrend..

At the moment every single trade I take is a trend-follower. But forex pairs etc. only spend a fraction of the time trending strongly. I hope that using supply & demand zones might help for non-trending trades.
 

barjon

Legendary member
10,319 1,569
At the moment every single trade I take is a trend-follower. But forex pairs etc. only spend a fraction of the time trending strongly. I hope that using supply & demand zones might help for non-trending trades.
Then stick to your last, don't trade FOREX it's a death trap :)
 

tomorton

Legendary member
7,371 995
Then stick to your last, don't trade FOREX it's a death trap :)

There's no reason that forex should have the bad reputation for destroying traders' accounts as it has - apart from the leverage available specifically to forex traders. But that's more down to the individual trader surely? After that, its just price going up and down.
 
  • Like
Reactions: wackypete2

aag100

Established member
613 35
How simple educators make it look in hindsight.
Where the price went up was your demand zone,where you should have bought.
Where the price went down was your supply zone,where you should have sold.
Simplez isn't it.got it?
 

barjon

Legendary member
10,319 1,569
There's no reason that forex should have the bad reputation for destroying traders' accounts as it has - apart from the leverage available specifically to forex traders. But that's more down to the individual trader surely? After that, its just price going up and down.
Tomo (and peter and fl)

Bit like your "double up" button and the 5 min default chart, SB companies point people at FOREX so I'd guess that's where they garner good profits on the other side of the trades.

Sure, price just goes up and down but maybe with different motivations than other intstruments - export/import companies getting lock-in hedging for example. I always think Gamma Jammer's http://www.trade2win.com/articles/752-day-life-forex-spot-desk-trader-part-1-a a good and telling read about what's moving price.

'Course, my view is probably coloured by my getting burnt when I tried it. All too fast and furious for me :LOL:
 
Last edited:
  • Like
Reactions: tomorton

foroom lluzers

Veteren member
3,611 135
'Course, my view is probably coloured by my getting burnt when I tried it. All too fast and furious for me :LOL:
If you use this thread article ideas , add a tick chart market timing strategy at the supply zones and demand zones , you have a forex holy grail strategy of 5 trades of 10 ticks each daily .

I knew Pete cracked the code in 2006.