Master Institutional Supply and Demand Trading (ULTIMATE STRATEGY GUIDE)

Understanding supply and demand is crucial for successful trading with large institutions. This chapter reveals key points about institutional supply and demand that most people are unaware of, helping traders secure funding and consistent profits. Learn what supply and demand are, how to interpret institutional order flow, draw zones effectively, identify high probability institutional zones, receive valuable resources, as well as enter and exit trades for maximum profit.

Traders in the market exhibit herd mentality, driven by emotions of fear, greed, and uncertainty. This behavior creates order flow which is reflected in price action on charts. Patterns formed by this price action allow for high probability forecasts of future price movements.

Financial markets operate through two-way auctions, with buyers and sellers placing orders on the bid and ask sides respectively. The order book displays the volume of bids from buyers and offers from sellers at different price levels. A trade can only occur when a buyer's order is matched with a seller's order of equal size. There are passive traders who use limit orders, waiting for prices to hit their desired level, while aggressive traders buy or sell at the current market price by crossing the spread.

Order flow refers to the interaction between passive and aggressive orders in the market. In this oversimplified example, a large institution wants to buy 10,000 Lots at Market price. Due to limited supply available at the current ask price, the price rapidly shoots up until all lots are filled. This creates an imbalance between supply and demand, causing prices to continue moving up in search of more liquidity.

Supply and demand zones help us trade on the right side of institutional order flow. In a range-bound market, prices accumulate or distribute orders in the bottom half (buyers step in) and top half (sellers step in). We aim to buy low and sell high. Aggressive buyers cause an imbalance, leading to a breakout. Instead of trading the initial breakout, we wait for price to return to the zone before entering our long positions where institutions will be present.

Price seeks liquidity to rebalance, initiating a rapid downside move and creating a supply zone. Institutional involvement backs this move. Price then pulls back to mitigate the supply zone, providing an opportunity for short positions. Eventually, demand enters the market and overpowers supply, leading to sustained bullish order flow. Institutions defend their positions at key levels.

To draw supply and demand zones consistently, there are three types to consider: range zones and pivot zones. Range zones occur when price initiates out of a range of candles, while pivot zones happen when there is a pivot in price caused by one or two candles. For supply zone, it's usually a bullish candle followed by a bearish thrust candle closing below its low; for demand zone, it's usually a bearish candle followed by a bullish thrust candle closing above its high. Refining the zone can lead to increased accuracy but also more missed trades.

Lower time frame ranges act as higher time frame pivot zones and vice versa. There are three types of fractal supply and demand zones: inside bars, sell to buy or buy to sell wick zones, and large width candle wick zones. Inside bars represent a range on a lower time frame. Sell to buy or buy to sell wick zones indicate pullbacks on a lower time frame during bullish price movement. Large width candle wick zones can be refined into lower time frame pivot or range zone by focusing only on the candle's wicks.

To find institutional supply and demand zones, there are eight key areas to focus on. First, look for zones that led to a break of structure as they indicate significant swings in price. Second, identify flip zones where supply turns into demand or vice versa. Third, pay attention to sweep zones where liquidity is taken by institutions for minimal slippage trading. Fourth, check if there is available liquidity in front of the zone as institutions need it for entering with minimal slippage. Fifthly stack multiple time frames' zones together which increases the probability of a move happening at that area. Sixthly align your analysis with higher time frames as it improves trade probabilities. Seventhly consider buying at discount prices and selling at premium prices within the range for better risk-reward ratios. Lastly focus on fresh untouched zones rather than ones already touched by price.

Learn how to identify high probability institutional demand zones for trading. There are three main methods to trade from these zones: setting a limit order directly on the zone, waiting for a reversal candlestick formation at the zone (best combined with a liquidation tool), or using a lower time frame break of structure for more confirmation and increased risk-to-reward ratio.

"Before entering a trade, it is crucial to have a clear exit strategy. The fixed R method recommends targeting the same amount, such as 3R, which helps minimize emotions and increase profitability. Trading is based on probabilities, and this approach puts the numbers in your favor."