The Level is Good Until it's Not (A Lesson in Supply and Demand)

2022年3月8日

G'day, Traders! Despite wars and rumors of wars there are always opportunities to be had in the financial markets, particularly the Energies markets. 

The purpose of today's trade example is to demonstrate that once a level of Supply and Demand are created in the financial markets, the rule of thumb is that a level is "good" until they are not... that is, until all the unfilled orders inside them are processed. No matter how old a level may be, they do not go "stale". 

Let's look at a trade which closed in the opening minutes of the market at 6PM EST on Sunday March 27, 2022:

A long opportunity became available to us on the 4-hour chart on Crude Oil Futures in the wee morning hours of Wednesday, March 5 (2:36am to be exact!). That morning (after having the required coffee and bacon as part of one's trading routine) there was plenty of time to evaluate the trade setup using Supply and Demand analysis. When a trade like this appears and meets your rules-based qualification system, you can then give yourself permission to take the trade.

The destination (a.k.a, Target) needs to be an opposing level of qualified Supply. The interesting part, and hence the jist of this article, is that no matter how old a level is, "a level is good until it is not." The level of Supply identified was from July of 2008 – almost 14 years ago! It is treasure chest full of sell orders that was created in 2008 and hasn't been touched since!

As you can see from the chart, price entered that Target level and ricocheted right away like a cat on a hot stove! If you drill down to the 1-minute chart you can see that price stayed at that level for a full two minutes until all the Buy Orders were exhausted and the sellers were back in control, driving price back down.

When trading via Supply and Demand, don't worry about how old a level is... if it meets your criteria of being a quality level, take it!

As always, Trade Well!