Notes:

If price is at a monthly zone the weekly chart will become irrelevant, as price has finally arrived
at the monthly zone arrived at the monthly no need to see the trend on a weekly chart.

Whenever price approach a larger Time frame zone i.e. monthly, on the entry time frame i.e.
daily you have to wait for evidence of loss of momentum.

on the entry time frame, we are looking for Evidence such as:

1. the break of the momentum line

2. the break of opposing pivot lows or highs
3. the removal of at lease couple of opposing zones

its important to keep an eye on the opposing zones:

1. which ones are broke and which ones are holding?

2. how many times the one that held was hit
3. how far was the penetration into it?

Monthly Chart (Curve chart):

Looking for trend.

which zones are created and respected and which zones are taken out?

Which zones are tested?

how many times are the zones tested?

Have the zones been penetrated deeper?

Each test causes the zone to weaken

are there any FREASH zones? We only use fresh zones

in equilibrium state, we follow the trend and refer to the weekly chart (Trend Chart)

Weekly Chart (Trend Chart)

See what kind of trend is the weekly zone has.

Using the momentum line, we identify the trend and locate the fresh S/D zoned

Daily Chart (Entry Chart)

Within the weekly S/D zone locate the daily s/d embedded within and wait till price is back to
that area,

Zones on top of zones (level on top of level/last kiss) are always better, if there are daily supply
zones below the “Fresh weekly supply zone” and price approaches that weekly zone, that mean
that buyers will be tired by the time he’s back to that fresh weekly zone.

As price approaches that s/d daily zone embedded within the fresh weekly zone, keep an eye on
the trend line of price, once price enters the zone locate which level caused the trend line to
break.

If that level is a supply zone its better if that level breaks the trend line and the previous low

If that level is a demand zone its better if that level breaks the trend line and the previous high

Wait for price to come back to that level once more

4H chart/3Hr Chart (refining time frames)

Black Chart

Instead of looking for the basing first when trying to identify zones, try this 3-step process out

To identify a Demand zone:

1. start with current price, go down and left without cutting through any candles

2. Identify a strong rally in price

3. Trace this strong rally in price down to its origin and you have your base

To identify a Supply zone:

1. start with current price, go up and left without cutting through any candles

2. Identify a strong drop in price

3. Trace this strong drop in price up to its origin and you have your base

I know this is basic for most people but it is clearly the most important thing in applying this
method.
I learned not to identify the base first but to look for the strong rallies and strong drops first
and it has helped me.

Yes, ideally you want basing candles in a base but it does not mean there is no base if there
are no basing candles

Remember also, all you need to do is change the time frame and that base will look very
different and you may find basing candles in the base then

Finally, please keep in mind the most important part of the patterns we trade (DBR, RBR, RBD,
DBD)

I have emphasized the last alphabet in all 4 patterns to make a point. The point is that the last
alphabet is the most important determining factor for a demand zone (the first 2) and a
supply zone (the last 2).

HOW TO DO A TOP-DOWN ANALYSIS USING THE SUPPLY-DEMAND METHODOLOGY

THE STEP BY STEP PROCESS

Looking at the activities of traders in the worlds many financial markets through charts has
allowed traders from everywhere and anywhere to be able to make more informed decisions
about how they speculate in the financial markets.

For a detailed T-D analysis I use 3 timeframes. You will see why as you read further.

Although I do similar analysis on each chart, each one of them has its own purpose.

Each timeframe has its own purpose.

Each timeframe used should be seen as a view of the markets from whatever perspective that
particular timeframe represents. This approach immediately makes it clear that using one
timeframe will not be enough to make a well- rounded judgement about what a market is
doing, at least not enough to put hard earned money at stake.
Each timeframe gives information that should be taken and put into a decision matrix to come
out with the most appropriate action that should be taken given the available information.

Notice I did not say the right action or most profitable action the use of the most appropriate
action is deliberate and implies that the decision is based on fact as obtained from reading the
chart.

As SUPPLY AND DEMAND traders (SAD traders!), we use the economic concepts of supply and
demand in interpreting market action.

THE STEPS
The first and most crucial step in doing a T-D analysis does not actually involve looking at
charts.
The first step is making a personal decision about what type of trader you are.

By this I mean, deciding how you choose to look at the markets - are you a trader looking to
make a monthly income from trading?, a weekly income?, a daily income?, or maybe even a
high frequency trader looking to be in and out of the markets numerous times a day or hour
even.
This decision is critical because it is what determines what timeframes (i.e. what view) will be
your Top and down timeframes in your Top-down analysis.

For a trader looking to make a monthly salary from trading for example, you are going to have
to use the monthly chart as your top. A weekly income trader will have to use the weekly
chart as the top whilst a trader looking to make an income daily must use the daily chart.

So STEP 1: WHAT TYPE OF TRADER ARE YOU?

Once you decide what type of trader you are then and only then can you go to work doing a T-
D analysis.
Notice at this stage you have thus far only decided on one timeframe, your top timeframe.
This top timeframe in the S&D methodology is called THE CURVE TIMEFRAME.
The full name is THE SUPPLY- DEMAND CURVE TIMEFRAME.

The Purpose of the Curve:

To identify the location of current price in relation to the location of the larger timeframe
supply and the larger timeframe demand.
Let us discuss how to identify the Curve on the Top timeframe.

You are seeking to identify the nearest FRESH Demand zone below current price and
the nearest Supply zone above current price. This represents the CURRENT S/D
curve

The term FRESH in the supply-demand methodology implies a zone of demand or supply that
price has not returned to at all since the zone was created. A zone that has even one
retracement however minimal the retracement, is no longer considered FRESH

Steps to identify zones: As I put in my discussion last time about this, this is the method I
learned to identify demand and supply zones, regardless of what timeframe I am looking at.

To identify a Demand zone:

1. go down and left without cutting through any candles
2. Identify a strong rally in price
3. Trace this strong rally in price down to its origin and you have your base

To identify a Supply zone:

1. go up and left without cutting through any candles
2. Identify a strong drop in price
3. Trace this strong drop in price up to its origin and you have your base

Once you have finished identifying the nearest fresh SZ above current price and the nearest
fresh demand zone below current price you have pretty much completed your assessment of
this timeframes view of that market.
There are other nuances for the curve timeframe that I can’t go into in detail in this post such
as the trend on the curve timeframe and how it ties into the zones and the appropriate action
to take, depending on where price is on the curve.

However, regardless of these nuances, by identifying the nearest fresh SZ above

current price and the nearest fresh demand zone below current price, what you have
done is identify an area above current price that you do not want to be a buyer at
and an area below current price that you do not want to be a seller at. That is critical
information.

The second chart is my TREND CHART.

I know you are probably thinking, what is AKT talking about, I thought we look at trend on all
timeframes?
We do.

However, trend analysis on each timeframe has different purpose and provides different pieces
of information. I will explain as we go along.

Hello everyone,

continuing on Top down analysis....

Continuing on the Curve for a little bit longer.

Once you have identified the nearest fresh demand below price and the nearest fresh supply
above price the next step is to decide what the most appropriate action is for you as a trader
to take.

To be able to make this judgement, you need 2 things

First where is price relative to the SZ above and demand zone below on this curve chart?

Close to or at Supply most appropriate action (which will be taken on the lower timeframes) is
to exit longs and start looking for opportunities to sell. Notice I did not say sell straight away
because you are near supply. I said start looking for opportunities to sell. You may get these
opportunities if they arise. They may not. For example, in cases where the S-D curve is
shifting.

Close to or at Demand most appropriate action is to exit shorts and start looking for
opportunities to buy. These opportunities may or may not arise. What you must not do is to
buy blindly just because price is at higher timeframe demand.

Please notice that I have not mentioned anything yet about the trend on the curve timeframe.

That is deliberate.

The reason is that although we must look at trend on this timeframe, trend is not the primary
function of this chart.

I will tell you why using an example.

Say you have done your curve analysis, identified supply above and demand below current
price.
You find that price is close to or at the curve timeframe demand zone.

Next you ask the question, what is the trend on the curve timeframe?

You do your analysis of what zones are being respected and what zones are being violated and
you conclude it is a downtrend.

What now?

Are you going to sell because it is a downtrend?

If you do, the odds are the trade will not work.

The reason is because you are at a larger timeframe demand zone, an area where the chart
objectively has told us that demand exceeds supply.

What then is the most appropriate action to take?

If you were short from above and are now close to or at curve timeframe demand, exit your
shorts
If you were not in any trade, now is not the time to be looking for a short because of where
you are on the curve.

Either wait for price to rally to the curve timeframe supply AND THEN join the downtrend
Or
Start looking for opportunities to buy, knowing that your buys will be counter trend (counter
to the trend on the curve timeframe).

So, trend is important in the curve timeframe but it is secondary to the location of price which
is the most important purpose of the curve timeframe chart.
(I know this point will be a controversial one for many but I hope I have explained things
clearly enough. My intention is not to confuse anyone

What about when price is neither close to demand nor close to supply?
This is called Equilibrium.

Supply and Demand are considered to be IN balance in this area (notice I did not say IM-
balance but rather IN balance, it was not a typo )

In this area where S&D are in balance you have 2 choices.

Either stay totally out of that market because S&D is IN balance

Or
Join the trend on your middle timeframe, not the trend on the curve timeframe please (more
on this later)
If you decide to go with option 2 be prepared to take your profits off the table quickly whether
you buy or sell because remember, this is a region where both supply and demand zones are
likely to work.

Hello Joe.
Thank you for the question.
To clarify for you, the nearest Supply and nearest DZs are not the same thing as Supply or
demand in control.

"Control" is a term used in the methodology once price reaches a level.

In the chart of the AUDUSD I posted the monthly SZ "is now in control" because price has
reached there.
The demand zone from where price rallied "was" in control when prices were down there. Now
that price has reached the monthly supply, the SZ is now in control.
I hope that makes it clearer for you

With regards to whether or not a CP can be used in curve analysis, as I stated in my post, I
use them because they represent one of the 2 pictures of demand we have. More importantly,
I have tested them.

Not knowing the context in which you have quoted Alfonso, I think what can be said of CPs is
that they are Trend "continuation" patterns and so are not best used when anticipating trend
"reversals".
The exception to that rule is when the CP is located inside a larger timeframe DBR OR RBD
reversal pattern.

For example, price is in a downtrend on the monthly.

Price reaches a monthly demand zone
You are looking to buy albeit counter-trend
You take an "X-Ray" of the monthly demand zone using the daily chart
You find a fresh RBR daily DZ inside the monthly DZ. It is fresh AND it is authentic (being a
RBR pattern)
So you now have fresh daily demand inside fresh monthly demand
I wouldn't ignore such a zone.

I hope that helps

best wishes

would like to address this age old discussion and issues around the idea of the Trend. My view
is from my time as a trader and my experience with trading or trying to trade trends. It is just
my view, nothing else.

It is a topic that divides most traders.

There are countless ways traders define trend – moving averages, ADX, price action, etc.

For us as SAD traders, we use the inter-relationship between supply and demand zones to
define trends.

Supply zones being created and respected = Downtrend

Demand zones being created and respected = Uptrend

A definition of trend that has totally changed how I look at them is this:
Trends are only the movement of price between higher timeframe supply and demand levels.

If price is moving from higher timeframe supply to higher timeframe demand we are in a
downtrend.
If price is moving from higher timeframe demand to higher timeframe supply then we are in
an uptrend.

By this definition, once I have identified the Curve SZ and the curve DZ I simply go to the
second chart, the trend chart, to determine the trend on that chart (please note that it is not
the curve timeframe chart that I determine the trend on, it is the middle chart of my sequence
of 3, the intermediate chart (more on this later).

By its very definition, a trend is something that has already happened. It is only recognised
after the fact.

Now, what causes the most confusion is deciding on a trade direction once the trend
direction is determined. We have all heard the age-old trading phrase, “The trend is your
friend” and others like “Don’t fight the trend”, “Don’t try to catch a falling knife” etc.

Well, to start with, Ed Seykota, the legendary trader made a little addition to the phrase “the
trend is your friend”. He said, “The trend is your friend, UNTIL THE BEND AT THE END”.

To add to Ed Seykota’s point, another legendary and extremely wealthy trader, Paul Tudor
Jones said the following about trends in general, “I believe the very best money is made
at the market turns. Everyone says you get killed trying to pick tops and bottoms
and you make all your money by playing the trend in the middle. Well for twelve
years I have been missing the meat in the middle but I have made a lot of money at
tops and bottoms”.

Allow me to use the Newton’s fundamental laws of motion to explain trends and what happens
to them. These laws are easily found on Google. I just picked the first link on a google search

Newton’s first law of motion:

Every object in a state of uniform motion tends to remain in that state of motion unless an external
force is applied to it.

Newton’s first law of motion adapted to Trends:

Every Trend in a state of uniform motion tends to remain in that state of motion until an external
force (An opposing larger timeframe zone) is applied to it.

The reason a lot of traders say trade in the direction of the trend is because trends do obey
this first law – a trend will continue in its current direction hence the view that the trend is a
friend.
A trend will continue in its current direction UNTIL “the bend at the end” comes when this
trend reaches an opposing LARGER timeframe zone, for example, a downtrend on a weekly
chart reaching a monthly demand zone; or a daily uptrend reaching a weekly supply zone.

So it is for this reason that it is critical that we know where we are on the CURVE
before we go ahead to follow any trend and not just follow the trend blindly.

In the supply demand methodology it is at this point that the concept of “Zone in control”
comes in.

If price is at an extreme i.e. at either curve timeframe supply or curve timeframe demand
then that zone is said to be in control (if at curve supply zone then that zone is in control; if at
curve timeframe demand then demand is in control)

Newton’s second law of motion:

The relationship between an object's mass m, its acceleration a, and the applied force F is F = ma

Newton’s second law of motion adapted to Trends:

The force needed to stop and change a trend must be larger than the force available on the
timeframe the trend is identified on. That force by definition can only come from a higher timeframe

To stop an uptrend, you need a “mass” of sellers and for there to be no more buyers (a loss of
buying momentum).
We can only find enough of a mass of sellers on a timeframe higher than the one we are
looking at the trend on
We assess momentum or acceleration using trend lines as taught by Alfonso
The combination of finding enough of a mass of sellers (arriving at the larger timeframe
supply zone), the lack of more buyers and the loss of momentum shown by a trend line break
tells us that the trend is no longer up and may soon become down.

Newton’s third law of motion:

For every action there is an equal and opposite reaction.

Newton’s third law of motion adapted to trends: This is how sideways markets are born
For every wave of buying that there is an equal and opposite wave of selling for, we will have
no overall movement, resulting in a sideways market

ontinuing on with our discussion...

I don't think I have mentioned this, but I just wanted to say that the information contained
from this discussion I have been having with my fellow traders comes directly from my trade
plan.

I am in the process of updating the pictorials in the plan. So I thought I would share some of
the plan with you all.
I could give out my trade plan but no-one else would be able to use it.
It has been individualized to me over the last 5 and a half years.
So I am not worried about releasing this information.
I want to help people in any way I can to understand this methodology.
Applying it once you have the information is what will take anything from months to years, as
Alfonso always reminds us in his posts.

So, I hope the information is useful.

Comments and feedback (negative and positive) are important.

Best wishes

PICTURES OF SUPPLY AND DEMAND

So, what does supply look like on a price chart?

What does demand look like on a price chart?

PICTURES OF SUPPLY:
There are only 2 pictures that depict supply on a price chart.
Both pictures have two things in common, they both have bases and they both have drops
after the bases.

Picture 1 of supply:
RALLY BASE DROP
This type of supply zone is a reversal pattern which implies they are best used when we are
looking for a zone for a potential reversal of a pre-existing downtrend to kick off. They are
usually found out at the extremes of moves and can be quite powerful.

The one downside to using this type of supply zone is that they are usually not authentic
zones (more on zone authenticity later). They tend to be pullbacks into zones represented by
the second picture of supply, the DROP BASE- DROP.

Picture 2 of supply:
DROP BASE - DROP
This type of supply zone is a continuation pattern which by definition implies that they are
best used when there is a trend underway (hence why the pattern is a continuation pattern,
i.e. continuing a pre-existing trend).

They are usually found in the middle of the curve (again, this is why they are linked to trends
because remember what we do in the equilibrium area? we follow the trend!)

They do not work as well for trend reversals UNLESS they are embedded within the larger
timeframe zone. For example, say you use the monthly chart as your curve timeframe and
price has now arrived at monthly supply. You know you are the extreme of the curve and
should be looking for opportunities to sell. Since the monthly SZ is too wide for you to use as
an entry zone, you take an X-Ray of that monthly SZ to take a closer look inside it.
This X-ray is taken using your daily lens, your daily timeframe.

Lo and behold, you find embedded within the monthly SZ, a daily DROP-BASE-DROP SZ.
You have just found your entry.

PICTURES OF DEMAND:
There are only 2 pictures that depict demand on a price chart.
Both pictures have two things in common, they both have bases and they both have rallies
after the bases.

This type of demand zone is a reversal pattern which implies they are best used when we are
looking for a zone for a potential trend reversal to kick off. Reversal of what you may ask?
Reversal of a pre-existing downtrend. Like their They are usually found out at the extremes of
moves and can be quite powerful.

The one downside to using this type of supply zone is that they are usually not authentic
zones (more on zone authenticity later). They tend to be pullbacks into zones represented by
the second picture of supply, the DROP BASE- DROP.

Picture 2 of Demand:
RALLY - BASE RALLY

This type of Demand zone like its counterpart supply zone, the DBD, is also a continuation
pattern which by definition implies that they are best used when there is a trend underway
(hence why the pattern is a continuation pattern, i.e. continuing a pre-existing trend).

They are usually found in the middle of the curve rather than at extremes (again, this is why
they are linked to trends because remember what we do in the equilibrium area (the middle of
the curve)? we follow the trend!)
They do not work as well for trend reversals UNLESS they are embedded within the larger
timeframe zone.

So there you have it, the 4 patterns supply and demand traders use in entering and exiting
the financial markets. No matter what market it is, we are looking for these patterns over and
over again.

Before we go over the steps we take in identifying any of these 4 patterns, a word about the
concept of the flip zone.

THE FLIP CONCEPT DEFINED:

The concept of the flip zone is based on the age-old technical analysis mantra of what was
once support becoming resistance and what was once resistance becoming support.

The slight supply-demand twist to this more conventional thinking suggests that a new zone of
opposing polarity is usually created in the process of taking out a supply or demand zone.

If a supply zone is what was taken out then a demand zone should be created in and around
the same area of the supply zone

If a demand zone is what was removed then a supply zone should be created in and around
the same area of demand

See chart examples below for both scenarios

ello Everyone. I hope you are having a restful day getting before the game starts again
Sunday night.

In this down time I thought I would share with you all, a view of Trends that is key to
understanding what exactly is going on when you look at your charts and seek to follow a
trend, only to see it turn on you.

I posted this view on FF in March 2016.

I hope it helps.

Best wishes

A DISCUSSION ABOUT TRENDS

I would like to address this age old discussion and issues around the idea of the Trend. My
view is from my time as a trader and my experience with trading or trying to trade trends. It
is just my view, nothing else.

It is a topic that divides most traders.

There are countless ways traders define trend moving averages, ADX, price action, etc.

For us as S.A.D traders, we use the inter-relationship between supply and demand zones to
define trends.

Supply zones being created and respected = Downtrend

Demand zones being created and respected = Uptrend

A definition of trend that has totally changed how I look at them is this:
Trends are only the movement of price between higher timeframe supply and demand levels.

If price is moving from higher timeframe supply to higher timeframe demand we are in a
downtrend.
If price is moving from higher timeframe demand to higher timeframe supply then we are in
an uptrend.

By this definition, once I have identified the Curve SZ and the curve DZ I simply go to the
second chart, the trend chart, to determine the trend on that chart (please note that it is not
the curve timeframe chart that I determine the trend on, it is the middle chart of my sequence
of 3, the intermediate chart .

By its very definition, a trend is something that has already happened. It is only
recognized after the fact.

Now, what causes the most confusion is deciding on a trade direction once the trend
direction is determined. We have all heard the age-old trading phrase, The trend is your
friend and others like Dont fight the trend, Dont try to catch a falling knife etc.

Well, to start with, Ed Seykota, the legendary trader made a little addition to the phrase the
trend is your friend. He said, The trend is your friend, UNTIL THE BEND AT THE END.

To add to Ed Seykotas point, another legendary and extremely wealthy trader, Paul Tudor
Jones said the following about trends in general, I believe the very best money is made at
the market turns. Everyone says you get killed trying to pick tops and bottoms and
you make all your money by playing the trend in the middle. Well for twelve years I
have been missing the meat in the middle but I have made a lot of money at tops
and bottoms.

Allow me to use the Newtons fundamental laws of motion to explain trends and what happens
to them. These laws are easily found on Google. I just picked the first link on a google search

Newtons first law of motion:

Every object in a state of uniform motion tends to remain in that state of motion unless an external
force is applied to it.

Newtons first law of motion adapted to Trends:

Every Trend in a state of uniform motion tends to remain in that state of motion until an external
force (An opposing larger timeframe zone) is applied to it.
The reason a lot of traders say trade in the direction of the trend is because trends do obey
this first law a trend will continue in its current direction hence the view that the trend is a
friend.
A trend will continue in its current direction UNTIL the bend at the end comes when this trend
reaches an opposing LARGER timeframe zone, for example, a downtrend on a weekly chart
reaching a monthly demand zone; or a daily uptrend reaching a weekly supply zone.

So it is for this reason that it is critical that we know where THE BIGGER TIME
FRAME LEVELS ARE before we go ahead to follow any trend and not just follow the
trend blindly.

Newtons second law of motion:

The relationship between an object's mass m, its acceleration a, and the applied force F is F = ma

Newtons second law of motion adapted to Trends:

The force needed to stop and change a trend must be larger than the force available on the
timeframe the trend is identified on. That force by definition can only come from a higher timeframe

To stop an uptrend, you need a mass of sellers and for there to be no more buyers (a loss of
buying momentum).
We can only find enough of a mass of sellers on a timeframe higher than the one we are
looking at the trend on

We assess momentum or acceleration using trend lines.

We do not assess Trend using trend lines

The combination of finding enough of a mass of sellers (arriving at the larger time frame
supply zone), the lack of more buyers and the loss of momentum shown by a trend line break
tells us that the trend is no longer up and may soon become down.

Newtons third law of motion:

For every action there is an equal and opposite reaction.

Newtons third law of motion adapted to trends: This is how sideways markets are born
For every wave of buying that there is an equal and opposite wave of selling for, we will have
no overall movement, resulting in a sideways market