Supply-demand trading is a trading method based on the idea of ​​finding a point where the market will sharply decrease or increase in price, and these zones will be marked as supply-demand zones. The supply zone is the area where the price falls sharply. In contrast, the demand area is the area where the price rises dramatically.

Over the last several years, the method of supply-demand trading has become popular with traders. The idea behind the concept of supply-demand trading is well known to many traders that when large financial institutions like banks, hedge funds cannot liquidate their trades, so they place pending orders. wait) at the desired price range to wait for the market to return to the supply-demand zone. Or a trader understands it simply when the big boy enters the order with extremely large volume, causing the price to run ... The problem of both the above-mentioned ways of thinking is not only incorrect but also causes many wrong thoughts like just need having a lot of money to pour into the market is sure to win ... or pending orders can make the market move.

The truth is that the market moves when it lacks liquidity and pending orders (namely buy limit and sell limit) don't make the market move, only market orders (buy and sell orders) do...

In command to understand why we will come to the concept of market liquidity.


Market liquidity is the ability to buy or sell a product without causing a large change in price. Whenever you see a strong market move it is due to a lack of liquidity in the market, not just because more buyers enter the market than sellers (or conversely more sellers than buyers. ).

When someone places a market order it removes some of the liquidity from the market because the person placing the market command wants his order to be placed at the exact same price, at that time in the market, the market command. his order will therefore match another person making a sale at the same time with the same market volume.

If the market order is larger than the pending order, this will cause the market order to be only partially liquidated (for example, the market has a sell pending order of 0.5 lots and you want to enter a buy command immediately. Can buy up to 0.5 lot, cannot be higher). In order to be able to liquidate your trade (eg buy command), the market will have to go higher to find sell pending command.

This means that pending command (specifically limit command) helps to add more liquidity to the market, on the contrary, market command withdraws liquidity from the market and is the cause of market movement.

We are retail traders, and our trading volume makes no sense to influence the market. Placing and exiting command is not a big deal for us. But for big boys, hedgers, institutional traders ... entering and giving the command is a problem for them.

Because their command is too large, big boys have to find the area where they want the least impact on the market (with minimal changes in market liquidity). They want retail traders that we provide liquidity for their trade. And often this time will be found when retail traders hit a stop loss.

And this is also the reason why the concept of stop hunting (stop the hunt, stop loss hunting ...) in the trading market appeared so popular. The big boy wants to push prices into a range of stops so that it is the stops of the masses of retail traders that provide liquidity to their trade. This helps them earn more money but less effort.

Understanding this concept is important for you to start trading with the big boy mindset. You can use OANDA's order book to step-by-step find crowdsourced zones to trade them.

But, traders also do not need to have tools like the OANDA order book to be dominant when trading in the market. Traders should learn to define the supply-demand zones and monitor the market's behavior to understand crowds of people involved in trading.