Hello traders! Now that the U.S. presidential election is finally over and we can stop being bombarded with half-truth commercials every thirty seconds, we can now fully concentrate on trading. Whether or not your candidate “won” is irrelevant. Neither showed the slightest interest in addressing the true economic problems of the U.S. government, namely that we spend much more than we take in. So let’s talk about some charts, ok?
In every Online Trading Academy class that I teach, the statements “What was support becomes resistance” and “What was demand becomes supply” are thoroughly discussed. Many new traders have at least heard this statement before, yet are unsure why it is the case. This week’s newsletter will demonstrate why.
In the following EURUSD chart, I have marked a demand zone that didn’t hold, thereby becoming a supply zone.
At point labeled 1, in a current uptrend price action pulled back and regained strength defining a new demand zone. But what caused this move up? Obviously greater demand than supply, but even more basic than that is the fact the people (or computers) bought here. If you bought at that point, you were making money quickly and have a fond memory of buying there. As you locked in some of those 100 pips in that move, many traders who have a fond memory of that price level will buy again when price hits that same level in the future – for example at the point labeled 2. As they realized… Continue Reading
