Supply and demand are the reason for Support and Resistance bounces in Forex market. Today, we discuss top 5 MT4 supply and demand indicator tips. Dig in!
AtoZForex – In Forex market, supply and demand are the key factors behind the moves of the currencies. In fact, all the price movements that are happening in the market, whether the price is going up or down, are caused by fluctuations in supply and demand.
Supply and demand concept
But what actually makes the supply and demand? In order to understand the concept of supply and demand, we will need to go back to the basics of the economic theory:
- if a product has a lot of demand, price rises;
- if there is an oversupply of a product, price drops.
In Forex, the same thing applies. When the demand for a certain pair rises, it means that there is lot more buyers than sellers in the market. Therefore, the price for this pair is also on the rise.
In case there is less demand for the currency pair, meaning that there are more sellers than buyers, the price of this currency pair is set to go down.
After reviewing the basics of the demand and supply in Forex, we can say that the demand in Forex comes from the buyers' market, and the supply is taking its roots from the sellers' market.
Supply And Demand Indicator MT4 Uses
Automated MTR supply and demand indicator is one of many custom MT4 indicators available on AtoZForex Indicators directory. This Forex Indicator is used for highlighting the supply and demand zones on the charts. You can see the chart with such zones below. The supply zones are in maroon color and the demand zone is shown in the blue color.
The main word here is zones. The zone means that we are talking not about just one line or price, but we consider the whole area between two price levels. Thus, this MT4 supply and demand indicator outlines exactly these areas for you.
Top 5 MT4 supply and demand indicator tips
Now, when you know the concept of demand and supply in Forex and what is supply and demand MT4 indicator, it is high time to learn how to trade Forex with this knowledge. Here are the top 5 MT4 supply and demand indicator tips.
#1: Set supply and demand zones as taking profit targets
In case you had to buy order and now you notice that the price is headed into the supply zone, consider locking in profits from your trades. The other option in this scenario is to shift trailing stop loss tighter.
#2: Stop Loss placement
The most appropriate way to place a stop loss is to put it outside of the support or resistance level zones. In this case, these zones are the supply and demand zones.
In case you enter a sell order in a demand zone, place your stop loss a few pips under this zone. Similarly, if you enter a sell order in a support zone, place you stop loss a few pips above the supply zone.
#3: Confirm your trades
Some of the traders in Forex are facing difficulties when trying to quickly identify support and resistance zones. Worry no more, this supply and demand MT4 indicator perfectly does this job.
One fundamental way to trade supply and demand zones is just to buy on the demand and sell on the supply zone.
However, some of the Forex industry experts believe that this way is not completely correct. They state that the proper method involves using the supply and demand zones along with the rules of your Forex trading strategy. Another great piece of advice is to use the supply and demand zones as the price action convergence. Based on the results of the analysis, you decide whether to buy or sell.
#4: Trailing Stops placement
The Automated MT4 supply and demand indicator is able to aid you in the placement of your trailing stop loss.
In a downtrend, the supply zones will be headed up constantly. Thus, if you have an open sell order, you are able to use the zones as your trailing stops to take your profits as price drops.
In the same way, in an uptrend, you can use the demand zones as your trailing stops and lock your profits as the price moves up.
#5: Watch out for Traps
The last, but not the least of our top 5 MT4 supply and demand indicator tips - use the demand and supply zones to protect yourself from traps! Demand zones are essentially support level zones and therefore the potential for sellers getting caught out with bear traps is there.
The demand zones are reflecting the support level zones. Therefore, the sellers have a bigger chance of getting caught out with bear traps here. A bear trap is when a seller thinks that a support level is going to break. So, once the price is starting to break the support level, the seller starts selling on the breakout. However, the price quickly reverses and spikes up.
Knowing the bear traps will definitely aid you to get out of losing trade. Moreover, you will be able to change the direction quickly, thus capturing the profits from the uptrend.
In order to download this indicator, please click on: Automated MT4 Supply and Demand Indicator
Think we missed something? Maybe you have something to add to these Top 5 MT4 supply and demand indicator tips? Let us know in the comments section below.