Expertsbazaar

Major highlights of budget 23rd July 2024

Understanding Supply Zones in Trading

Supply zones indicate areas where selling pressure is anticipated to overcome buying pressure, leading to price declines. These zones vary in strength based on momentum and candle formation:

1. Weak Supply Zones : Characterized by a lack of momentum and consolidation with small candles. These zones often fail to hold strong resistance.
2.Normal Supply Zones: Feature decent momentum with normal-sized candles, providing moderate resistance.
3. Strong Supply Zones: Defined by strong bearish candles with solid momentum, offering significant resistance and higher probability of price reversal.

Gap trading involves taking advantage of price gaps between trading sessions. Traders identify four types of gaps: breakaway, runaway, exhaustion, and common gaps. To trade gaps, start by recognizing the gap type. For instance, trade breakaway gaps by entering a position in the direction of the gap after confirming strong volume and momentum. For runaway gaps, follow the trend but be cautious of overextension. In exhaustion gaps, watch for reversals, indicating the trend’s end. Use stop-loss orders to manage risk and confirm signals with technical indicators like volume and moving averages for higher accuracy.

1. Double Top Pattern
- Entry: Wait for the price to break below the support level and then rise back to retest this level (now resistance). Enter a “Sell” trade at the retest.
- **Exit**: Look to exit at a lower support level where the price shows signs of stabilizing or smart money might start accumulating.

2. **Double Bottom Pattern**:
- **Entry**: Wait for the price to break above the resistance level and then fall back to retest this level (now support). Enter a “Buy” trade at the retest.
- **Exit**: Look to exit at a higher resistance level where the price shows signs of facing resistance or smart money might start distributing.

By focusing on retest entries, you align your trades with smart money movements, improving the chances of successful trades.

One should trade on next day of the gap up/down when high/ low of previous day is taken along with swing high / low .Always check for high volume while on the gap day for confirmation.