I have read some articles where this approach is described as a low risk and high reward trading opportunity, but im curious if any has thought of it this way. And maybe even traded this way. I hope to get some applies. all are very welcome.
Basically the idea is when price is moving sideways, then there's a very good balance between supply and demand. When prices moves down from that level, there must be an imbalance between supply and demand in that level.
We then know that if we hit that level again, it was a supply area, and who wants to buy into an area where we know by history that theres has been some selling going on. So if we hit that supply area again, we will be selling in the area, with a stop just outside the area. Its off course just opposite with a demand level.
The Risk/Reward ratio in this approach is very good because you have a tight stop.
- Supply
- Supply
- Demand