 Hi, my name's Leon Roe currency trader and trading coach at trading 180 comm and welcome to this video on Spatial awareness and risk reward as it relates to supply and demand and I'll be talking about something called the crowded exit which is real in the Forex market and in really any market from a technical analysis perspective. So If you are trading Supply and demand or even if you're trading support and resistance But you're here because you're pretty trading looking to trade supply and demand and know a bit more about supply and demand His most traders will just look at you know a level of demand or supply and then say okay Well, that's demand. I'm gonna take a trade there now. There's a bit of a higher level that you need to try to look at when it comes to selecting levels of demand and your entries so One thing you need to keep it keep in mind is spatial awareness Yeah, as it relates to your risk reward now. What do I mean by that? So? Let's say for example. Let's say we have You know a market that is a trending Yeah, you have a market that comes up makes a new high right and Then starts to pull back to what was known as a demand zone, right? Now We may see an entry somewhere around here Yeah Zoom in slightly a little bit. We may see an entry and we may enter right at this Entry here You know, whatever candle that is that could be, you know some sort of pin bar Yeah, everybody's favorite and This would have to be you know your stop or stop us we have to go somewhere around here now We know that if this is a supply zone, and this is demand This is What the market would consider an expensive area? Yeah, it's a supply equals expensive and we know that to be true Because the mark there was no demand up here the market didn't want to pay the price You know, we always have price Time is going to be obviously via the other axis So this is an expensive area Right proven to be an expensive area and the demand is proven to be a cheap area Obviously depending on what currency pair, you know, you're buying as far as if you're buying the base or the quote currency now If this is an expensive area, this is a cheap area And we are entering here How much upside potential do we have when it comes to our risk-reward ratio? right so risk reward ratio Yeah, how much distance do we have before we may hit? What is known as the expensive area? Yeah, now is this would this represent a decent trade now? A lot of traders don't take this into Consideration they just looking for areas of demand and then saying okay. Well This you know, I've seen an entry. I've seen a pin bar I'm gonna take it right but is that really the the smartest play and When it comes to risk-reward ratio, what you want to be is spatially aware now for me This doesn't represent a decent trade. Yes, you could have probably the perfect setup here But if you haven't got enough upside potential Yeah, and the reason why you need that upside potential is because the market's already proven that this level here Is an expensive area and it's likely to be Expensive in the future when if prices ever do come up to here They're gonna be what is known as problem areas problematic areas. Yeah so Unless you believe Fundamentally that you know, we should we are still undervalued down here and prices should go above that most traders I'm not fundamentally driven. They are technically driven But if you believe obviously that we are definitely vastly undervalued and that prices should go higher then You know brilliant But if you're trading this purely off of you know, technicals, which I really don't recommend But if you are and one of those technical traders, then you're gonna want to at least Try to take profit at what would be a problematic area And if everybody else is looking at this area of supply as a problematic area, guess what's gonna happen? Everyone else is gonna get out at this level and if you've bought here, then you have to sell Yeah sell to exit which means that also, you know, they're gonna be more supply orders from a technical analysis perspective Yeah, and your risk-reward ratio doesn't look so good Does it because we're gonna have more supply potentially Yeah, then demand because everyone's gonna be getting out what is known as a crowded exit Yeah at or just before this supply zone So if your risk-reward represents let's say for example, you know 60 pips But your upside potential is Maybe somewhere like maybe 70 pips from the to the absolute higher Then you might say risk-reward ratio one to one is you know is decent for me. I always want to at least attempt to make One to two or two to one go for double Why risk? Because then it puts lower pressure upon My win rate and if all I have to do if I keep going for two to ones The win rate I need to have just to break even which basically means not to lose any money is around about 34 to 35 percent if you're gonna include You know spreads Right, so about 35 percent just to break even right to not lose money Right break even that question is can you be right more than 35 percent of the time? Of course, you can at a two to one ratio But the problem is is that when you're in a situation like this where you haven't got enough upside potential You're really kind of capping your risk-reward ratio. Now. What's the alternative to this So the alternative to this would be where you have More risk-reward, so you have a bit of a pullback prices making a bit of a new high, right? Prices start to pull back To a demand zone. Let's be in demand supply Where your entries now represent again? This is gonna be a crude pin bar Yeah, where this might represent again From your entry to your stop-loss May represent something like again 60 pips But you have an upside potential of potentially, you know a hundred and 50 pips yeah from the absolute, you know, demand low To the higher may represent more than that now that is something that I am interested in it's because At least if the market doesn't get all the way to the top due to what is known as the crowded exit Yeah, and what that is is where traders will Tend to take profit and want to take profit before and get out early before Other traders. I mean if you're if you've been in the market, you know You've felt the urge in order to get out and take profits early now when Prices are coming to a problematic area be it a supply zone Yeah, if you're if you're going if you're going long if you're going short, obviously it would be you know a demand zone You want to probably take profit before? Everybody else even if you're not meant necessarily, you know conscious of it your subconscious of that fact Yeah, because you want to take profit before Prices end up turning around like what they did in the past Yeah, same thing with with support and resistance So what you're gonna have is as I'm the lead up to a supply zone They were gonna be traders who bought down here and they're gonna be taking profit just before You know the market reaches new highs because that will be the smart thing to do now if this represents if this crowded exit you know represents and I know the It's not necessarily Representative but let's say for example that was a two-to-one right and It's represented 120 pips for example you're getting out before Everybody else you don't want to be left holding the bag right? You don't want to be left the one thinking to yourself Well is will price, you know get up here and if it doesn't get up here and You know prices start to reverse again. You're gonna start to think to yourself Well, you know, maybe I should have taken profits slightly early before that level Yeah, so The point is is that you want to give yourself enough space Right for price to run to the upside Yeah, and even if prices don't necessarily even run to the upside they might run to maybe fair value if fair value represents, you know 120 pips. Yeah, and your risk is 60 pips then you then you know that you have at least You know a three-to-one potentially even up to a four-to-one right before you get to the highs Which represents a trade that you know is a good risk reward is one-to-one a good risk reward potentially if again, you're you know, you have a high probability strategy in a high in a high win rate, but in my You know my way of thinking is that I want to be obviously right a lot more than I'm wrong But I also want those You know those wins to be you know double triple quadruple of what I'm making because then I can obviously make more than just One-to-ones here one point one to ones there. The thing is with when you have a You know a 50% win rate or a 60% win rate, but you're getting one-to-ones. It's It can be very it can be very Challenging to actually just grow your account steadily. You want to really Have you know good risk reward two to one three-to-ones, right? And then it also takes the pressure off of you having to have a you know a high win rate as well to make You know to make a profit. So let's look at this in the market So here we are on a pound dollar chart and this was demand zone right here and this Was your two supply zones, you know that would been marked out from From earlier in the week and again if you want to Follow along with some supply and demand zones that have a weekly supply and demand Technical analysis that is released on Sundays Right. So this was the beginning of the week and prices had come down into this area now if you were a buyer of the The pound What you would be looking to do is looking at the daily Demand zone Going down into a lower time frame. I trade the the four hour and then looking for an entry now Little indicator my candlestick entries and here would have been one of the entries That was provided. I'm not a buyer of the pound and I'm not going to pretend that I took this trade At the moment with brexit going on But if you were you know taking this trade right from a risk-a-war perspective and from a technical perspective This is what you'd be looking for right. This is the kind of trade you'd be looking for where you have An expensive area the market high right. So you have demand from a daily perspective You have a high right, which is an expensive area. You have a cheap area, which is demand When price come back down to this cheap area what you want to look for is your upside potential, right? Is do I have enough? upside potential Before the crowded exit before traders start to look to take profit So again Look at this two-to-one Right, you have enough upside potential before everyone else starts looking at this Recent market high and starts to also look to take profit whoever was around here. You have enough risk reward Which is what you really should be looking at right is considering spatial awareness Yeah, now what we're going to look at is compare that with for example the pound Sorry the dollar yen So on the dollar yen We also have prices that have come down into a demand zone This would have been supply zone push up Into what is known as a potentially expensive area and we get a pullback now again going down into a lower time frame chart And understanding where we may have you know an entry Right, we ended up getting Two candle entry right here these two green candles there Stop below the market low But now you can start to see where as far as a risk reward perspective goes We haven't got that much upside potential right now Supply potentially is coming into the market from a technical analysis perspective We don't know what's going on fundamentally. Well, well, I do anyway With the with the Japanese yen and the dollar, you know, I would be a buyer with a dollar Obviously, there's risk off risk on sentiment, etc. Etc. But why wouldn't I have taken this because is it worth the risk? Is it worth my time? risking My hard-earned money for just a one-to-one Risk rewards That's a question that you have to you know answer for yourself, but for myself No, it isn't right. I would prefer prices to come further down by if it does come further down right and then Have a better risk reward to the upside Yeah, so it's something to always think about spatial awareness risk reward isn't just okay I'm gonna enter, you know here and this is the way the entry is think about Overall market structures think about who else is getting in who else is gonna get out does that represent Good risk reward. What are the likelihood of pro is the likelihood of prices breaking through an expensive area? you have to take all these things into consideration and It just adds a bit of Higher-level analysis when it comes to taking trades and being selective my mentor mark Great-great trader told me that there is something called level and it was a trade selection. You have to be selective It's not every single setup. You should take right If it fits your rules and these are the things that do fit your rules or don't fit your rules then fine but you have to Understand what is gonna be a good risk reward for you and what isn't yeah and Selecting trades is something that you have to you know learn to do and learn to refuse trades If they don't fit your plan just because you see an entry doesn't mean it's a great entry. So With that being said If you do have any questions Definitely leave them in the comment section Below if you're watching this on YouTube or you can email me at info at trading 180.com I hope you will have a great trading week and you've had a great trading week so far And if you've locked in some profits great if you haven't don't worry It's only again one week in 52 in the next, you know 104 except two years three years four years that you're gonna be trading So just as long as you manage your risk go for more than you risk give yourself the best chance possible You know to continually make profits and remember from a risk-reward perspective If you're going for two to ones and you're winning at 40% then you're making money. So Guys take care and I'll speak to you soon