 Hi, my name is Liam Rowe currency trader and trading coach at trading 180 comm and in this video I'm going to be explaining why demand and supply zones Fail and it's a question that I get asked a lot. Why did this zone not work out? Why how to know when a zone is going to turn and I've got news for you Nobody knows when a zone is going to turn or which zone is going to fail Trading is a probabilities game all we're doing is we're trying to understand the likelihood of one thing Happening over another if anybody tells you that this is this zone or this level is going to work Then you should reply to them say well if you know that this zone is going to work Then why don't you bet everything you have on it because if they know that indicates what? Certainty and if you're certain that something is going to happen Then why not bet everything you have on that one trade and just become a billionaire? Millionaire hundred times hundred times over traders won't do it right because they understand that nobody can predict the future And it's a probabilities game. So why even try to figure out when this zone is going to turn it's just Understanding the likelihood of one thing happening over another. That's all we're doing So let me get into why zones fell specifically from my from my knowledge So why zones fell first things first what you need to do is really kind of understand Supply and demand zones that they are potential bargain cheap or bargain prices. Yeah, so You know rally-based drop drop base rally I'm not an advocate of that narrative because it doesn't really tell you anything in regards to Value and understanding buying low and selling high Yeah, and if you want to watch my youtube video on why supply and demand is the genesis of all trading technical trading strategies The link is in the description box below and this also I think I'd probably have it in one of the Link on the top right-hand side and that really explains it but from a really kind of quick I guess example is we're looking at the higher high high low principle if prices This is a price chart Yeah, this is zero and let's say for example, that's ten. Yeah There's definitely demand here as prices go higher This is now seen as an expensive area If prices can't go beyond whatever price that is Let's say for example, that's eight price start to pull back before this happens before this move higher happens prices up between an Expensive area and what is known as a bargain area or a cheap area. Yeah, that's just you know fact There was value here Buyers bought at this price point buyers weren't willing to push We weren't willing to pay the price whatever the price of this was so then you have what is known as potential pullbacks And until prices actually break This high here and start to go even higher. Yeah Whatever the pullback is Whatever price that was when buyers start to buy and there's demand Even at a previous expensive area if buyers still continue to buy Push prices higher then this becomes a bargain or a cheap area Proven it's proven fact. Yeah, there's no disputing about that higher highs and higher lows Aware the strongest areas of demand and lower highs and lower lows are the strongest areas of Supply potentially this was a bargain here so much so even at a previously expensive area buyers were willing to buy Yeah, now What we need to understand is That whatever drove prices to new highs from this low prices come back down here Yeah, this is where The demand zone strongest area of demand. It's not gonna be here most traders will be trading and An area of what is known as support and resistance. So that would be Known as resistance and then when prices come back, they would trade here Yeah, as some sort of level of support But if we're looking at this being the origin of the move higher Then this is just what a pullback. That's all that is. This is you know, if you guys know about Fibonacci Retracements you got 32 50 61.8% etc. But that's just a discount from this low To this high so when traders are trading areas of support and resistance They're not necessarily always trading at the best areas. This is always going to be The most of the best price to buy this was the bargain in the cheap area in the same exact way that this Was the bargain or the cheap area if you understand Value and what is driving prices support and resistance is not the best area to buy technically Not to say that the support and resistance doesn't work, of course Support and resistance, you know can be a decent area to buy but you have to understand What is the best area to buy and it's always going to be the origin of the move that causes higher highs Yeah, so higher high When that starts to pull back that's known as what an expensive area because buyers no longer willing to buy Yeah, I'll pay the price at that price point. Whatever that price point is Yeah, and the origin of that move is where the bargain is right so Supplying demand zones the monzones are Potential bargain prices and when prices come back down to here This is where we are looking to buy again. This is the best area to buy now again. Nobody knows All right when prices come back down here We know that this is a potential bargain in the past But what could have changed here first of all it could be a change in fundamental analysis and sentiment so fundamentals from a forex perspective a driven by three things GDP Inflation And interest rates INT sorry Interest rates, but they're also driven by what is known as risk of sentiment right, so risk of Sentiment yeah, and risk of sentiment is described as when We're in an environment of uncertainty or turmoil Or or anything where Traders will look to put their money into safe haven assets or safe haven Currencies like the yen or the Swiss franc so Just because it was a bargain here. Let's say for example if this was You know, maybe a week ago Yeah, whatever whatever, you know Date and time that was and prices come back down here What we need to understand is whether this is a bargain again Here if the fundamentals haven't changed as to why this was a bargain here Then there is a higher probability and a higher likelihood that this will also become You know an area where prices will turn if for example, you know, there is the Fundamentals and risk sentiment has changed from when Strong demand was produced here then the likelihood that this is going to fail It's going to increase that's pretty much What we're doing we're just understanding that when prices come back to a level is This a bargain when we compare GDP inflation and interest rates The second reason why Zones fell it's going to be because of the search for liquidity now liquidity in its simplest terms is basically the amount of Buyers and sellers and buying sell orders that they are in the market. So for every buy transaction There has to be sellers a sell transaction That's be someone willing to take the other side of your trade when you press a buy on your broker There has to the broker is taking the other side of your trade now Have you ever had this situation? And I'm sure you have is when let's say for example There is a news release and the news comes out and everyone can see the number Let's say for example It was non-farm payrolls and the numbers come out way better than expected So you're everyone's like bye bye bye bye bye bye, right? Everyone's going to the ups thinking that price is going to go to the upside But actually prices go to the downside and everyone's like, huh? Fundamentals don't work. First of all news trading is not fundamental trading. It's definitely not month fundamental trading and the reason why this happened is because It was not enough liquidity to the upside. There's not enough If everyone wants to get long, right? There was not enough Sell orders above the market to facilitate the buying Yeah And the liquidity in fact is what to the actual downside. So while everyone is getting long if you buy Yeah, your stop-loss Is what a sell order you are forced to sell when your Stop-loss gets triggered at a worse price Then what you bought for bought for in the same way that when you take profit you'll take profit is a sell order and you are selling at a you bought for for example to And you're selling for For so your profit is to yeah And on the other side of that trade is your broker who is forced to buy our worst secure a worst price because when you bought it to They sold it to you for two Yeah, when you take profit at four they are forced To buy at four so they sold it to you and they're forced to buy back at a Worst price so they lose and you win when you get stopped out Let's say for example You're forced just to sell at one you bought for two, but you're forced to sell at one they are Buying back taking the opposite side of this trade and they Sold it to you at two and they were bought it back at one. That's basically how it works. So if there's not enough Buy orders If I say there's not enough sell orders above the market to facilitate everyone who wants to buy Then the market is going to surge for liquidity and the liquidity and the sell orders are what? Below the market your stock losses are The sell orders the liquidity that the market needs and money's not trying money's transferred It's not it's not made it's transferred from the winner from the loser. Sorry to the winner Yeah, so lose every time you get stopped out. It goes to the winner. Yeah That's the way that money is made it's it's taken it's not Created it's not made it's taken in the forex market So what ends up happening is is that the market needs to search for enough? Sell orders triggers out all the stock losses before it wants to then go on its way And how many of you guys have seen that happen where you get whipsawed out? Yeah, you get The market goes the opposite way when everyone's trying to go long on some great news It stops them all out and everyone's saying okay That's it. I'm out triggered and then the amount of sell orders allows the transaction for what buying to occur and then the market Can do what it wants because it's got enough liquidity to the downside in order to now Transact anyone who wants to buy and who are the smart money buying? Yeah, who are the smart money who are buying who are the liquidity providers the liquidity providers are other banks so The top ten Right the top ten liquidity providers have a market share of around 50 to 60 percent Right so these are the guys that provide the liquidity Yeah, these are the guys taking the opposite side of everybody's trade So everybody and when I say everybody I'm talking about, you know from retail traders and even other financial institutions These are the guys that are taking the other side of those trades. These guys are providing the liquidity Yeah, so it's in their interest. It's in their interest for you to lose So what they do is they drive the market to places where they can get the liquidity from you guys and Then they can push the market in their direction Yeah, it's JP Morgan UBS. These are there. This is their market share in 2018 2017 I don't think anything has really changed, you know 2019 last year but this is The these are the guys, you know, these are the financial institutions That provide the liquidity. Yeah, and they're not they are not gonna be losers They're going to be the winners. This is the reason why stop hunting happens and some people might say for example Well, the retail trader only makes up seven eight percent of the market, which is true You know in in we're small fry, but when you think about if the global market four trillion All right four trillion in the forex market of five trillion something like that now seven percent or four trillion is Somewhere in the region of around 350 billion All right 350 billion pounds or dollars worth of Retail trading orders remember like I said Money's not transferred. It's taken and if only around about 80% of those traders lose money That's a lot 80% of 350 billion. That's a lot of money out for grabs daily Yeah, so the search for liquidity is What and the reasons why one of the reasons why? Levels, you know tend to not hold and it's because none of us really know none of us know for certain when the The liquidity providers, you know these guys None of us know for sure when they are ready to push the market in the direction that they want to push it Nobody knows You know when the market is going to turn but we just we do have clues That's what we do have. There are clues in how we can actually Determine the best Or the likelihood of one thing happening over another at certain zones now not all supply and demand zones are Created equally there are higher probability trades and all higher probability trades that we look at and Those are the supply zones And demand zones that we need to identify now if you want to identify those higher probability zones It's a free training at trading 180 comm One of the things that we need to do first and foremost is understand fundamental analysis and risk sentiment. That is 100% You know a must if you want to take the highest probability trades because financial institutions are looking at Look at fun fundamentals and risk sentiment to make their decisions. They are not looking at a level of support and resistance and Saying well, there's a pin bar or an engulfing there and then Taking their taking there, you know, they're massive positions based off of technical analysis They just are not doing that. So why would you alone do that technical analysis? It's just used for our timing and identifying past supply and demand zones and past value so one of the ways that we Definitely will increase the probability of a successful trade is Fresh supply and demand zoning you'll learn about how to identify the freshest areas of supply and demand zone and On the free training at trading 180 comm and you also learn about market manipulations something our term is capture pain relief Location trades as well, which is the zero sum game and identifying how to take advantage of losing traders who trade typical Technical analysis breakout traders with traceman traders and level traders. So go to trading 180 comm absolutely free training and Yeah, you'll understand a bit more how to trade and identify higher probability levels and zones so hopefully that's answered your question and Just embrace the probabilities embrace probabilities That's all we're trying to do is trade is manage our risk go for at least You know more than we risk double as an absolute minimum and putting ourselves in the best position to You know succeed over the long term so guys if you have any more questions Just email me at info at trading 180 comm and take care