Hi

I was reading (again) the supply/demand theory. I want to ask some of the guys that trade with it.

A great place of demand is located where price abruptly rose, with big long bullish candles, right? This indicates that at that area there are very big pending orders, waiting to buy whatever is thrown at them, right?

Question: How can pending (possibly unfilled) buy orders, help the price move up so abruptly?

I can understand if the form a very solid support, where the price will stop and cannot go lower. But how can the price shoot up?

My only thought is that other traders have realized the existence of those big buy orders, and rushed to buy at higher levels.

What do you think?

bgeorge 

Hi I was reading (again) the supply/demand theory. I want to ask some of the guys that trade with it. A great place of demand is located where price abruptly rose, with big long bullish candles, right? This indicates that at that area there are very big pending orders, waiting to buy whatever is thrown at them, right? The fact that there were big long bullish candles does not necessarily mean that there were big pending orders. In fact, it may also mean that there was low liquidity, hence fewer pending orders than usual. This would be the norm in the minutes and seconds preceding an important data release. Also, if you're talking about a bullish candles, the pending orders would be waiting to sell, not to buy. Question: How can pending (possibly unfilled) buy orders, help the price move up so abruptly? I can understand if the form a very solid support, where the price will stop and cannot go lower. But how can the price shoot up? My only thought is that other traders have realized the existence of those big buy orders, and rushed to buy at higher levels. What do you think?

Hi. Please see above.

bgeorge 

A great place of demand is located where price abruptly rose, with big long bullish candles, right?

From market and/or volume profiles you can easily see that this assumption is completely wrong - at least
for assets with (theoretically) infinite supply and demand like futures.

Quite the opposite: Between balance areas ("support", "resistance") where the big volume is traded and DOM is
deep, prices rise or fall through a thin/empty DOM. In the profiles you can derive that from low volume nodes that
show the "move" (which realiter isn't in terms of supply and demand).

I.e.: Your candles basically show the jump (thin DOM = absence of supply and/or demand) - starting from a higher
volume node and ending at another higher volume node (area of vast supply and demand).

@choke35 never seen a simultaneous response such as that!

choke35 

From market and/or volume profiles you can easily see that this assumption is completely wrong - at least for assets with (theoretically) infinite supply and demand like futures. Quite the opposite: Between balance areas ("support", "resistance") where the big volume is traded and DOM is deep, prices rise or fall through a thin/empty DOM. In the profiles you can derive that from low volume nodes that show the "move" (which realiter isn't in terms of supply and demand). I.e.: Your candles basically show the jump (thin DOM = absence of supply and/or demand) - starting from a higher volume node and ending at another higher volume node (area of vast supply and demand).

@bgeorge choke35's answer is more correct

Thank you guys.

@choke35

I am sorry, could you clarify what you mean by "market profile" and "volume profile"? Do you mean the DOM (https://nexusfi.com/articles/trading/DOM)

Regarding this statement:
"A great place of demand is located where price abruptly rose, with big long bullish candles"

I am happy you dissagree because I also found it weird. Please help me out however. I did read in several places that a very good indicator of great demand is the big bullish candles right after it. Maybe I am missing some element. Could somebody explain how to spot a place of great demand, so later I can place buy orders, when the price approaches that level?

bgeorge 

I am sorry, could you clarify what you mean by "market profile" and "volume profile"? Do you mean the DOM (https://nexusfi.com/articles/trading/DOM)

If you check back on the word volume profile above you will see that it is underlined and in blue. Click on that for more information, that should give you an idea.

bgeorge 

Hi I was reading (again) the supply/demand theory. I want to ask some of the guys that trade with it. A great place of demand is located where price abruptly rose, with big long bullish candles, right? This indicates that at that area there are very big pending orders, waiting to buy whatever is thrown at them, right? Question: How can pending (possibly unfilled) buy orders, help the price move up so abruptly? I can understand if the form a very solid support, where the price will stop and cannot go lower. But how can the price shoot up? My only thought is that other traders have realized the existence of those big buy orders, and rushed to buy at higher levels. What do you think?

It really depends if you belive the hype that Sam seiden et all peddle.

What most fail to grasp is the interaction and importance of supply and demand in relation to market structure.


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