thanks for yr question.
1st i like to refer u to see the 3rd line - 3rd condition.
so,
1. drawing supply/demand have to be only from a reversal zone - its not true.
2. Drop-Base-Drop: Low demand and high supply pushes prices down to a base of equilibrium. After which demand falls off even further and supply increases causing a continuation of the selloff.
The supply demand paradigm, in terms of price movements consists of four basic types – as follows, with a brief description:
Drop-Base-Rally: Low demand and high supply drops prices to a base of equilibrium. After which demand rises and supply falls causing a reversal rally.
Rally-Base-Drop: High demand and low supply pushes prices up to a base of equilibrium. After which demand falls and supply rises causing a reversal sell off.
Rally-Base-Rally: High demand and low supply pushes prices up to a base of equilibrium. After which demand increases and supply evaporates causing a continuation rally.
Drop-Base-Drop: Low demand and high supply pushes prices down to a base of equilibrium. After which demand falls off even further and supply increases causing a continuation of the selloff.
1st i like to refer u to see the 3rd line - 3rd condition.
http://www.forexfactory.com/attachment.php?attachmentid=1447280&d=1402652572
Check this image which explains how to draw Supply and Demand levels..
Check this image which explains how to draw Supply and Demand levels..
1. drawing supply/demand have to be only from a reversal zone - its not true.
2. Drop-Base-Drop: Low demand and high supply pushes prices down to a base of equilibrium. After which demand falls off even further and supply increases causing a continuation of the selloff.
The supply demand paradigm, in terms of price movements consists of four basic types – as follows, with a brief description:
Drop-Base-Rally: Low demand and high supply drops prices to a base of equilibrium. After which demand rises and supply falls causing a reversal rally.
Rally-Base-Drop: High demand and low supply pushes prices up to a base of equilibrium. After which demand falls and supply rises causing a reversal sell off.
Rally-Base-Rally: High demand and low supply pushes prices up to a base of equilibrium. After which demand increases and supply evaporates causing a continuation rally.
Drop-Base-Drop: Low demand and high supply pushes prices down to a base of equilibrium. After which demand falls off even further and supply increases causing a continuation of the selloff.