#1
When a new imbalance is confirmed as a zone
30th April 2014, 10:50 AM
Read the lesson on how to validate a level, the conditions mentioned in that lesson
(departure, basing, freshness etc.) need to apply as well. In this lesson we are
talking about the imbalance itself, it will be considered potential until it complies
with the validation rules in the above-mentioned lesson.
As a rule of thumb, a zone needs to take out an opposing zone to be validated,
but there very specific circumstances when this rule does not apply
The screenshot samples below show valid levels as per the level's validation rules
on this lesson. You must differentiate between a valid level of demand that has
removed an opposing area of supply and the "tradability" of the level. Maybe the
level is no longer valid because a HTF area is in control, or its basing is not
correct, etc. Do not confuse validity of a level and tradability.
A zone or imbalance is validated under these 2 specific circumstances:
You must ask the charts the same 2 questions below over an over. See each
chart as the ancient Greek Oracle that has the answer to everything, you just
have to ask and offer a sacrifice, your time Ask the Monthly Oracle the right
questions, then the Weekly Oracle... they will always answer you.
The questions are always the same when it comes to spotting and drawing Supply
and Demand zones:
1. Imbalance took out an opposing zone.This rule is the core of this supply
and demand strategy
o Making a higher high or a lower low does not necessarily validates a
zone, it also needs to take out an opposing zone, unless scenario 3
occurs (read below)
o Exception: If there is a H4 demand zone that took out an opposing H4
supply but the supply is within a D1 or bigger timeframe, the removal
of the zone does not make the demand zone tradable, it’s way too
high and we’ll need the D1 supply to be taken out instead. The same
applies with a D1 demand zone having removed an opposing D1
supply zone but that supply zone is located within a WK supply zone.
Price is fractal, the same rules apply to all timeframes and
combinations
2. A Trendline has been broken at a bigger timeframe or a flip zone
(WoW trade)
o When a Trendline is broken, the imbalance originally created that
caused the break of the TL will be validated automatically as a valid
zone even if an opposing level has not been removed
Sensitivity: Internal document for Union Bank
o This new level will be valid as long as 1 HTF zone is not hit and
gains control. That is, if an ascending WK TL is broken and a bearish
engulfing pattern is confirmed as supply (it broke the TL), it will be
valid as long as a HTF MN demand zone or clear HTF are not hit
o A level created after a TL break is valid as long as it does not reach
an opposing level and that opposing level takes control without being
taken out
Watch this 10 minutes video for a more detailed and visual explanation of the
core rules
CLARIFICATIONS
There is no opposing zone to be taken out and a profit margin bigger than 3:1
to the opposing zone, OR it's all time highs or lows where there is no opposing
level to be taken out
• There are times when the opposing zone is way far from the origin of the
imbalance. This happens normally in strong trends or after the breakout of a
flip zone. Make sure there is no flip zone on the way up when this happens
• Sometimes the opposing level is used up and not tradable (not 2:1 or way
too wicky). Try to lean on well-formed D1 zones in these scenarios. You
can be more aggressive with H4 longs if you want, but try not to assume that
a used-up zone is going to be removed "this time"
• A D1 supply zone may have taken out an opposing D1 DZ but if D1 SZ
neither consolidated away nor created a 2:1 imbalance all lower TFs than
D1 will be negated since the bigger TF zone is not tradable
• Under this scenario we'll already have a valid Trendline connecting several
valleys or peaks
Tradable versus non-tradable zone. A valid zone at any given timeframe
is only tradable if it complies with the multiple timeframe analysis and the
Sequence rules
• A valid H4 demand zone that took out valid H4 supply zone will be valid if
it follows the Sequence rules. We're always talking about higher probability
setups
• That valid H4 DZ could be created right underneath a valid D1 supply zone
and WK supply zone, with a clear downtrend. What do you think is going to
happy to a small H4 DZ against a WW/MN supply zone in a downtrend? It
will have very low odds and will most likely be easily removed
• #2
• 30th April 2014, 11:23 AM
• New Zone is validated when the opposing one is taken out
EURUSD D1 timeframe 16th September 2013. A couple of D1 demand
Sensitivity: Internal document for Union Bank
zones examples are shown
#3
30th April 2014, 11:34 AM
A Trendline has been broken at a bigger timeframe or a flip zone (WoW trade)
• There is no need for the opposing zone to be removed if we have hit a bigger
timeframe zone than our entry timeframe
• Remember you can be more conservative and wait for the opposing level to
be removed
• EURUSD D1 timeframe 28th September 2013. A couple of D1 demand
zones examples are shown
D1 CHART
Sensitivity: Internal document for Union Bank
H4 CHART
#4
30th April 2014, 11:52 AM
There is no opposing zone to be taken out and a profit margin bigger than 3:1
to the opposing zone
• There is no need for the opposing zone to be removed if there is no zone to
be removed, zones will be validated automatically if there is a profit margin
higher than 3:1 to the opposing zone
• EURUSD H4 timeframe 20th November 2014
Sensitivity: Internal document for Union Bank
#5
30th April 2014, 12:14 PM
A ZONE TAKING OUT AN OPPOSING AREA LOCATED WITHIN A
HIGHER TIMEFRAME ZONE IS NOT HIGH ODDS
• EURUSD D1, 6th NOV. 2013
• The fact that supply is being taking out by a demand level does not validate
the level if we'd too high buying against D1 or higher timeframe areas of
supply. The opposite applies to supply zones removing demand zones too
low at a HTF area of demand
#6
5th February 2015, 01:27 PM
Validation of potential imbalances at all time lows and highs
Sensitivity: Internal document for Union Bank
There are times when there are no opposing zones to be taken out because price is
printing all time highs or lows. Under these circumstances, brand new imbalances
that follow the main odds enhancers as described in the lesson on how to score a
level should be used as filters.
These are the features we'll need for such a potential imbalance under all time
lows/highs:
• An 2:1 imbalance after breaking out of the basing
• Ideally 3:1 profit margin. The profit margin would really be the imbalance
created by the departure, since there is no opposing level to measure profit
margin from
• Consolidating away with 1 full OHCL candle
• Good base. Stay away from wicky bases or too many candles at the base
• Watch candle closes on Monthly and Weekly charts. Big fishes love
fishing at all time lows/highs, many breakout traders will trade there, these
trades might feed opposing institutions orders that were lurking in the dark
waiting for retailers. Ideally wait at least for brand new MN/WK imbalance
who lower low or higher high has a WK/MN close after the all time
lows/highs price
Sensitivity: Internal document for Union Bank
Sensitivity: Internal document for Union Bank
