Understanding whether a demand or supply zone will hold can be broken down into simple yet effective criteria. Here’s how you can validate these zones using both basic and advanced approaches:
1. HTF Bias
- What It Is: Check the Higher Time Frames (HTF) to determine the overall market trend.
- Bullish Market: Look for demand zones.
- Bearish Market: Look for supply zones.
- Why It Matters: Trading against the broader trend can lead to poor outcomes. Always align your trades with the HTF bias.
2. Pricing
- What It Is: Understand market pricing relative to previous highs or lows.
- How to Use:
- Bullish Market: Buy on a retrace to discount levels (below previous highs).
- Bearish Market: Sell on a retrace to premium levels (above previous lows).
- Why It Matters: Buying low and selling high increases the probability of a successful trade.
3. Orderflow
- What It Is: The direction of price movement through previous market levels.
- Types:
- Bullish Orderflow: Seen in bullish markets.
- Bearish Orderflow: Seen in bearish markets.
- How to Use: Identify where price is likely to continue moving based on the HTF bias and orderflow.
4. Liquidity Sweep
- What It Is: The market's action to break previous structure and create a Change of Character (CHoCH).
- How to Use:
- In a bearish market, look for liquidity sweeps that print a CHoCH.
- In a bullish market, look for similar sweeps and CHoCH patterns.
- Why It Matters: A liquidity sweep can confirm that a zone is significant, increasing your confidence in its validity.
5. Inducement
- What It Is: A zone that attracts many traders but eventually results in their stop losses being triggered.
- How to Use:
- If you see a zone without an inducement, it may be the actual point of interest (POI).
- Why It Matters: Identifying inducement helps in avoiding traps and improves trade accuracy.
Summary:
- HTF Bias: Determine the broader trend.
- Pricing: Buy low in a bullish market, sell high in a bearish market.
- Orderflow: Align trades with market direction.
- Liquidity Sweep: Confirm zones through price action and CHoCH.
- Inducement: Avoid common traps to validate genuine zones.
This approach ensures you’re not only aligning with the broader market trends but also making informed decisions based on price action and market behavior.
