Fakeouts,Supply & DemandBy Dom M Jnr

Introduction

This is a journal breaking down my thoughts before during and after fakeout trades.

We will cover:

- How to spot fakeout levels- Types of fakeouts- How to avoid fakeouts- How to trade fakeouts- Psychology

How to Identify Fakeout levelsThe first step is to identify retail support and resistance.

- The aim here is to find the most obvious levels. Don’t think about it too much- You can use a line chart to see them more clearly- We can clearly see a nice support at the bottom, most retail traders will buy as soon as the market hits

these levels- Let's take a closer look in the next slide

What Really Happened?

- We can clearly see that after several wicks below the support, market made the push to the upside.

- This was a trade I was watching in real time so let's look at my thoughts while the market was playing out in the next side.

What Was Required To Trade The EURUSD Fakeout?

The most important thing is that there was a clear demand zone below the retail support!

We all know how to draw supply and demand based on theforexscalper’s course.

We can also see that there are several wicks into the demand zone, so it would be ideal to enter on one of these wicks

After the market has grabbed all the orders in the zone we then see a nice bullish push

Let’s Look at example on USDCAD

- This pair, at the moment, is notorious for fakeouts. So as supply and demand traders we can find really nice setups

What are we looking for?

- Obvious Retail Levels- Supply and Demand levels around the retail levels- Push from S&D- Nice pull back to enter on

We can see that retail traders are going to sell after a bounce from the retail level

- If look left we can see a similar set up- Market always leaves clues when you look left

Market bounced then went straight for stop losses - You can see that market when to a fakeout level just above the supply zone.- From there we can see sellers came into the market- Then we got a nice pullback on the 30m/ 15m timeframes which is where we

can get an entry

Compression Type Fakeouts

- We all know compression from the section in theforexscalper’s course- We are going to look how we can capitalise on the fakeouts at the end of these moves

We can see market making the squeeze into supply

Retail traders will be buyer because market looks so bullish

Now we see a lovely rejection and a wave of sellers- Don't be afraid to miss a move, we can enter after a pullback

Another example for USDCHF

The reason the majority of traders lose.

PSYCHOLOGY!

All of the setups we have covered so far would have been losers without proper execution.

In order to achieve proper execution you need a solid trading mindset.

Having a proper trading system without a proper mindset will not give you consistent results.

In order to close the gap between your potential and current results you need to analysis yourself and your mindset when you are taking trades. This is an idea that in often expressed by Mark Douglas Author of Trading In The Zone.

In the book Thinking Fast and Thinking slow the idea about 2 system which our brain uses to make decisions are broken down.

System 1 - The fast thinking system.

- Works automatically, is very quick and requires little effort.

System 2 - The Slow thinking system.

- Requires a slow more effort, can be described as ‘lazy’ and can be influenced by the fasting thinking system. However this system is great for complicated decisions.

How is this related to trading?

Let's break it down.

Trading Using System 1

Have you ever woken up, looked at a blank chart and said ‘this looks like a perfect trade’, taken the trade and it went straight for your stop loss lol .

When you trade using system one you have a tendency to make impulsive decisions which can really harm your trading account.

The majority of traders will most likely be trading based on impulsive decisions, this is why they all buy and sell on retail levels - leaving a sea of SLs around theses areas. Professional traders know this and take advantage of this as they have to take out the trades in the opposite direction before market can move properly in the direction of smart money.

Priming

This is the idea that information that you consume throughout the day subconsciously affects the decisions you make when trading.

For example you go on instagram and see 3 different traders telling you to sell GBPJPY. For all we know each trader is taking the same sh*t signal. However system 1 does not know how to validate information from different sources. Later on when you are on the charts, you already have a bias and are so focused on finding a sell opportunity that you are completely blind to a high probability buy opportunity.

It is hard to regulate what we see throughout the day however we can reduce the effect of priming by focusing only on trading rules and trading responsibility for our trades.

“ You are not right or wrong based on whether the trade goes in you direction or not. You are right when you follow your rules”

- Random Youtube Comment

Let’s Look At An Example on GBPJPY

Things To Observe:

- Where will the retail traders be entering?- Where will the retail stop losses be? - Where does the smart money/ professional traders come in

Thank You For Making It This far

The rest of the presentation is just going to be fakeouts that I have traded recently with my thoughts on them.