The Curve

The Curve

In order to determine the curve on a price chart, we use the higher time frame to find the closest supply and demand zones to the current price.

This is very important because it gives us a clear picture of who’s in control; buyers or sellers, and to avoid buying at supply and selling at demand.

The rules are:

·       We look for the closest fresh supply and demand zones on the higher time frame, in our example, we are using the monthly chart.

·       On the higher time frame, we divide the area between the two proximal lines into 3 equal parts: Very Low, Low, Equilibrium, High, and Very High.

When the price is High and Very High in the curve, we only SELL.

When the price is Low and Very Low in the curve, we only BUY.

When the price is at Equilibrium, we can either trade in the direction of the trend using the intermediate time frame or we don’t trade and wait for the price to move away from this zone.

Once we determine the curve on the higher time frame, we move to lower time frames to identify and draw our supply and demand zones and place our entries accordingly.

If there are no supply or demand zones on the higher time frame, we simply trade with the prevailing trend using the intermediate time frame.

For example, if the trend is up in the intermediate time frame, we move to the lower time frame and we buy at demand zones. And if the trend is down, we sell at supply zones on the lower time frame.

If we have a sideways trend, we don’t trade unless the lower time frame zone overlaps with the intermediate or the higher time frame zone.

For example, if in the intermediate time frame, we have a sideways trend approaching a support level, we move to the lower time frame and identify an overlapping demand zone to buy with the premise that the price will keep bouncing between support and resistance.

As a rule of thumb, when the price is in the middle of the curve, it is better not to trade.