I’ve made over $5,000,000 in the last 6 years using the same trading method.
Its simple yet effective.
Heres how I use supply and demand zones to daytrade;
Its simple yet effective.
Heres how I use supply and demand zones to daytrade;
Basics
Supply zones (where sellers are likely to emerge) and demand zones (where buyers are likely to step in) are crucial areas on a chart which can predict potential reversals or continuations.
Supply zones (where sellers are likely to emerge) and demand zones (where buyers are likely to step in) are crucial areas on a chart which can predict potential reversals or continuations.
Chart Setup
I start with a clean $SPY chart, usually on a daily timeframe to identify major zones.
However, for intraday trades, I use the 5M and 15M to execute trades.
I start with a clean $SPY chart, usually on a daily timeframe to identify major zones.
However, for intraday trades, I use the 5M and 15M to execute trades.
Drawing Zones
For supply zones, I look for a sharp price drop.
For demand zones, a sharp rise.
I mark these areas, ensuring I encompass both wicks and bodies of candles.
For supply zones, I look for a sharp price drop.
For demand zones, a sharp rise.
I mark these areas, ensuring I encompass both wicks and bodies of candles.
Validation
Not all zones are equal.
If price revisits a zone and shows a strong reaction (bouncing off or dropping sharply), it validates the strength of the zone.
Not all zones are equal.
If price revisits a zone and shows a strong reaction (bouncing off or dropping sharply), it validates the strength of the zone.
Option Selection
Once zones are identified, I wait for $SPY to approach these zones.
Based on expected reaction:
Demand zone = I buy CALL options
Supply zone = I buy PUT options
Once zones are identified, I wait for $SPY to approach these zones.
Based on expected reaction:
Demand zone = I buy CALL options
Supply zone = I buy PUT options
Expiry Selection
How I usually choose my option expiration dates & strikes:
Monday - Wednesday
• Friday expiration, at the money.
Thursday-Friday
• Next week expiration, slightly out the money.
Options have time decay. Always be mindful of theta, especially when trading…
How I usually choose my option expiration dates & strikes:
Monday - Wednesday
• Friday expiration, at the money.
Thursday-Friday
• Next week expiration, slightly out the money.
Options have time decay. Always be mindful of theta, especially when trading…
Stop Loss
I set stop losses based on the opposite end of the zone.
If $SPY breaks and closes beyond the zone, it’s a signal that the zone might be invalidated.
I set stop losses based on the opposite end of the zone.
If $SPY breaks and closes beyond the zone, it’s a signal that the zone might be invalidated.
Profit Target
I usually set initial targets based on the next opposing zone. For instance, if I buy a CALL at a demand zone, I’ll target the next supply zone above.
I usually set initial targets based on the next opposing zone. For instance, if I buy a CALL at a demand zone, I’ll target the next supply zone above.
Review
Post-trade, I always review.
Did the trade go as expected? Were the zones accurate?
This continuous learning refines the strategy over time.
Post-trade, I always review.
Did the trade go as expected? Were the zones accurate?
This continuous learning refines the strategy over time.
Risk Management
Never go all-in.
Even with the best analysis, the market can surprise.
Allocate only a fraction of your portfolio to any given trade.
Never go all-in.
Even with the best analysis, the market can surprise.
Allocate only a fraction of your portfolio to any given trade.
Trading options on $SPY using supply and demand zones is systematic and reduces impulse decisions.
It’s about patterns, patience, and discipline.
Stay consistent and keep learning.
It’s about patterns, patience, and discipline.
Stay consistent and keep learning.
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