Supply and Demand

Trading the Wick Methodology

Four Hour Charts
This is a rule-based trading methodology with emphasis on mitigating losses with
strict money management by using candle wicks occurring within supply and
demand zones to gauge stop losses. The methodology assumes all zones are valid
for trading but recognizes many zones will fail. Selecting supply and demand zones
is part technical and part art. No best way of defining supply and demand zones
is presented. It is assumed that the trader has a basic knowledge of supply and
demand trading as basics are not presented here but some resources for your study
are provided.
1. Identify supply and demand zones. I tend to use zones associated with Wide
Range Bars (WRB). I also identify zones where price exits brief consolidation
via rally-base-drop (RBD), drop-base-rally (DBR), rally-base-rally (RBR) and
drop-base-drop (DBD) patterns. When these patterns are associated with a
WRB I consider them particularly strong.
The following resources are
recommended:
a. Sam Seiden: Google him and you will find a wealth of videos.
b. Read the Price is Everything thread on Forex Factory. You dont have to read
the whole thing. You will get the idea after reading 50-100 pages.
c. Read the BS Trading with Kenneth Lee thread on Forex Factory. There is an
attached PDF that is super.
d. Google Wide Range Bar analysis and read the free material available on this.
Search through Hidden Gaps posts for much on WRB.
2. This method is based on H4 charts.
method.

It is not a multi-time-frame-analysis

3. Wait for price to enter or touch a supply or demand zone. Wait for the candle
that engages zone the to close. The candle that first engages a zone is the
signal candle (SC).
If the candle closes bearish it is bearish signal
candle (BeSC). If it closes bullish it is a (BuSC).
4. Entry criteria:
a. The
span
b. The
span
c. The
d. The

wick of a BeSC in demand must be 25% or larger than the total BeSC
wick of a BuSC in demand must be 10% or larger than the total BuSC
wick of a BuSC in supply must be 25% or larger than the total BuSC span
wick of a BeSC In supply must be 10% or larger than the total BeSC span

5. Stop loss is 2 to 3 pips beyond the wick end.

6. If trade is entered in supply target is the closest demand zone. If trade is

entered in demand target is the closest supply zone.
7. More on zones:
a. A zone is good for trading until price has completely traversed the zone
and closed beyond its boundary.
b. If price closes inside the zone after exceeding it the zone is still good
for trading.
c. Each subsequent return to a zone increases the risk that the zone will
fail.
8.

Special trading situations:

a. Proxy-wick-candle (PWC): Used when the signal candle does not
meet criteria for trading. For example the signal candle might be a
large bearish candle closing on its low with little or no wick. In this
case wait for the next candle to close and consider using it is a proxywick. Well call this a proxy-wick-candle (PWC).
b. Retracement entry:
The signal candle closed with a large wick
making the risk greater than the trader desires. In such a case
determine the 50% level of the signal candle and place a limit order.
Place the stop loss 2 to 3 pips below/above the wick of the signal
candle.
c. Re-entry after stop-out: As long as the next candle meets trading
criteria it can be used to trade.