How the Supply and Demand Trading Strategy Was Created

How the Supply and Demand Trading Strategy Was Created

Trading in financial markets is often seen as a complex and mysterious endeavor, but some successful traders have managed to decode the market’s behavior and develop effective rule-based strategies that can determine in advance, where market prices are likely to turn and where they are likely to move to.

One such trader is Sam Seiden, who created the Supply and Demand trading strategy that has gained widespread recognition for its simplicity and effectiveness.

Sam’s journey to creating the Supply and Demand trading strategy began during his time on the trading floor of the Chicago Mercantile Exchange.

Working on the trade desk, his role was to handle institutional order flow, which provided him access to real buy and sell orders from banks, financial institutions, hedge funds, and retail accounts. It was here that he recognized a pattern that would set the foundation for the way he approached trading forever.

Seiden noticed that the market’s real supply and demand levels could be identified when he organized these buy and sell orders into stacks based on their price levels.

The largest stack of buy orders below the current price was where the market’s strong demand was and is where price would turn higher, while the largest stack of sell orders above the current price was where the market’s strong supply was and where price would turn lower.

This simple yet powerful insight allowed him to anticipate turning points in the market before they happened.

To apply his understanding, Seiden started marking these supply and demand areas on price charts while still on the trading floor.

As prices moved from demand to supply and back again, he could predict where market prices were likely to turn or change direction and where price would move to after it turned.

This strategy proved to be remarkably accurate in forecasting price movements.

Another aspect that set Seiden’s strategy apart was its focus on the behavior of professionals versus novice retail traders.

He observed that typically, banks and financial institutions consistently made successful buy and sell decisions, while many novice retail traders made poor buy and sell decisions that often lead to losses.

This discrepancy led him to question why one group consistently outperformed the other, despite trading in the same market.

Motivated by this observation, Seiden delved deeper into understanding the decision-making process of successful professionals. He saw that consistently, professional and novice traders were taking the opposite buy and sell action at key supply and demand levels in markets. The novice trader would buy after a rally in price and at a supply level and the professional was the seller at that level. Price would then typically decline, the novice would lose money and the professional would profit.  Seiden observed and documented this in many markets and at many supply and demand areas on price charts over the years.

He then distilled this knowledge into the Supply and Demand trading strategy, which aimed to help traders spot high-probability trade setups by identifying key supply and demand levels on price charts.

He was always focused on accurately forecasting where price would turn in a market and where price would move to for the simple reason that… The low risk, high reward, and high probability entry into any market and for any trading purpose is always as close to the turn in price as possible. Entering positions away from the turn in price only increases risk and decreases reward.

Seiden’s strategy offers traders a clear framework and rules for making informed buy and sell decisions in the markets.

By focusing on real market supply and demand levels, traders can avoid overcomplicating their approach and instead, make trades based on objective criteria.

The Supply and Demand strategy has gained a reputation for its effectiveness across various trading styles, from day trading to swing trading to long-term investing.

In conclusion, Sam Seiden’s journey from the trading floor of the Chicago Mercantile Exchange to creating the Supply and Demand trading strategy underscores the power of simplicity and observation in the world of trading.

By recognizing the significance of real supply and demand levels and translating that insight into a practical rule-based strategy, Seiden has provided traders with a valuable tool to navigate the complexities of the financial markets.

If you’d like to learn a simple, systematic approach to trading Supply and Demand, sign up for a FREE workshop to learn the Pinnacle Method of Supply and Demand developed by Sam Seiden.

Link to FREE Workshop with the Pinnacle Institute: Upcoming Events | PINNACLE INSTITUTE

Supply and Demand Market Timing YouTube Session with Sam Seiden: Market timing with Sam Seiden: April 29th, 2021 Discussing Supply and Demand – YouTube


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