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A significant amount of forex traders have trouble drawing supply and demand zones manually. When these traders can’t draw the zones they decide to do the next best thing which is look on the internet for indicators which can automatically draw the zones on their charts.
Quite a few of these supply and demand zone indicators exist online, some are free while others you must pay for, what I’m going to show you today is why using these supply and demand zone indicators can cause your trading more harm than good and I’m also going to give you a supply and demand zone indicator which can help you out in your trading of supply and demand zones.
The Problem With The MT4 Supply And Demand Indicators
I’ve seen a few indicators pop up over the last few years which will promise to draw dead accurate supply and demand zones on your charts.
The problem with all these supply and demand indicators is they will mark the zones according to how the trader who coded the indicator trades supply and demand. This presents a problem because each trader has their own tweaks to the supply and demand method, some may draw the areas differently to how other traders draw them, which means if the person who has coded the indicator has a different criteria for identifying and drawing supply and demand zones which is incorrect to the way they should really be drawn, then by using the indicator your also going to be trading supply and demand in an incorrect way.
The chart above shows 6 supply and demand zones which were drawn automatically by a free supply and demand indicator I downloaded a few years ago.
I just want to say right now this was actually one of the better supply and demand indicators which came out at the time supply and demand trading become popular, there were others which would literally only drawn like 3 levels on the charts
Now from me looking at this chart I can see the indicator has failed to mark many of the zones which I would typically mark when I’m trading supply and demand, not only this but most of the zones which have been marked by the indicator are old zones which formed a long time ago.
This tells me the person who created the supply and demand indicator above has coded the indicator based on the rules Sam Seiden uses in his supply and demand trading, Sam believes older zones have a higher probability of working out successfully than zones created recently, looking at the image above we can clearly see 5 out of the 6 zones marked by the indicator are all pretty old.
These zone are not good for trading as I mentioned in my supply and demand trading article, the older zones have a lower probability of working out successfully than newer zone which have formed recently. One last thing I’ve noticed about this supply and demand indicator is some of the zones it has marked have been marked in what I would call the wrong way.
The way I locate a supply or demand zone is by looking for a large bullish or bearish engulfing candle in the market, as this tells me someone has either brought or sold in an amount big enough to change the market direction. In the demand zone which is second from bottom on the image you can see it has been shaded as a zone yet there is no engulfing candle present, there’s a large bearish candle which is followed by a small bullish candle, I can’t understand the reasons why this point has been shaded as a demand zone ?
Maybe its a zone on a lower time-frame ? If it is then why is it being marked on the 1 hour chart instead of the time-frames it actually appears on ?
Like I said before this indicator is one of the better supply and demand indicators out there, even though it has some critical failings which is likely to cost you money if you start using it in your own trading.
The Only Supply And Demand Zone Indicator You Need
Now I’ve given you a small overview of why the supply and demand zone indicators which promise to draw correct supply and demand zone on your charts don’t tend to work very well, I want to give you an indicator which will help you in trading supply and demand zones.
This isn’t the type of indicator which will automatically draw the supply and demand zones on your charts, ( it can but it doesn’t mark the right zones ) but it does have some other little features which come in handy when drawing the zones and when trading the zones.
Here’s an image of 4 supply and demand zones which I’ve marked on the charts using the supply and demand indicator.
One of the features of this indicator is when a zone you have drawn has been touched, the zone itself will change color to let you know the zone has been touched. If a zone is touched it will change to a darker shade of the color which you can select in the settings tab for the indicator.
Another small but important feature is the little number you can see in the corner of the supply and demand zones.
This number is the size of the zone itself, one of the zones has 26 in the right hand corner, what this means is the total size of the zone from high to low is 26 pips, therefore if the market comes into the demand zone you know the maximum you will have to risk on a trade will be 26 pips, this may sound like a small feature but you’ll be surprised how much time you can save when you need to mark the zones quickly.
All of these colors along with many other setting can be changed in the indicator window which I’ll show you how to use in a minute. I’m not sure if the settings I have the supply and demand indicator currently on are the ones which were the default settings when I first downloaded the indicator, so what I’ll do is put some images up of the settings window and you can copy the setting yourselves if you want the indicator to display the zones in the same way you see in the image.
How To Add The Supply And Demand Indicator To MT4
Adding the supply and demand indicator to MT4 is quite easy although I must admit I had to do a google search on adding indicators to MT4 as its been such a long time since I’ve last added one.
First you need to click the link below and scroll down until you come across the link which says RectangleReader.ex4
Once you have downloaded the indicator, open the folder you saved it to then copy the file.
Now open MT4 go to File and click on Open Data Folder.
When the Data Folder window pops up, open the MLQ4 folder and past the rectangle reader file into the folder titled Indicators.
Once this is completed restart MT4 and the indicator should show up in the custom indicators tab.
You can add any other custom indicator you come across to your charts by following the same steps outlined above.
Now I’m going to show you how to change the settings of the supply and demand indicator to be the same as mine.
First navigate to the Charts tab at the top of the MT4 window and click on Indicators List, the box below should open up on your screen.
Select the RectangleReader Indicator and click on Edit in the top right.
When the new window opens scroll down until you come to the same options you can see in the image above. If the options you see are different to the ones you see in the above image change them to match mine and your zones will display in the same way you can see in the chart above.
How Can They Fall For This
The last thing I want to talk about when it comes to supply and demand zone indicators is how there are some websites which are selling these indicators for unbelievably silly prices. I don’t have a problem with people selling trading related things so long as they are priced fairly for what they do. I have come across one website which sells a multitude of different indicators, one of which is a supply and demand zone indicator. This indicator does not even draw the zones using rectangles, it uses lines and looking at the images of it placed on a chart its evident that if you were using this indicator it’s likely you wouldn’t have a clue as to what is going on in the market because of how many lines are present.
How much for this supply and demand indicator ?
Unbelievable isn’t it ? But the best of it is that $149 is the reduced price, normally it costs $199.
That’s almost as much as I had to put in my first trading account !
I really don’t get how people are able to get away with this, if the indicator was something like $10 then I would think okay its a fair price, so long as it performs better than the free supply and demand indicators you can find online, looking at the images of the indicator in action its clear that this isn’t the case, I mean it doesn’t even draw the zones as rectangles ! how can it be considered a supply and demand indicator when all it does is confuses you as to where the supply and demand zones are located in the market.
Anyway the point I’m trying to make is never buy any trading products which have a ludicrously high price point, no one should be buying an indicator for $149 no matter how good they say it is, I wouldn’t even pay $149 for all the indicators they have for sale on their site ! When people sell trading related items for huge prices it’s a sign they don’t actually make money from trading, if they did then why do they need to charge so much for a product like a trading course or a subscription service?
I understand the frustration traders have when they feel like they cannot do something correctly, such as draw accurate supply and demand zones. Part of the problem is there are so many different supply and demand methodologies it makes it really difficult to know the right and wrong way of drawing them, my article “How To Easily Draw Supply And Demand Zones” is the correct method you should use to draw the zones on your charts.
I can guarantee if you practice drawing the zones using the steps given in the article within time drawing the right zones will become second nature to you and you spend more time actually trading the zones instead of marking the zones.