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I was reading (again) the supply/demand theory. I want to ask some of the guys that trade with it.
A great place of demand is located where price abruptly rose, with big long bullish candles, right? This indicates that at that area there are very big pending orders, waiting to buy whatever is thrown at them, right?
Question: How can pending (possibly unfilled) buy orders, help the price move up so abruptly?
I can understand if the form a very solid support, where the price will stop and cannot go lower. But how can the price shoot up?
My only thought is that other traders have realized the existence of those big buy orders, and rushed to buy at higher levels.
What do you think?
Can you help answer these questions from other members on NexusFi?
From market and/or volume profiles you can easily see that this assumption is completely wrong - at least
for assets with (theoretically) infinite supply and demand like futures.
Quite the opposite: Between balance areas ("support", "resistance") where the big volume is traded and DOM is
deep, prices rise or fall through a thin/empty DOM. In the profiles you can derive that from low volume nodes that
show the "move" (which realiter isn't in terms of supply and demand).
I.e.: Your candles basically show the jump (thin DOM = absence of supply and/or demand) - starting from a higher
volume node and ending at another higher volume node (area of vast supply and demand).
Regarding this statement:
"A great place of demand is located where price abruptly rose, with big long bullish candles"
I am happy you dissagree because I also found it weird. Please help me out however. I did read in several places that a very good indicator of great demand is the big bullish candles right after it. Maybe I am missing some element. Could somebody explain how to spot a place of great demand, so later I can place buy orders, when the price approaches that level?
If you check back on the word volume profile above you will see that it is underlined and in blue. Click on that for more information, that should give you an idea.
