Trading Strategy: Supply and Demand Dynamics

My strategy is built around a core concept: identifying the balance between supply and demand, anticipating price action when this balance shifts. This reflects basic economic theory in practice. The market, in my view, operates in microcycles, and recognizing these can present profitable opportunities.

Extreme Volatility (Red Zone):
Characterized by sudden surges in supply or demand, creating a significant imbalance that squeezes the order book. This often occurs in pump-and-dump scenarios.
Strategy: On this timeframe, swing or scalping trades with tight stop-losses can be profitable. The goal is to capture the rapid price movements caused by the imbalance.

Mid Volatility (Orange Zone):
After extreme volatility, the market usually enters a more stable, yet still volatile, phase. Here, retail traders speculate, while institutions or high-frequency traders (HFTs) may control liquidity within a defined range.
Strategy: Range trading with boundary stop-losses in both directions can be profitable, as we exploit the liquidity sweeps conducted by HFTs to clear out speculative orders.

Low Volatility (Green Zone):
This phase signals uncertainty and low trading volume, with minimal retail trader interest.
Strategy: Rather than trading here, this phase serves as an indicator of an upcoming extreme volatility phase, hinting at potential price action.

Following price action, the market often returns to previously established levels (marked by green boxes), where buy/sell orders come in to limit further movement. These levels form support or resistance.

Counter-trend trades at support/resistance levels, with stop-losses placed beyond the boundary.

Breakout trades when price breaks beyond these levels, anticipating significant price movement.

When we zoom in and out of different timeframes, it’s like observing the hierarchy of an organization vs. cellular activity within a single cell. Each level of detail is important but follows the same principles.

Without delving too deeply into complex patterns or technical analysis, do you think this straightforward strategy resonates with your approach?

Could such a simple framework lead to consistent price action predictions?