I want you guys to understand that institutions with their big buy orders cannot exit huge positions without causing the stock to get too far away from the limit orders or where they want to enter. It's simple supply and demand.

Remember, these institutions are playing with millions, if not billions of dollars. So to enter certain limit prices, they need to place multiple smaller orders to accumulate into that one larger order.

Example: Institutional Apple Purchase

I'm going to give you guys an example. If an institutional investor wanted to buy, say, 3 million shares of Apple all at one single time, it's going to cause an imbalance in the stock market, and they wouldn't be able to purchase—like I said—Apple if it's trading at $90, if that's their limit price.

If they wanted to purchase at $90 per share at 5 million shares or 3 million shares, not all the orders are going to fill at that price. Remember, that order would cause too much demand in the stock market, driving up the stock too far away from its current price.

The Institution Strategy

So what they need to do: They're going to purchase shares at a certain price that's not going to be too far away from the stock price, that's not going to be too much in volume that's going to drastically alter the stock price. So they have to enter in bits and pieces. That's going to leave unfilled orders, and that's how we're going to capitalize on it as well.

Remember guys, for every buyer there has to be a seller, and vice versa—for every seller there is a buyer. Knowing that institutions have buy prices down at these certain levels, we need to play on their side. We need to be smart investors. We're going to wait for these prices to return to that area where institutions have those limit orders that's going to ultimately push the needle and push the stock higher.

I don't want us to be retail traders. Almost 80%—I'm talking even 90% to 95%, some statistics even have 99%—of retail traders are unprofitable. And that's because they chase the trend, they play when there's sentiment, and they get caught in a bunch of reversals.

Institution Profitability Data

I pulled out an article of some institutions and their profits so you guys can get a better idea of how profitable these institutions are:

• JP Morgan Chase (largest bank in the nation): Led the way with $14.5 billion in profits
• Wells Fargo: $4.9 billion
• Citigroup: $2.9 billion in the quarter

All earnings were higher than analysts had expected.

You can see there's eight US systemic firms that reported 294 profit days over quarter 3. You guys need to understand that these guys are profitable on a consistent basis, year after year. We want to play on that side. We want to think differently than the masses.

We're not going to think how every retail trader invests or trades. We need to be a contrarian thinker in terms of retail, and we need to be right. We need to put ourselves on the side of those profitable investors.

Here's how we draw demand levels:

1. Look to the left of the chart
2. Identify a basing candle followed by a strong upside bar (a strong big green bar)
3. Draw the zone starting from the top of the body of the basing candle to the bottom of the wick or bar

For supply levels and zones:

1. Look to the left of the chart
2. Identify a basing candle followed by a strong downside bar (a red bar)
3. Draw the zone starting from the bottom of the basing candle to the top of the wick or bar

I'm going to show you guys the application of this in real time so you guys can get a better understanding of what I'm saying.

Chart Setup

This is Tesla on the weekly time frame on Trading View. Whatever trading platform you use would be sufficient as well, but I'm currently using tradingview.com. It has all the indicators you need to draw your supply and demand levels and other indicators that I like to use.

This is Tesla, once again, on the weekly time frame. I'm going to show you guys the execution of drawing supply and demand zones.

Drawing a Demand Level

To draw a demand level, you want to identify a basing candle followed by a strong upward green bar. As you can see here, this is a basing candle followed by a strong green candle. This would be an area of major demand.

Candle Anatomy Review

To go over a quick anatomy review of candles:

• The rectangle that you guys see here is considered the body of the candle
• The lines that you guys see are considered wicks

To draw a demand level, you want to go to the top of the body, and then the bottom of it would be whatever it is—whether it's the bottom of the bar or the wick, whatever is further down. So this would be an area of major demand.

Drawing a Supply Zone

To draw a supply zone, it would be the inverse. So you would identify a basing candle followed by a strong downward movement. As you can see here, this followed by a huge downward movement—this would be considered a supply zone.

To draw a supply zone, you want to go to the bottom of the body all the way to the top of the wick. Whether there's a wick or not, you're going to go to the top—whether this is the top or this is the top, whatever is further to the top, that would be your supply zone.

So those would be areas of major demand. As you can see here, there are other areas of major demand, other areas of major support, but this is a great overview of where you guys want to enter and where you guys want to exit certain plays.

So that concludes day three. I want to know your guys' biggest takeaway from this day, and I want you guys to post it inside of the Facebook group and hashtag day 3 for me in the group. See you guys in the next video.

In our next lesson, we'll explore how to combine these supply and demand levels with the fundamental analysis we learned in day two. We'll show you how to use both technical and fundamental analysis together to make more informed investment decisions.

Remember: The key is thinking like an institution, not like retail traders. Position yourself where the smart money is, and wait for prices to return to these key levels where institutions have their orders waiting.