What is a Demand Zone?
- Demand Zone = Strong Buying Area
- Price drops to a level → large buy orders are triggered → price bounces upward.
- Usually marked with a green rectangle on the chart.
Example: If price falls to $25 and strong buying consistently pushes it back up, the $25 area is considered a demand zone.
What is a Supply Zone?
- Supply Zone = Strong Selling Area
- Price rises to a level → heavy sell orders are triggered → price reverses downward.
- Usually marked with a red rectangle on the chart.
Example: If price rallies to $30 and sellers consistently push it back down, the $30 area is considered a supply zone.
How to Identify Zones
- Look for strong impulsive moves (big bullish/bearish candles).
- Identify the base (the small consolidation area before the impulsive move).
- Draw a rectangle covering that base → this is your supply or demand zone.
Demand Zone: Base before a strong upward move
Supply Zone: Base before a strong downward move
How to Use in Trading
- Buy at Demand Zones: Good opportunity for long entries.
- Sell at Supply Zones: Good opportunity for short entries.
- Confluence: If a zone overlaps with Support/Resistance or Fibonacci levels → even stronger.
- Stop-Loss Placement: Always set SL just outside the zone.
Limitations
- Zones weaken with each retest.
- Market makers may trigger fake moves into zones to grab liquidity.
- Best zones are those that are fresh (first touch).