Supply and Demand Zones

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Supply and Demand zones do offer a great insights into the structure of any market. If you have an idea of how to trade with support and resistance zones, you might find supply and demand zones very similar.


1. Focus on a price level (zone)

It’s difficult to analyze the market without a focal point. If you look for turning points at every price level, you will only find confusion.

How do you know which price level to focus on? Which price levels are potential market turning points?

2. Observe what happened (happens) at the potential support/resistance
Signs of strong demand

When the market tests a potential support, look out for:

Bullish price pattern
Inability to clear below the support
Increased volume
Congestion

Signs of strong supply

When the market tests a potential resistance, look out for:

Bearish price pattern
Inability to clear above the resistance
Increased volume
Congestion

Look for these price action signals in the past, as well as in real-time price action. The more signs you see, the more likely you’ve found a true support/resistance zone.