Supply and demand zones explained
A demand zone is a base that price left sharply upward; a supply zone is a base price left sharply downward. The sharper the departure and the fewer times price has returned, the more attention traders give the zone.
How to spot it
- 1Find a strong move away from a tight base of candles.
- 2Mark the base as the zone.
- 3Check how many times price has returned (freshness).
- 4Prefer zones aligned with the higher-timeframe trend.
Common mistakes
- ✕Zones that are too wide to define risk.
- ✕Trading zones that have been tested many times.
- ✕Ignoring a clear trend that runs through the zone.
The Supply & Demand lens grades zone freshness, departure strength and location as separate rules.
Educational content only. Not financial advice. No pattern or concept guarantees any outcome.
Keep learning
A fair value gap is a three-candle pattern where a strong middle candle moves so fast that the wicks of the candles on either side don't overlap.
A liquidity sweep happens when price pushes just beyond an obvious swing high or low, where many stop orders sit, and then quickly reverses back inside.
In smart money concepts, an order block is the last down candle before a strong move up (bullish) or the last up candle before a strong move down (bearish).
Market structure is the sequence of swing highs and lows.
Support is an area where buying has stepped in before, slowing or reversing declines.
A breakout and retest is a three-step sequence: price breaks through a well-defined level, comes back to test it from the other side, and holds.
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