Having trouble making disciplined trades in the market? Don’t worry. Most traders blindlessly enter and exit trades with no idea why price reverses at specific points. This translates to confusion, inconsistent profits, and frustration. The actual problem? Lack of knowledge of supply and demand—those invisible forces that drive the market.
In this in-depth article, we’re going in on The ULTIMATE Supply & Demand Guide (My Secrets). Whether you’re a novice or an expert trader, learning supply and demand zones will change your perspective of the market. No more false indicators and assumptions. You’ll be able to see how to identify important price levels, confirm zones, and take entries and exits like a master.
This is your no-nonsense, no-fluff guide to mastering supply and demand zones, with three potent tricks that will have your trading zones three times more precise. Let’s dive in.
What Is Supply and Demand?
In trading, supply are areas where there has been aggressive selling, resulting in price declining. Demand zones, however, are areas where aggressive buying has pushed prices higher. But the catch is: not all up or down movement makes the grade. For an area to qualify, the movement must be aggressive.
Think of it like Black Friday shopping—chaotic, urgent, and impactful. That’s the kind of market reaction you’re looking for to define supply or demand zones.
How to Identify Valid Zones
Spotting Aggressive Moves
Suppose you notice a large green candle with subsequent buying pressure. If the momentum is initiated by one red candle, chances are you’re looking at an authentic demand zone. For supply, it is the reverse: locate the green candle preceding the strong decline.
Drawing the Zones
Here is a basic rule:
- For demand zones, look for the very last red candle prior to the aggressive up-move.
- For supply zones, locate the very last green candle prior to the aggressive down-move.
- Draw your zone from the high to the low of this candle. This range is now your supply or demand zone.
Valid vs. Invalid Zones
Not all zones are equal. A valid zone needs to accomplish two things:
- Demonstrate an aggressive move (strong candles).
- Lead to a break of structure (BOS)—a distinct change in market direction.
Let’s dissect:
- If a demand zone forms a new high, it’s confirmed.
- If a supply zone forms a new low, it’s confirmed.
- If there is no BOS, it’s not valid—don’t trade it.
For convenience, software such as the Trading Lab private indicator can automatically identify BOS levels for you, saving you loads of time and minimizing errors.
Entry and Exit Strategy
After you’ve identified and confirmed a zone, it’s time to execute the plan.
Entry
Enter when price reverts back to the zone:
- For a demand zone, wait for price to pull back down.
- For a supply zone, wait for price to rise back up.
Stop Loss
Place it just outside the zone:
- Below for demand.
- Above for supply.
Take Profit
Target the origin of the aggressive move:
- For demand, this is the swing high.
- For supply, it’s the swing low.
This creates a strong risk-to-reward setup, ensuring your potential gains outweigh your risks.
The Three Secret Tricks to Triple Your Accuracy
Here’s where The ULTIMATE Supply & Demand Guide (My Secrets) excels. These are usually underappreciated advice but can significantly enhance your winning percentage.
Trick 1: Slow Return to Zone
A careless mistake? Selling zones that price returns too rapidly.
What to do instead:
- Wait for a slow, gentle return to the zone.
- Steer clear of trades where price speeds back; these tend to lose.
- A gradual approach means low resistance and higher likelihood of the zone standing strong.
Trick 2: Fair Value Gap Confirmation
A Fair Value Gap (FVG) is an imbalance where price moves so rapidly it creates a “gap” between candles. This is usually seen on aggressive buying or selling.
This is how to apply it:
- Look for the first candle of the zone.
- See if there’s a FVG right after that candle.
- If so, the zone is much more likely to continue holding.
With a tool such as the Trading Lab’s indicator, these FVGs will automatically be highlighted, with green boxes for bullish gaps and red for bearish.
Trick 3: Employ Automation Strategically
It takes time and can be error-prone to mark BOS and FVGs by hand. Automating it:
- Saves time.
- Increases accuracy.
- Allows you to see the big picture.
The Trading Lab indicator is already loaded with Smart Money Concepts tools such as BOS and FVGs, which will speed up and clean up your analysis.
Putting It All Together
Let’s review The ULTIMATE Supply & Demand Guide (My Secrets) step by step:
- Identify a strong, aggressive move.
- Find the prior opposite candle and draw your zone from high to low.
- Search for a break of structure to confirm the zone.
- Ensure a Fair Value Gap exists near the start of the move.
- Wait for a slow return to the zone—not a sharp bounce.
- Enter, place a stop-loss outside the zone, and take profit at the high/low of the move.
Do all this, and you’ll start stacking up wins more consistently than ever.
Conclusion
Supply and demand zones are not merely chart markings—they’re the foundation of institutional trading tactics. When utilized properly, as outlined in The ULTIMATE Supply & Demand Guide (My Secrets), they provide you with the advantage you require in the current fast-moving markets.
You now possess the entire roadmap to:
- Recognize legitimate zones.
- Make accurate entries and exits.
- Stack probability in your favor using three effective tricks.
No more downloads of dodgy eBooks or surfing untrustworthy websites—what you need is all here.
If this guide has been beneficial to you and you want more, join the Trading Lab community in Discord. It’s full of like-minded traders discussing ideas, setups, and observations that can take your game to the next level even further.