Supply and Demand: Figuring out the Core of Day Trading DTTW

You assume that the price action will begin to trigger the aggregated sell orders in the area, which is likely to lead to a price drop. Thus, this creates an opportunity to ride a bearish move on the chart. The supply and demand of a currency pair is determined by the players in the Forex market.

supply and demand zone trading

The rules of supply and demand analysis in Forex are quite simple. You should buy when the price action approaches a demand level and bounces upwards. You expect the price to increase as a result of the aggregated buy orders in the demand zone. Therefore, you have the opportunity to ride an upcoming price swing. The supply and demand imbalances in Forex can be seen visually on the price chart. Each tick on the graph represents changes in the traders’ attitude toward the respective pair.

What Are Supply and Demand?

For this reason the trade could be held on the assumption that the increase will continue. Adding two horizontal trendlines to the Campbell Soup Company chart below shows a clear zone of support between $26.50 and $27.50. The two trendlines connect significant peaks and troughs over the past twelve months of price action. Traders can watch the zone of support area for a potential upside reversal or look for a breakdown that would indicate downside continuation. In either case, the zone of support provides a higher probability area from which to trade, due to the increased level of interest in this area from market participants. Traders typically watch support zone activity closely as it can be profitable for identifying a reversal or further downside.

So again they sell over a period of time to minimise the market impact of their trades, which creates the ‘supply zone’. A supply and demand based trading system is a relatively simple, yet powerful way to trade Forex. It is considered one of the purest price action trading mythologies around. It is always a good idea to draw the supply and demand areas on the chart. This way you will be aware visually where the zones are, and be prepared to trade the market when the price reaches the appropriate S/D zone.


The supply and demand theories root in traditional microeconomics with no fancy and complicated technical aspects or mathematical formulas required. Therefore, whether you are an experienced trader with big compassion for price action or a complete newbie, this book is aperfect companion for the rest of your trading journey. Demand and supply zones are very similar to support and resistance; therefore, these areas indicate where a trader can place stops and limits.

I’ll love to know more about Supply and Demand trading strategy. This is when the price temporarily breaks out in the opposite direction but then quickly reverses. This is a sign of big players ‘stop hunting’ to find extra liquidity for their accumulation or distribution. If the trading range that exceeds the breakout is too wide or has too many long-wick candles, it shows uncertainty and is less likely to represent accumulation from a whale. There are two types of candle zones to look for on the chart, either one will proceed a big price move. Putting this theory into practise, the idea is to find the place on the chart where demand overcame supply or where supply overcame demand .

Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. To learn more about who we are, readour storyabout how a community came together to save their beloved, historic bookstore.

We have designed a unique algorithm to plot supply and demand zones on your chart automatically with multiple time frame functionality. See zones from the large time frame, and the smaller time frame all from one chart! This helps in many ways including preparation, user-defined entry/stop/target points, and gives you extremely visual aspects that are reoccurring. A demand zone is a price area with strong buying interest below the current price action. Many investors don’t want to buy the asset until it goes lower and reaches the demand zone because a person may get greater returns on the portfolio.

A lot of people will say that the longer the “fresh” zone has been around, the stronger it becomes. This is simply not true, and as a result, a lot of people have lost trades thinking this way as price just blows right through the zone. Triggering their order, and eventually hitting their stop not long after.

Supply and demand trading strategy

This is also true for support and resistance trading where levels get weaker with each following bounce. You don’t want to see price spending too much time at a supply zone. Although position accumulation does take some time, long ranges usually don’t show institutional buying. Good supply zones are somewhat narrow and do not hold too long. A shorter accumulation zone works better for finding re-entries during pullbacks that are aimed at picking up open interest.

As always, I hope you can treat the book not only as a learning material but also as a friend of yours. To me, conveying all information, strategies, and thoughts into a book effectively is never a quick and easy task. There is the editor, formatter, and designer who contributed to the completion of a good book. Once you have mastered all the techniques presented in this book, you will be confident in identifying a high probability trading zone as well as entry, exit, and stop prices.

What Is a Zone of Support?

Wykoff explained these phases by the action of the ‘whales’ which these days are big institutions like money centre banks in forex markets or hedge funds in the stock market. You would put a stop loss order right below the demand area when you are long in the market. Conversely, put your stop loss order right above the supply area. Above you will see the Weekly chart of the AUD/USD which displays a supply level. needs to review the security of your connection before proceeding.

What strategies do institutional traders use?

  • Introduction. Are you a retail investor who thinks algorithmic trading is impractical due to its cost as well as trading volume?
  • Arbitrage.
  • Index fund re-balancing.
  • Mean reversion.
  • Market timing.
  • Scalping.
  • Trend following.
  • Momentum.

We’re also a community of traders that support each other on our daily trading journey. To minimize the risks and maximize the winning potentials in the market, we all need to stack the odds in our favor. In other books, I emphasize on the need for trading based on at least one confirmation signal. I call them chart phenomena as they appear on the chart constantly. So, if you are truly serious about who theBIG PLAYERSare and how totrade like a champion traderusing the supply and demand trading methods, then click the Buybutton. As seen above our software can be used in a sideways market on a small and large time frame.

Supply and Demand Trading: How To Master The Trading Zones (Hardcover)

It is important to refer to the Demand levels as an area and not as a single line on the chart. A descending channel is drawn by connecting the lower highs and lower lows of a security’s price with parallel trendlines to show a downward trend. Find the approximate amount of currency units to buy or sell so you can control your maximum risk per position. Supply and demand are both key factors in determining the price of a particular product in the market. Please note the information contained within this document is for educational and entertainment purposes only. All effort has been executed to present accurate, up to date, reliable, complete information.

A supply zone is where traders and investors try to sell an asset for fundamental and technical reasons. Some market participants are selling because the asset reached their target. Others do the top 10 qa testing tools same due to changing economic environment or news that has altered an asset’s outlook. Usually, the price reacts sharply to the supply zone, meaning that there is a lot of selling interest.

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