đ What are Supply & Demand Zones?
A supply or demand zone is a price area where big orders were waiting, so price left it fast. A demand zone sits below price: buyers stepped in so hard that price rallied away. A supply zone sits above price: sellers hit so hard that price dropped away.
Unlike a single support line, a zone is a box (a price range). The idea: if big players could not fill all their orders the first time, some orders may still be waiting there. That is why price often reacts when it comes back. Right now $BTC on the 4H chart sits between one supply zone and one demand zone.
đ Live chart in the cover and in the image post below.
đ How to spot it
⢠Look for a sharp, strong move: big candles, high volume
⢠Find where that move started: a small pause of 1-3 small candles (the "base")
⢠Draw a box around the base, from the candle bodies to the wicks
⢠Base, then rally = demand zone. Base, then drop = supply zone
⢠Fresh zone = price has not come back to it yet. These react best
⢠Every retest uses up orders, so the zone gets weaker each time
đ How traders use it
⢠Entry: wait for price to return to a fresh zone, then look for a reaction (a rejection wick or a strong candle)
⢠Stop-loss: just beyond the far edge of the zone. If price closes through the whole box, the orders are gone
⢠Target: the next opposite zone (from demand up to supply, or from supply down to demand)
⢠Check the risk:reward first. If the next zone is too close, skip the trade
⢠Trade with the bigger trend: demand zones work best in an uptrend, supply zones in a downtrend
𧪠Live example: $BTC 4H
⢠Supply zone 1: $83,466-84,147, the Oct 14 base. From there BTC fell 2.2% in one 4H candle, with the biggest volume of the week (~$592M)
⢠Supply zone 2 (fresh): $82,641-82,941, the Oct 16 base. The Oct 16 high $82,941 was rejected and price dropped 1.6% to $81,353 in the next candle
⢠Demand zone: $79,800-80,980, the Oct 15 base. From the $79,800 wick BTC rallied 1.8% in one candle (~$524M volume)
⢠That demand zone was already retested once on Oct 16 (low $80,809) and held, but it is no longer fresh
⢠BTC is ~$81,556 now, right in the middle, under the 4H 20 EMA $81,933 and 50 EMA $82,519, 4H RSI 44.1
⢠A push into $82.6-82.9K is a first test of fresh supply. A clean 4H close above $82,941 would break it
⢠A second drop into $79.8-81.0K tests a weaker demand zone. A close below $79,800 would break it
â ď¸ Common mistakes
⢠Drawing zones on every small pause. Only a sharp move away makes a real zone
⢠Making the box too wide, so the stop-loss is huge
⢠Trusting a zone that was already tested 2-3 times
⢠Buying demand in a strong downtrend without any reaction candle
â Quick checklist
⢠Find a sharp move with high volume
⢠Box the small base before it
⢠Prefer fresh zones, on 4H or 1D
⢠Wait for a reaction candle in the zone
⢠Stop beyond the zone, target the next zone, risk only 1-2% per trade
đŹ Do you trade zones or single lines? Which one works better for you? đ
Not financial advice. DYOR.