Learning supply and demand zones is a very important strategy in your trading career, like these key zones telling you that the points where the market has high chances to go. Whether you’re involved in forex, stocks, or cryptocurrencies trading, having a tight grip on supply and demand trading strategy can improve your trading in many aspects. In this guide, we will first discuss what the supply and demand key zone is in trading. Then we will discuss how to draw supply and demand zone accurately in your trading chart. And the final thing which we will discuss is which one is the best indicator for the supply and demand zone. Let’s get started!
Understanding Supply in Trading
Supply zones are areas where sellers show interest in selling a currency pair. It acts as a ceiling level for the price where buyers stop buying in the currency pair and sellers start selling it.
How to identify Supply Zones:
- It is the area of the market where sellers are interested in selling any assets.
- Supply zone acts as a ceiling for the price movement.
- Identify it by marking the previous higher high of the price movement..
Understanding Demand in Trading
The Demand zone is the area where buyers are interested in buying of any assets and move it further higher. Demand zone acts as a floor for price and stop price to prevent further down. It will always be formed at the higher low of the previous price movements.
How to identify Demand Zones:
- Demand zones always form at the lower low of the price.
- Always act as the floor for the price.
- Often result in price surges when tested.
- Can be identified where the market is a previous high, low, so that will act as a support level for the price.
Steps: How to Identify Supply and Demand Zones
Drawing supply and demand levels correctly can be challenging for new traders. But don’t worry, here’s a simple way you can learn how to identify Supply and Demand Zones very quickly.
1. Step: Identify Key Price Levels area
Identify first where the market creates lower highs or lower lows. These are the strongest Supply and Demand Zones.
2. Step: Use Horizontal Lines
Supply Zones: First, draw a horizontal line at the point where the price creates a lower High. That is your strong Supply Zones. This is the area from which the market will reverse.
Demand Zones: Draw horizontal lines at the points where the price creates a lower low. This level is the strong Demand Zones. From this zone, the price has high chances to bounce back and go high.
How does a Supply zone become demand and a demand zone become supply in trading?
Supply to demand zone:
When the supply zone becomes weak and the market closes with a double candle upside, the supply zone breaks and transforms into a demand zone for the price.
Demand zone to Supply:
When the demand zone becomes weak and the price closes below it, the demand zone breaks and transforms into a supply zone for the price.
Top Indicators for Recognizing Supply and Demand Zones
Drawing of Supply and Demand Zones manually is the best way, but here are some indicators that make these levels more accurate.
1. Supply and Demand Zone Indicator (TradingView)
Type this indicator in the search bar of Trading View. This is the indicator which creates supply and demand zone automatically without doing anything manually.
2. Fibonacci Retracement Tool
The Fibonacci retracement strategy tells you about specific key reversal points near Supply and Demand Zones. We used Fibonacci strategy to increase accuracy for trade entry and exit from the market. The price actively reacts to specific Fibonacci retracement levels (0.62 to 0.79), acting as supply or demand and strongly reversing.
3. Automated Supply and Demand Indicators in Trading View
This is an automated Supply and Demand Zones indicator which is available on platforms like Trading View, MT4, and MT5.
Frequently Asked Questions (FAQs)
What does supply and demand trading mean?
It is a market certain area from where price can bounce back. Your lower high or higher high act as supply for the price, and the lower low or higher low act is demand for the price.
How do traders spot strong supply and demand zones?
By simply marking the area of where mthe arket creates highs or lows. This level act is your supply and demand.
What are the best indicators for supply and demand zone analysis in trading view?
The Best indicator is The Supply and Demand Zone Indicator and Volume Profile Indicator on Trading View are commonly used. Search these indicator in search bar of trading View.
How do I locate supply and demand zones using Trading View?
You can use indicators like the Supply and Demand Zone Indicator in Trading View, or simply draw levels manually like your previous high and low.
Conclusion
Becoming an expert in Supply and Demand Trading strategy can increase your trade accuracy. Whether you are trading in stocks, forex, or crypto. This strategy works in all markets. If you are a beginner trader and you want to learn the demand and supply strategy, do back testing daily and practice this thing that the Hest traders team mentioned in this guide. Open a demo account on Trading View or any other trading exchange like MT4, MT5, which offer a demo account, keep practicing this thing by simply drawing the key zone of demand and supply. You can also use some of this indicator, and increase your trading accuracy. Combined these tools, and you will see the best results in the future.
“Trade with Confidence, Trade with Heist!” Heist Trading wishes you Happy-trading!