Supply and Demand Zones Explained
Supply and demand zones are areas where a strong imbalance moved price sharply away — the footprint of unfilled institutional orders that price often returns to.
What are supply and demand zones?
A demand zone is a tight consolidation (a 'base') right before an explosive move up; a supply zone is a base before a sharp drop. The base marks where large orders accumulated before pushing price away, leaving unfilled orders behind.
Unlike a horizontal support line drawn across many touches, a supply/demand zone is a fresh area tied to a single impulsive departure — and it is considered strongest on its first retest, weakening each time it is tapped.
Marking and trading zones
Mark the zone from the base of the consolidation to the start of the impulsive move. Trade the first return into it in the direction of the impulse, with a stop beyond the far side of the zone.
Supply and demand overlaps heavily with the order block concept and pairs with market structure: the best zones sit in the direction of the higher-timeframe trend.
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Play Chart Bound free → Try today's Call the Candle →Frequently asked questions
What is the difference between supply/demand and support/resistance?
Support/resistance is a horizontal level tested repeatedly. A supply or demand zone is a fresh area tied to one impulsive move away from a base, usually strongest on the first retest.
How do I draw a demand zone?
Find a tight base immediately before a strong rally, and mark the zone from the base low to the start of the impulsive candle. Watch for price to return to it.
Do supply and demand zones weaken over time?
Yes. A zone is considered strongest on its first retest because the unfilled orders there get consumed; each subsequent tap tends to be weaker.