Oct 16 • General discussion
What is “Supply & Demand” in trading?
- Demand = buyers willing to purchase at a given price (which tends to push price up).
- Supply = sellers willing to sell at a given price (tending to push price down).
- A supply zone is an area on the chart where price previously dropped sharply, meaning a lot of selling pressure was clustered there.
- A demand zone is the opposite: where price previously rose sharply, showing strong buying interest.
- The idea in trading is that when price returns to these zones, it might react (reverse, pause, or continue) because there may still be unfilled orders or institutional interest around those levels.
These zones are like “magnet points” on the chart where price often “remembers” to react.
- You don’t just enter as soon as price touches the zone you look for confirmation.
- The stop loss is typically placed just beyond the zone limits (so if price violates it, you’re “wrong”).
- The profit target is often a previous high/low or next supply/demand area.
Additional Tips & Things to Watch Out For
From what the video implies (and general supply/demand trading logic supports):
- Fresh zones (zones that haven’t been tested yet) tend to be stronger. Once a zone is hit multiple times, it weakens.
- The strength of the move when the zone was first formed matters — sharp, strong moves suggest stronger zones.
- Use multiple timeframes: find zones on a higher timeframe (stronger ones), then zoom in to look for confirmation on lower timeframes.
- Avoid “broad zones” — zones drawn too wide make it harder to get precise entries and stop placements.
- Be disciplined: only take entries that meet all four steps, rather than jumping in impulsively.
Simplified Example (Putting It All Together)
Let’s say we see this on a chart:
- Price rallied up strongly from $100 to $120.
- That $100–$105 region is then a potential demand zone (where buyers showed up strongly).
- Later, price comes back down toward that $100–$105 area.
- As it enters that zone, a bullish engulfing candle pops up (price closes above the zone), showing buyers stepping in.
- You enter long (buy) at or right after that bullish candle closes.
- You place your stop loss just below $100 (slightly under the zone).
- Your target might be $120 (previous swing high) or another supply zone above.
If price breaks below the zone with strong momentum, then your stop gets hit that means your hypothesis (demand would hold) was wrong.
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What is “Supply & Demand” in trading?
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