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Supply And Demand Trading: The De몭nitive Guide (2020 Update)

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Want to learn supply and demand trading but don't know where to start?

Keep losing money with S & D and don't know why? 

I've got you covered...

Over the last few years, “Supply and Demand trading” has become one of the most popular Forex trading
strategies. And for good reason...

Supply and Demand trading takes the best of support and resistance and combines it with the tried and true
concept of supply and demand.

The result is a strategy that allows you to pinpoint EXACTLY where and when the banks are buying and
selling. Giving you the chance to get into some of the biggest reversals BEFORE they begin.

Sounds pretty amazing, right?

Supply and demand is a big part of how I trade forex... along with other strategies, of course. And today, I'm
going to give you a full breakdown of how to start trading it yourself.

Here's a quick look at what we'll cover:

What is supply and demand trading and how does it work?

Why the normal way of trading S & D is wrong.
Finding, and drawing supply and demand zones correctly.
The di몭erence between supply and demand and S & R.
The two ways you can trade the zones.

So, ready to learn what supply and demand trading is all about?

Let's jump into the guide...

Free PDF: Download This Post As A PDF To Read Later - Includes S & D Rules PDF 

TABLE OF CONTENTS

1 Part 1: Overview Of Supply And Demand Trading  2 Part 2: How To Find And Draw Supply And Demand 3 Part 3: The Two Ways To Trade Supply And Demand
Zones  Zones
1.1 How And Why Supply And Demand Zones Are Created
2.0.3 Finding Supply And Demand Zones 3.0.5 3 Rules For Trading Supply And Demand Pro몭tably
1.1.1 Understanding The Zones
2.0.4 How To Draw Supply And Demand Zones  3.0.6 Part 4: FAQ And What To Do Next
1.1.2 The Two Types Of Supply And Demand Zones

Part 1: Overview Of Supply And Demand Trading 

Before we get to grips with supply and demand the strategy, we need to talk about the supply and demand the concept...
after all that's what the strategy is based upon.

In economics, the law of supply and demand determines the price people pay for a product.

This law states:

When the supply of a product is high and the demand is low, prices must fall to incite buyer's interest; when the demand
for a product is high and supply is low, prices must rise to represent the scarcity of that product.

Sound familiar?

So, for example...

When you buy a house, the price is determined by supply and demand, which itself is governed by various economic
factors. Supply and Demand either increases or decreases, causing the price to change.
One of the biggest factors is birth rate - the number of people being born.

If a country has a declining birth rate, house prices 25 - 30 years down the road will be lower. Why?

Because fewer people being born = less demand for houses later on. If demand is low with lots of supply (houses), prices
must fall to incite interest from buyers.

Does that make sense?

Now Forex, as well as all other markets - stocks, commodities, crypto, etc – are driven by this same concept.

News events, economic announcements, and just general market action all cause di몭erent groups of traders to buy and
sell, resulting in changes to the supply and demand equation. These changes manifest visually as the rises, declines, and
consolidations we see on our charts.

When we see price rising, demand outstrips supply.

When we see price falling, supply outweighs demand.

When supply and demand are in relative balance, a consolidation forms.

Observing the image above, you can easily see how changes in supply and demand create the moves we see.

First: supply and demand are in relative balance, resulting in a consolidation. Supply is equal to demand. That's why price
moves sideways rather than up or down.

Second: for whatever reason, something changes, and supply suddenly outweighs demand. Someone, or a group of
traders, decides to sell EUR/USD en masse, causing the price to fall.

Supply outstrips demand for a while, as more and more people decide to sell. They see price fall, so they decide to sell
themselves.

Third: However, demand then comes in (3) and pushes price higher, setting o몭 a new upswing.

This continues before equal supply enters the market and creates equilibrium. With supply and demand now in relative
balance, price moves sideways, and we see a tight consolidation form.

Later, demand outstrips supply again and a large upswing forms.

It is a “play-by-play” commentary that goes on day by day, week, month, quarter, year, etc. Of course, it also goes on hour,
half-hour, quarter-hour, 5-minute, one minute, and yes, etc.

How And Why Supply And Demand Zones Are Created

So, with all of that in mind, you're probably wondering:

“How does this all link together?" How does the concept of supply and demand give us a trading strategy we can use to
anticipate where and when reversals could begin in the future?

The answer lies in what causes supply and demand to change in the 몭rst place.

Changes in supply and demand will ONLY OCCUR when the banks and other big traders buy or sell. We retail traders
can't cause price to rise or fall; we don't have enough money! Only the banks, with their deep pockets and unlimited
buying/selling power, can make price move.

So, when we see supply get outweighed by demand and vice versa, that's because the banks have decided to buy or sell,
usually by placing trades, but very often by taking pro몭ts or closing trades.

Now, here's where it gets interesting:

In Forex, the banks can never place their full position all at once.
Their positions are so large they must break them into smaller chunks and place each trade individually, around a similar
price, to avoid pushing price away and potentially forcing the entry at a bad price.

This way they achieve the same e몭ect of placing one huge position, by placing a bunch of small ones instead.

Here's their problem:

These positions are often so big that not enough people exist on the opposite side - buying when the banks want to sell,
or selling when the banks want to buy - to get them placed, even if they break them down into smaller chunks.

So, they must let price move away and then make it return later on to get the rest of their position entered.

On a chart, that process looks like this...

First: the banks place what positions they can, and price shoots away.

They then: make it return to the source, the point they placed their initial position, to get their remaining positions
entered.

Once they do: price fully reverses, and a large move ensues.

So, supply and demand trading is all about 몭nding points where the banks have bought or sold - supply and demand
zones - and then jumping into trades when price returns to pick up the rest of the banks’ position to get into the reversal,
right beside the banks.

Price moves from supply zones to demand zones and back: over and over again.

If we identify these zones, which I'll show you how to do, later on, we can get into these moves precisely at the point they
begin. That'll give us a low-risk entry with a very large risk to reward ratio.

Amazing, right?

Understanding The Zones

Let's go over the two zones now, so you can see how they work.

Demand Zones

Demand Zones represent points where the banks have placed a signi몭cant number of buy positions. These are the
support levels of supply and demand trading, if you will.
Demand Zones form when the banks place a large number (or size) of buy positions, creating excess demand, and
resulting in the price reversing and moving higher.

The point where price reverses is the demand zone.

Usually, this will create a signi몭cant swing low, but sometimes price will reverse mid-move as well.

Supply Zones

On the other side of the fence we have supply zones.

These are points where the banks place a signi몭cant number (or size) of sell positions and these are resistance points
where price could fall.

Supply zones form when the banks decide to sell a large amount of currency. This selling creates an excess of supply,
which causes price to fall, creating the supply zone we see.

The point where price reverses, which is usually a prominent swing high, is the supply zone. If price returns here, it has a
high probability of falling again.

The Two Types Of Supply And Demand Zones

Before we move on, we need a quick discussion about the two types of supply and demand zones.

While supply and demand zones are the same thing - zones where price could reverse - the zones come in two types
based upon whether they form from a reversal or continuation.

The two types are as follows:

Rally-Base-Rally (RBR) and Drop Base Drop (DBD) Zones,

Rally-Base-Drop (RBD) and Drop Base Rally (DBR) Zones.

Rally-Base-Rally and Drop-Base-Drop

Continuation Zones:

Form, when price moves in one direction, bases, i.e consolidates or pauses, then continues in the same direction.
These zones always form mid-move, either from the banks taking pro몭ts or closing trades.

Compared to the reversal zones, continuation zones don't tend to work that well; they form from banks placing a small
number of positions into the market. So, they don't hold the power of reversal zones.

That said; they can give you good trades here and there, especially if you know which zones to watch for in particular.

On to reversal zones now...

Rally Base-Drop and Drop-Base-Rally

Reversal Zones:

Form, when price reverses direction, bases, then sets o몭 a new swing.

These zones form when one major swing changes to the other, usually from the banks buying or selling large quantities of
currency.

Reversal zones are the ones you should be trading using Supply and Demand methods. They're the highest probability
zones in the market.

These reversal zones are formed by the banks and other big traders placing huge buy and sell positions, compared to the
much smaller positions they place to create continuation zones.

At the end of the day, don't get too caught up over which type of zone you're trading. Starting out, your goal is to simply
gain experience 몭nding and trading zones.

Focus on the reversal zones if you can, but don't get obsessed. The types don't matter so much as whether or not you're
몭nding the right zones and drawing them correctly on the chart. That's the key skill you need. Once you've got a handle on
that, you can start 몭ltering the zones and only trading certain types.

Check my article, "The Two Types of Supply And Demand Zones," for a more detailed overview of the reversal and
continuation zones.

Importatant Note: Pro몭t Taking Zones And Trade Placing Zones 

While RBR/DBD - RBD/DBR are the two main types of supply and demand zones, a further two types exist based on
what causes the zone to form in the 몭rst place:

Pro몭t-taking zones, and

Trade placing zones.

These zones, both of which form the two types listed at the top, are created via the banks taking speci몭c action in
the market, either taking pro몭ts or placing trades. Each type has its own characteristics that in몭uence what price
does when it returns. For example, price tends to spike beyond pro몭t-taking zones before reversing.

This is because pro몭t-taking zones aren't that powerful; due to forming from the banks taking pro몭ts rather placing
trades.

Knowing what these further two types of zone are and how they a몭ect what price does when it returns can give you
a real leg up when it comes to trading S & D, and you can learn all about them in my article below.

Check It Out Now

 
Part 2: How To Find And Draw Supply And Demand Zones 

If you want to be successful trading supply and demand, you MUST master the 몭nding of high probability zones and
correctly drawing them on the chart.

It takes time, practice, and experience to get this right:

But, I know a couple of tricks that should make everything much easier.

We'll start with 몭nding the zones...

Finding Supply And Demand Zones

Now, you’re going to have trouble 몭nding supply and demand zones.

I know, I know... that's probably not what you wanted to hear. But, stay with me, because I know a method you can use to
make 몭nding zones much easier.

Supply and demand zones are formed by the banks buying and selling large quantities of currency, right? Well, what does
that look like on a price chart?

Typically: a sharp rise or, a sharp decline appears in price.

So, to 몭nd good supply and demand zones look for sharp rises and declines in price. They reveal the banks are buying or
selling a large amount of currency, which means a supply or, a demand, must exist at the source of the rise or decline.

Let's take a look...

Look at the rises on the chart above… see how sharp they are?

Rises like this occur when there's a huge imbalance between supply and demand: demand outweighing supply in this case.

What causes excess demand?

Why has price shot up?

It's because the banks have decided to enter a large buy position. They've decided to place buy trades, close sell trades, or
take pro몭ts o몭 sell trades.

To locate Demand Zones, then, look for sharp rises...

They reveal the banks have decided to take some action in the market - like place buy trades - which means price has a
high probability of reversing once it returns to the source of the rise.

This is the demand zone.

And with the zones marked, this is how it looks.

Right away, you can see how almost all of the zones resulted in price reversing or at least caused a reaction of some sort.
Even when there wasn't a large reversal, price still moved away from the zone, which gives you some idea of how accurate
they are at predicting when and where price could reverse.

Also, notice how the zones are drawn from the base?

This is the point where demand exceeded supply and price shot up.

When it comes to drawing demand zones, which we'll go through in a minute, we always draw them from the base down
to the most recent swing low to cover the area the banks placed their positions.

Let's switch over and look at Supply Zones now…

To 몭nd good supply zones we use the same process as with demand zones, only... the other way around; rather than
looking for sharp rises, we're looking for sharp declines.

Sharp declines take place when excess supply comes into the market, which happens when the banks sell.

If the banks sell large quantities of currency - whether to place trades, close trades, take pro몭ts, etc. chances are - they
haven't been able to sell the full amount they need to accomplish their entry.

That means it's likely the price will return to the same point - the supply zone - later on, so they can get the rest of their
positions executed.

If I mark the zones on the chart, this is how it looks.

Again, almost all of the zones cause some sort of price reaction; most result in a large reversal, but a couple only cause
minor declines, which last for two or three hours.

It’ll take some practice to get good at 몭nding the right zones; but, if you follow these guidelines, you will pick it up fast.

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How To Draw Supply And Demand Zones 

Learning how to 몭nd the right supply and demand zones is one thing; but, what's even more important; what you really
need to get good at, is correctly drawing the zones on the chart.

Your entry depends on whether you've marked the zone properly, so you need to get it right.

Draw the zone too big... your risk will be higher. You must cover a larger area with the zone.

Draw the zone too small - which is probably even worse actually - and price may not touch the edge before reversing,
causing you to entirely miss the reversal and not get into a trade.

Luckily, drawing supply and demand zones isn't that di몭cult... once you see the trick.

Here’s how to draw demand zones...

Demand Zones

So: to draw a demand zone, 몭nd a sharp rise where you think a zone has formed.

This rise seems good enough.

Now you need to locate the source of the move - the point where this most recent rise originated. That's where the banks
placed their buy positions (in this example).

If they still have positions left to place, they'll bring the price back to this point. So, we need to cover it with a zone large
enough to ensure price reverses within it.

To do this: 
     open the rectangle tool from the tool menu, and 
     place the rectangle on the 
     MOST RECENT SWING LOW that 
     formed at the source of the move.

In our example, that's the low above...

Technically, the swing low is where the banks placed their buy positions. It's the point where most retail traders were
selling, so the banks had lots of opposing orders to place their positions. 

The banks need sellers to buy from; remember, this is the key: opposing orders.
However, we can't just mark the low; because, buying came in above as well.

So, here's what we look for:

Leave the bottom edge of the zone on the low, and 
move the top edge up to the 
LAST SMALL CANDLE that 
formed before price shot upwards and 
created the 몭rst big bull candle.

If the small candle is bullish, mark it to the close.

If the small candle is bearish, draw it to the open.

If you've drawn it correctly, it should look like this...

The lower edge should sit on the most recent swing low, and the 
upper edge should rest on the last small candle before the 
몭rst big candle appeared - a small bull candle in this case.

If you can't 몭gure out which small candle to draw the zone from because the price action is too confusing, just draw the
zone from the low to the point where the rise really takes o몭.

Nine times out of ten, that'll su몭ce as a valid zone. Your risk will be a little bigger, as the zone probably won't be the ideal
size. But, it'll cover the right price range and provide you with a valid trade if price reverses within it.

On to supply zones now...

Supply Zones

The way we draw supply zones is practically the same as demand zones.

We 몭nd the source of sharp down-move: place a zone on the most recent swing high, bringing it down to the last small
candle that formed before the decline.

Here's how to do it:

First, 몭nd a big decline where you think a supply zone has formed.

As with demand zones, we always draw supply zones from the base or source of the decline. That's the point where the
banks placed their sell positions. If they still have positions left to enter, they'll bring price back to this point to place them
at a similar price before causing the reversal.
Once you've found the source:

Place the rectangle tool on the most recent swing high,drag the opposite edge down to the LAST SMALL CANDLE that
formed before price fell sharply and created the 몭rst big bear candle in the down move.

If the small candle is bullish, mark it to the close.

If the small candle is bearish, draw it to the open.

With the zone drawn, it should like this...

You can see the top of the rectangle rests on the swing high and the lower edge sits on the open of the last small candle
before price fell sharply, which was a bear candle in this example.

Again, if the price action gets too confusing and

you can't 몭gure out which candle is the small one:
draw the zone from the low to the
point where the decline turned sharp!

Look for the 몭rst big candle in the decline. That'll give you a valid zone, just with a slightly bigger risk due to the increased
size.

And with that, you're all set!

Important Note: Don't Make This Mistake Drawing Zones

Drawing supply and demand zones correctly will never be a walk in the park, but there's one huge mistake so many
traders make that causes them to draw the zone the wrong way:

Not incorporating the nearby rises and declines.

We draw supply and demand zones from the source because that's where the banks bought or sold to create the
zone. However, the banks don't always buy or sell from one spot. Sometimes, they don't have enough orders
available to buy and sell the full amount they want, so must split their buy/sell positions up and enter them from
multiple points.

On a chart, this results in multiple rises or declines originating from di몭erent but nearby prices.
The problem arises when these rises and declines aren't included in drawing the zone.

Since they form from the banks buying or selling if you don't draw the zone to incorporate them, the zone won't be
100% correct - the e몭ect being that price will often miss the zone before reversing, causing you to miss out. So, you
MUST learn to include these rises and declines when drawing the zone.

If you want a full guide on how to do this, head over to my article below... it'll teach you exactly how to determine
which rises/decline must be included, and why it's so important to get right.

Check It Out Now

Part 3: The Two Ways To Trade Supply And Demand Zones

As trading strategies evolve, new ways of trading them get created. Sometimes these ways work better than the previous
methods or suit a particular style of trading. Supply and demand trading has also gone through this process, and today
there are two di몭erent ways of trading the zones…

Price action entry, or… Set and forget entry.

Each method has pros and cons, and it is possible to be successful with either. I’ve made money with both in my time
trading Supply and Demand.

Let’s go over each method now, so you can see how they work.

More on that in a minute.

First, let me explain how each method works…

Limit Order Entry

Popularized by Sam Seiden, the set and forget entry is the original way of trading supply and demand. It’s the simplest way
to trade the zones and is the method most gurus and sites teach.

With the set and forget method, you trade the zones using limit orders.

The idea is that by placing a limit order at the edge of the zone, when price returns, it'll execute the order and put you into
the trade. 

The upside being you'll never miss a reversal – 

which happens from time to time with S & D - and 
the downside being price may just blast through the zone, 
causing you to lose money, which happens a lot!

Here's a quick example, so you can see how it works:

As always, start by marking a bunch of zones on the chart.

Look for the zone closest to the price.

Once you've found a zone, place a limit order at the edge CLOSEST to the current price. If price is going to reverse from the
zone, it must at least breach the closest edge, either by spiking through or by moving in via normal price action.

With the entry placed, now put a stop loss at the opposite edge.
Remember; don't place the stop exactly on top of the edge. Place it slightly outside the zone, so there's a small gap
between the edge price and your stop price.

Now, just wait to see what happens...

In this case, the trade was successful: price came down, spiked the upper edge (triggering our order), before reversing and
moving higher. It’s a great trade, in anyone’s books.

Like I said, the limit order entry is a decent way of trading supply and demand. I used it for a long time, and the results
were overall pretty great.

The problem is it's 몭awed in a way the price action entry isn't, and sooner or later, you'll get tired of this issue cropping up
over and over again.

More on this in a minute.,,

First, let's go over the price action entry.

Price Action Entry

 My preferred way of trading supply and demand, and the method most pro traders utilise.

With the price action entry, you trade the zones using price action, candlestick patterns to be exact. Rather than place limit
orders at the edge of zones, you wait for candle patterns.

Look for pin bars or engul몭ng candles to form inside a zone and then enter.

They indicate the banks are interested in making price move away, so the price action gives you more con몭rmation price
will reverse.

Here’s how it works:

So, 몭rst o몭, mark a bunch of zones on the chart and 몭nd which one is closest to price.

Now with the price action entry, we must wait for price to enter or touch the edge of the zone BEFORE entering. We want
to see evidence price is going to reverse in the form of a pattern before we get in. That way we know our trade has a better
chance of being successful and making money.
Soon after price enters the zone, a bearish engul몭ng pattern forms.

This is our signal to get in. The engul몭ng pattern con몭rms the banks likely want price to reverse from the zone, so it gives
us additional con몭rmation a reversal is about to take place.

Note: You can use pin bars as well for the entry, but in my experience, engulfs tend to work better.

With our entry set, we place a stop above the zone - as price could still come down and reverse somewhere inside, which
happens from time to time - and wait to see if it reverses.

And in this case, it does...

A few hours after the engul몭ng pattern appears, price reverses and exits the zone.

Now our next task is to:

First: lower the risk by getting our stop to breakeven so we can't lose if price reverses again, and

Second: take pro몭ts as price continues to rise.

Taking pro몭ts really comes down to personal preference - any method will do, so long as it's safe. I like to take mine
whenever price makes a new higher high - if I'm long - or a new lower low - if I'm short.

Once I see price make a new high or low, I'll move my stop to the low (or high if I'm short) of the swing that caused the
market to make the new higher high or lower low. That's the point the banks entered their most recent positions, so the
chances of price coming down and breaking past, are extremely low.

So, in our example, I'd take pro몭ts like this...

I also use the same method to move my stop to break-even.

When I see price 몭rst make a new higher high/lower low, I'll move the stop to the low/high of the swing created from price
making the new higher high/lower low to reduce the risk.

Then, I'll follow the process above to take pro몭ts.

 Why The Price Action Entry Is Better 

I’m not going to knock the set and forget entry too much, because it is a decent way of trading supply and demand,
and you can be quite successful with it – I can attest to that.

When it comes to trading the zones, you need to stick to using price action.

The problem with using limit orders is a problem we price-action traders know all too well:

Con몭rmation.

The limit order entry provides NO con몭rmation price will reverse from a zone; you just place the order at the edge and
hope price reverses. This wouldn’t be a problem if all zones worked all the time, but that’s the thing, they don’t.

Price blasts through zones frequently, usually without stopping. With the limit order entry, you can’t avoid this, the
result being A LOT of losing trades.

With the price action entry, however, things are di몭erent…

You must wait for a pattern to form inside or at the edge of the zone before placing a trade, as that con몭rms the
banks want price to reverse. This allows you to avoid the zones price blows through without stopping.

It’s not foolproof – zones still fail even with the right price action –

But, it is a better, safer way of trading the zones.

So, the point is clear:

Stick to trading supply and demand with price action.

The set and forget entry is okay, but the unavoidable losing trades really drag it down, and make it inferior to using
price action.

3 Rules For Trading Supply And Demand Pro몭tably

So, now you know how supply and demand works and the two ways you can trade the zones (and which way is better).
You're ready to begin using the strategy in your trading.

But wait, not so fast...

Before you start trading Supply and Demand, there are a few key rules you need to understand to 몭nd the right zones on
the chart and trade them correctly using your entry method.

Here's what they are...

1. Old Zones Rarely Work, Avoid Them AT ALL COSTS

If you search for supply and demand trading online, almost everyone - guru's, experts, traders, etc - will tell you old zones
have the same probability of working as new zones, and they're 몭ne to trade.

I'm going to tell you right now, that's complete hogwash.

It's one of the biggest lies in the supply and demand community, and if everyone stopped and thought about it for a
minute, they'd understand why it doesn't make any sense!

As we know, supply and demand zones are formed by the banks buying and selling with huge orders. They cause the
zones to form by placing a few positions, then make it return later to place the rest and cause the reversal.

That's why price returns and reverses from the source of sharp rises and declines, as we saw earlier.

Now, here's my problem with the idea old zones cause reversals.

If the banks want price to return to a zone - whether to place trades, close trades, or take pro몭ts - they would want it to
return quickly, relative to the timeframe they're trading.

They would NOT want to wait a long time!

Their reason for entering may change.

I mean, think about it...

If you were a bank that just bought 50 million EUR/USD, and you still had another 50 million to buy at the same price,
would you wait for price to return to the zone three months from now?

Of course not, the whole market could have changed by then!

The price action would have changed, the economic situation would be di몭erent, the orders won't be the same...
everything would be di몭erent from when you entered, changing your reason for buying EUR/USD in the 몭rst place.
There wouldn't be any point buying more as the market isn't the same as it was when you bought initially.

The reality is the banks want price to return to a zone ASAP.

They don't want to wait a long time to get their remaining positions placed; they want to place them as soon as they
possibly can so they can get into the market and take advantage of their reasons for entering.

Don't trade old supply and demand zones:

They DON'T work.

You'll often see price reverse from old zones, but it's not the zone causing the reversal, it's some other technical factor -
could be a Support & Resistance level, big round number, economic announcement, etc.

Follow these guidelines to know when an old zone’s usefulness expires:

1. Daily zones = 90 days

2. Hourly zones = 20 days
3. Less than H1 = 1 day.

2. Always Put Your Stop Slightly Outside the Zone

A bit obvious this, but I thought I'd put it in since it's a mistake I see many new supply and demand traders make all-too
often.

When you trade a zone, put your stop slightly above or below the opposite edge.

DO NOT put it on the edge itself to skimp the risk.

It's all too common for price to spike through the edge of a supply or demand zone before reversing. If you put your stop
at the edge rather than leaving a slight gap, the spike will take you out and make you miss what could be a successful
trade.

You can see that happen here...

Just when it looked like price was about to reverse from this zone, price spiked through the lower edge. If you had placed
your stop loss here, this spike would've taken you out, and caused you to not only lose money but also miss the reversal
that then took place - not good.

So, always leave a little gap between your stop price and the edge of the zone.

How big that gap should be depends on the pair and volatility at that time, but in most cases, 15 - 20 pips should give you
enough headroom to avoid any spikes while still keeping risk low.

3. Only Trade Fresh/Untouched Zones

Another big mistruth you'll hear in the supply and demand community is the idea zones have the power to cause reversals
more than once like support and resistance levels do.

Again, this isn't true, not even close.

Supply and demand zones are ONE TIME USE.

Not two times or three times, one time ONLY.

When price hits a zone and reverses, that's it; the zone loses its power. The probability it'll cause another reversal in the
future is extremely low.

The only exception to this rule is if a zone forms at the top or bottom of a consolidation. In this case, price will probably
reverse two or three times from the zone, since the consolidation shows the banks are buying/selling from similar points.

However, once the consolidation is over, the zone loses all its power and probably won't cause another reversal. If you
think about why a zone forms, it's obvious why they lose all their power after one touch.
 Remember, the banks cause supply and demand zones to form because they've still got positions left to place - they
haven't been able to place/close all their trades or take the right amount of pro몭t.

So, they bring price back to the point they've already bought or sold to get their remaining positions placed - the supply or
demand zone.

That way, they can place their positions (e.g trades) at a similar price, which allows them to make a similar level of pro몭t
from each trade with a similar amount of risk.

So with that being the case, why would the banks want price to return a zone a 2nd or 3rd time?

If they've already brought price back to get their remaining trades placed, why bring it back again?

It doesn't make any sense! They'd only bring price back the 몭rst time if they knew they could get their remaining trades
placed, making it pointless for them to bring it back again a 2nd or 3rd time.

So this idea that zones can cause multiple reversals like support and resistance levels... it just doesn't add up.

You might see price return to the odd zone a 2nd time and reverse every now and again, but that's not a normal
occurrence. And it doesn't show zones can cause multiple reversals. All it means is that something random occurred when
price was in the zone - like a news release - and that caused it to reverse, not the banks buying or selling.

Part 4: FAQ And What To Do Next

Supply and Demand is a MAJOR focus for me on this site. I’ve used the strategy for a long time. It’s a core
component of how I trade, and view the markets. That said, it was impossible for me to cover everything about
supply and demand trading in this one article.

So below, I’ve put together a bunch of Supply and Demand articles for you to add to the knowledge you have gained
from this article.

These 6 additional articles cover all the bases of supply and demand. You will learn: how to 몭nd the highest
probability zones, why the normal way of trading S & D (a la Sam Seiden) doesn’t work, the biggest mistakes to
avoid, how to draw the zones correctly… among other important things.

It's a good idea to get my book too...

The Next Step? Learn The 5 Rules For Trading Supply

Demand Like A PRO Trader...
Take your trading to the next level. Sign up today to download my FREE E-Book and learn how the pro's trade
supply and demand. Also Includes: Supply And Demand Trading: The De몭nitive Guide PDF

Name Email
Sign Up

This will go over the 5 key rules you need to know when trading supply and demand. Many of the rules or beliefs
traders have on how to trade Supply and Demand don't make sense in the real world, as I explained earlier. So, I
created this book to clear them up.

These 5 rules will improve your trading, by helping you 몭nd and trade the best zones.

I've also left a small FAQ containing the most common questions people ask about supply and demand at the
bottom... Check it out if you have any questions about S & D - or leave a comment if your question isn't answered.

3 Key Facts Sam Seiden Gets Wrong About Trading Supply And Demand

If you’ve traded Supply and Demand for a while and not had much success, this article will probably explain why.

While Sam Seiden gets a lot of credit for coming up with Supply and Demand, many of the ideas he promotes about the
strategy are 몭at out wrong and at odds with how the market really works. Like, for example, saying strong zones are those
with a sharp move away – ever heard this before?

Most traders believe this to be true, even though it doesn’t technically make any sense.

There are a few things he gets wrong, and I’ve compiled a list of the most important ones into a post that explains the
problems with them and why they don’t make sense…

Read Now
 Don't Make This Mistake Drawing Supply And Demand Zones  

Drawing a zone correctly is the single biggest thing to get right in supply and demand trading, but many traders make a simple
mistake that causes them to draw the zone the wrong way…

They don’t include the nearby points where price reversed.

When you fail to incorporate the nearby rises or declines when drawing the zone, you end up missing trades that otherwise would
have been successful.

While this doesn’t happen for every zone, for many, it does. And over time, if you fail to correct it, this will cause you to miss out on a
lot of trades, which will impact your bottom line.

To avoid this, make sure you read my post below to draw the zones correctly.

Read Now

Why You Should Avoid Rally-Base-Rally/Drop-Base-Drop Zones 

Supply and Demand zones come in two 몭avours, each determined by what price does to create the zone.

These two types of zones look and perform very di몭erent to one another due to what causes them to form. However, most
traders don’t realize this… they mistakenly assume both zones form for the same reason and have the exact same probability
of causing price to reverse, which they don’t.

I’ve written this article to explain why this is, and why you should stick to only trading one type of zone if you want to see good
results.

Read Now

Pro몭t Taking Zones Vs Trade Placing Zones: What's The Di몭erence?

On top of two types of zones, they can also form for two di몭erent reasons: either the banks placing trades, or taking pro몭ts o몭
trades. Each type of zone has its own quirks and characteristics which, if you know, can help you trade them and make fewer
mistakes

To learn what these are, check out my pro몭t-taking zones vs trading placing zone post.

Read Now

3 Mistakes That'll Destroy Your Supply And Demand Trading 

In the case of supply and demand, there are 3 key mistakes traders make over and over again that you MUST avoid to become
successful. My post below details what these mistakes are, why traders make them (and it’s not all their fault in some cases), and
most importantly… What you can do to avoid them yourself.

Check it out below if you’re interested.

Read Now

Frequently Asked Questions About Supply And Demand Trading

Q. How long will it take to get good at 몭nding and drawing the zones?

A. If you practice, it shouldn’t take too long.

It’s best to spend some time 몭nding and drawing the zones yourself. By going back and 몭nding/marking the zones you’ll
start to get a sense of how to draw them and what the good ones look like. Over time, you’ll get better and better until
eventually you’ll know exactly what they look like and how to draw the properly.

Q. Can a zone be used more than once, like support and resistance?
 A. No, supply and demand zones are a one-time use.
Sometimes you’ll see price reverse from a zone after it’s been touched, but these zones typically form at the top and
bottom of consolidations, so are okay to trade. For all other zones though, only take the trade the 몭rst time price returns to
a zone.

Q. Is supply and demand trading pro몭table?

A. It is if you learn from the right places.

Most supply and demand guru’s don’t really understand how the zones work, so if you learn from them, you’ll        
 probably lose money or you won’t be very successful. If you learn from the people who do know what they’re talking
about, ... , you should have a decent chance.

Related Posts

Related Posts:

The Complete Guide To The Total Beginners Guide Top 22 High Probability Is Discretionary Trading

Trading The Double Bottom To Trading Support And Candlestick Patterns Cheat Better Than Mechanical
Pattern Resistance  Sheet  Trading?

Tags: S & D F

Comments

Marvin
September 26, 2019 at 6:13 am

so. for the entry signal

we should go down to lower timeframe to 몭nd or just stay the current timeframe we trade at

Admin
September 26, 2019 at 11:46 am

Hey Marvin,

Stick with the timeframe you trade o몭 for now. You can use a lower time-frame but I need
to explain it more, as there are a few things you need to be aware of. I’ll try to get a guide
about it out in the next few weeks.

lukino60
September 27, 2019 at 8:30 am

Hey Liam,

this is piece of art. I already read your S/D book and all articles from old web, but this is again
eye open in another way. I have again some ideas how to read price.

Thanks

Admin
October 1, 2019 at 6:16 pm

Glad you liked it Lucky.

Got some more S + D posts on the way. Keep a lookout for them over the next couple of
weeks.

Marvin
September 28, 2019 at 3:00 am

one more question. what about the pro몭t taking lvl, I am little confused with it
thx
 Admin
October 1, 2019 at 6:10 pm

Hey Marvin,

The pro몭t-taking level should be the closest zone on the higher time-frame. So if you trade
o몭 the 1 hour, you need to take pro몭ts once price reaches the next zone on the daily. If you
trade o몭 the 1 min or 5 min, take pro몭ts once price reaches the 1-hour zone. Don’t take
pro몭ts right away, though. Wait for signs of a reversal 몭rst, and then take pro몭ts if you see
something developing.

Sborero
January 13, 2020 at 4:10 pm

Great post, you have taught me how to draw supply and demand zones. I have more idea now
how to draw these zones.

Admin
January 14, 2020 at 6:23 pm

Great, glad to hear Sbo!

Let me know if you need anything else.

mahmoud
February 12, 2020 at 8:46 am

Thanks for your guidance in S&D. you enlighten me of some points as i am trading this method
already. appreciating your e몭orts.

Good luck
April 14, 2020 at 7:31 pm

Thank you very much for making me know s/d zone but how do you identify it

Admin
April 17, 2020 at 12:39 pm

No problem, lucky. Happy to help

Rob
April 19, 2020 at 4:40 am

Hi great article! I just found about this website and it is really helpful. Do you have any tips about
pro몭t-taking strategies you use? Do you take some pro몭t at the 몭rst trouble area or do you just
wait for it to hit the target? I have been having an issue where I tend exit the trade pretty early so
I usually only earn around 2Rs per trade. I feel like you never know if the price is gonna reverse
at the 몭rst trouble area. Did you ever has this issue when you were learning?

ปั
몭
มไลค์
June 9, 2020 at 10:03 am

Like!! I blog frequently and I really thank you for your content. The article has truly peaked my
interest.

Mandala
June 25, 2020 at 12:20 pm

Hello,
Can you please explain more about the curve? I trade the daily time frame and using H1 for
con몭rmation when the price reaches the daily zone.
 Admin
July 5, 2020 at 9:53 am

Hey Mandala, Liam here.

To be honest, I don’t really use the curve concept in my trading. I understand it is a part of
supply and demand theory – the economic concept of S & D, I mean – but for trading, I just
don’t think it adds anything valuable. It kind of narrows your view of the market and what
zones are important, I think.

Much better to just concentrate on 몭guring out where the strongest zones are – zones
created from the banks placing big trades – and then trade o몭 of that, rather than focus on
what the overall curve is, which may cause you to put more importance on zones that aren’t
that important if that makes sense?

Liam.

Roshan Thapa Chhetri

July 24, 2020 at 10:49 am

quick question. for test demand zone which candle must be appear red or green candle . what if
whole candle touch the demand zone without wick on distal line ,does it consider rejection? if i
saw demand zone in Day chart , still i have to go small time frame or not. when should i go small
time frame ? your expedite reply would be wonderful. thank you

Admin
July 24, 2020 at 1:57 pm

It can be red or green, Roshan, doesn’t matter which. The candle must touch the edge of the
zone to signal a rejection, that’s the most important thing. If it doesn’t touch the edge, it’s
not classed a proper rejection, just a normal spike. As for daily zones, you can drop down to
a lower timeframe if you want, it depends on your preferences really. I like to drop down to
lower risk, but you can stay on your normal timeframe too – it’s up to you, really.

Steve
August 9, 2020 at 12:21 am

Please what is your take on this?

I trade zones if price returns within:
5 min TF = 2 hours of zone creation
15- 30 min TF = 6-8 hours of zone creation
1 Hour TF = 24 hours of zone creation
Daily TF = 1 month of zone creation
Weekly TF = 1 year of zone creation

Admin
August 11, 2020 at 7:57 am

Try these instead, Steve:

1 min/5 min/15 min – 1 day.

30 min/1 hour/4 hour – 20 days
Daily – 3 months

I’ve tested these myself going back quite a few years, and they seem to work really well. Just
give a little leeway with the times; you don’t need to be super speci몭c, e.g if a zone forms 1
day over the daily TF time, that’s still a valid zone. You can’t be exact with things like this, so
you have to allow for a little variance with when price should return.

Steve
August 11, 2020 at 11:49 am

I’m very grateful sir. You’re doing a great job

Steve
August 11, 2020 at 2:28 pm

Hi Liam,
Would like to know if S & D zones could be traded at anytime of the day, i.e. Asian, London &
New York market hours. Thank you

Admin
 Admin
August 12, 2020 at 12:00 pm

Yes, you can trade them at anytime, Steve. The time of day doesn’t matter, only whether the
zone is strong or not.

Steve
August 12, 2020 at 4:17 pm

Noted with thanks sir

Tshepi89
September 3, 2020 at 1:52 am

Hi Liam
thank you for the quality lesson above . your material has proven helpful for me and i change
my whole perspective on trading.

please see “How To Trade Supply And Demand On The Daily: Full Guide + What You Need To
Know” as the page does not open

thank you

Esther Dawodu
November 16, 2020 at 6:56 pm

Would Like To Know If You Have Written The Guide On Using The Lower Timeframe To Enter
S&D Zone … And the guide on how to trade S&D zone daily

Admin
November 25, 2020 at 11:03 am

I haven’t got a guide on entering using a lower timeframe zone, Esther – I’ll try to get
something out in the near future. I have got a guide on trading S & D on the daily, though…I
took it o몭 the site as I’m going to re-purpose it for another post, but I’ll send it over to you
so you can read it.
Cheers,
Liam.

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