How to Identify Supply and Demand Level Zones: The Ultimate Guide

In this article you will learn the correct way to identify supply and demand level zones on a price chart. This will allow you to find those best zones of supply and demand to find those high quality setups.

The importance of trading from the correct supply and demand level zones, is to find that imbalance between the sellers and buyers within the market. Once you can identify the correct zones, you then will learn how to easily draw supply and demand zones.

This leads to being able to then identify those fresh and tested supply and demand level zones.

Introduction

For many traders who are new to this game, they have their heads buried in spreadsheets, looking at charts, and getting the same results over and over.

What can I do to improve my results?

What am I doing wrong?

Know Your Market Before you can examine the correct way to identify supply and demand level zones, you need to know the market itself.

You must know the market to identify the right setup for you.

How can you find the right setup for your position?

There are many ways to do this. Using simple technical analysis techniques is a great way to find that setup for a position, but for many, this is very slow and tedious.

What can you do to improve your ability to find the right setups?

There are 2 ways to do this: Experience – Acquire more experience!

NFXT Advance Supply & Demand Trading Course

What are supply and demand level zones?

I often get asked this question.

I believe that this question is very simple, to the point, and gets people to think more about what happens when they trade. The term ‘supply and demand level zones’ will be new to many and it should be the first step in creating a solid understanding of what exactly are supply and demand level zones.

I have often found myself using the term supply and demand level zone. I think that I have coined the term so many times that people will say that I have created the term.

I have taken the liberty to rename it a little bit, but the term ‘supply and demand level zones’ still fits the definition. When I started trading, I watched quite a lot of traders working in the trading market. There was one thing that always intrigued me.

This was how can I understand the importance of trading from the correct zones of supply and demand?

The importance of trading from the correct supply and demand level zones

It is extremely important to identify the supply and demand level zones.

This is due to the fact that this is the most powerful way to find those fresh and tested zones of supply and demand to profit from. Being able to identify those zones of supply and demand levels is actually a very good “rule of thumb”.

It’s not something you have to rely on, as it is not about whether you’re right or wrong. It’s just about identifying the best level of supply and demand in the market for the given time period. This leads us to the other two components on;

  • how to identify supply and demand levels on the price chart.
  • how to easily draw supply and demand level zones

Identifying supply and demand level zones

The market is like a giant mixing bowl. There is always some sort of imbalance in the bowl. This can be caused by the buyers and sellers trying to push and pull the bowl in opposite directions.

By knowing where this bowl imbalance exists you will be able to work out where the market is in its weakest position and where it’s strongest position lays. By being able to identify and sell from the market’s weakest position, the profit potential is much higher and will lead to massive gains.

It is always important to know where the market’s weakest point is and where its strongest point is. You do not want to buy and sell at the same time, when it is strong because you are buying at the high and selling at the low. This would be like putting a straightener on both ends of a screw.

To learn more on how to identify supply and demand zones in Forex check out this video below…

Easily draw supply and demand level zones

These are the two main types of supply and demand level zone curves on a price chart: There are a lot of different ways to draw a supply and demand level line or zone on a price chart.

Once you have drawn your supply and demand level zone, this type of graph is known as a coherency. If your price is at a low supply level, then this coherency is rising. In other words, you are more likely to get a buy signal if your price is now on a rising coherency line.

On a price chart by plotting the horizontal axis to be X, with “at” and “below” bars that represent these zones. When there is a small amount of volume when the bar above “X” is being drawn, this will allow you to identify the “X” bar of the horizontal axis.

You can therefore follow this path to find any area of extreme price lows or highs. A wider area of price highs or lows will mean the market is already balanced between buyers and sellers. A narrower area will mean the market is finding equilibrium.

Now of course, drawing your supply and demand level zones, doesn’t have to sound as complicated as I indicated above.

To make your experience that much easier with learning how to draw supply and demand zones for yourself, you will want to watch this next video to help explain this to you in a more simplified approach.

If you want to learn how to identify and trade those key supply and demand level zones, you first need to be able to identify fresh and tested supply and demand level zones.

How to identify fresh and tested supply and demand level zones

Now we come to the core of this article, with finding those top zones to be trading from. This being able to identify the fresh or tested zones of supply and demand on your price charts.

: Find the supply and demand level patterns within the market

Knowing the level patterns is the key to identifying supply and demand level patterns. Some people claim that looking at a market action for 2-3 weeks is enough. However, this is not true. What they fail to take into account is the fact that it takes time for patterns to be formed and to be confirmed on a price chart.

Following the above approach has proven to be the best to spotting these new fresh and tested supply and demand level patterns. It requires you to focus on specific events that take place, within the market.

This has been the most important part of my work over the past 10 years, as this is when you will start to find the supply and demand level patterns. To improve your experience reading this article today…

I have created a video to demonstrate exactly how to approach finding those fresh and tested supply and demand level zones.

When you focus on fresh and tested patterns, you then know when trading from a new supply and demand level, the price is higher, while it’s lower when the new level is established on a price chart.

While the price was just forming, the seller decided to sell at the lower price and they were able to sell and pocket their money. The buyer decided to stay with the current price level, as the price was just forming. So now the buyers are higher and the sellers are lower.

On the other hand, when a supply and demand level is established with an established price, the buyers will wait for the new price to settle. The sellers will also wait for the new price to settle, as this will allow them to make money. This is why the new price will show a very low volume for a while, which is a clue that the supply and demand level is not in a fresh zone.

Learn to trade supply and demand yourself

Now you will have a better understanding of how to identify, find and draw your zones of supply and demand. Not to mention also how to find fresh or tested zones of supply and demand.

Your next step will be up to you… take this new found knowledge from my article and videos today and put them to good use, with trying to trade supply and demand.

Or… to learn from someone who has a proven supply and demand methodology.

The choice is up to you.

If you’re ready to take the next step in your supply and demand trading, then you seriously need to check out my advanced supply and demand course right now clicking here.

Conclusion

Learn how to identify supply and demand level zones, where the seller’s number are high and the buyer’s number are low. This will allow you to find those profitable opportunities to trade from.

Then identify the key zones, being a fresh or tested zone of supply and demand, which will allow you to see ahead of time if a zone is a suitable to look to trade from.

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