The Best Way to Find Demand & Supply Zone

Demand & Supply Zone

The Different Way to find the Demand & Supply Zone in any Chart

Sat Sep 23, 2023

What are the Demand and Supply Zones?

Supply and demand zones are an essential concept in technical analysis that can provide valuable insights into market trends and price movements. Understanding how supply and demand interact can help traders identify potential trading opportunities and make more informed decisions.

Supply and demand zones are areas on a price chart where the price of an asset tends to stall or reverse. They represent areas where there is a significant concentration of buying or selling pressure, which can impact the direction of price movements.

In a supply zone, there is an excess of sellers, causing the price to drop. This occurs when supply exceeds demand and traders are willing to sell at a lower price. Conversely, in a demand zone, there is an excess of buyers, causing the price to rise. This occurs when demand exceeds supply, and traders are willing to buy at a higher price.

Supply Zone: The candlesticks or bars that mark the origin of a strong downtrend are called the supply zone or distribution zone.

Demand Zone: The candlesticks or bars that mark the origin of a strong uptrend are called the demand zone or accumulation zone.

4 Phases of Market:

Let’s think about the three simplest concepts in trading financial markets

When demand is greater than supply, the price goes up
When demand is equal to supply, the price goes sideways
When supply is greater than demand, the price goes down

Financial markets move in phases of the above. There are uptrends and downtrends or price ranges. Mr. Richard Wykoff was one of the first market analysts to explain the interaction of these phases, giving them four labels.

Accumulation Phase
Markup Phase
Distribution Phase
Mark Down Phase

Types of Demand & Supply Patterns?

There are 2 types of Supply and Demand we mainly focussed on. Continuation & Reversal Pattern. By analysing the Price Action We are trying to understand that is it a Supply or Zone. Because sometimes Demand works as a Supply Zone, and Supply as Demand.

Reversal Patterns:

The DROP-BASE-RALLY is a Bullish Reversal Pattern
The RALLY-BASE-DROP is a Bearish Reversal Pattern

Continuation Pattern :

The RALLY-BASE-RALLY is a Bullish Continuation Pattern
The DROP-BASE-DROP is a Bearish Continuation Pattern

Demand becomes Supply and Supply becomes Demand

When a price breaks below a support level, the broken support can become a resistance level. Likewise, when the price rises above a resistance level, it can become a new support. This shift indicates changes in supply and demand dynamics.

Conclusion

If you want to learn the Support & Resistance more deeply, get the OPTA ONE Advanced Course
Support & Resistance or Supply & Demand are the most important studies in Price Action
We plan our Trade Entry, Stop Loss, Trailing SL, and Exit with the help of these zones
We also use these zones to predict the Market & plan for the next day

Happy Trading & Investing!

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Nitesh Roy
Entrepreneur, Career Coach, Business Analyst, Graphic Designer, Professional Digital Marketer

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Disclaimer: The above article is based on my personal knowledge & experiences. I am not a SEBI Registered Analyst. I never provide any Tips, Paid Calls, Recommendations, Assurance, Guaranteed Services, etc. I only charge for my Mentorship Program. Please consult with your Financial Advisor before doing anything in Stock Market. I am not liable for any Profit or Losses