Supply and demand zones
A zone is the small area where price paused just before a strong impulse. Big orders were placed there, and some were not filled. When price returns, those orders can push it away again.
How to draw a zone
- Find a strong impulsive move (big candles).
- Look at the small candles just before it: the base.
- Draw a box over the base, from the wick extreme to the body edge.
Good zone, weak zone
| Good | Weak |
|---|---|
| Price left it very fast (displacement) | Price left slowly |
| The move from it broke structure (BOS) | No break of structure |
| Fresh: price has not come back yet | Already touched 2 or 3 times |
| With the higher-timeframe trend | Against the trend |
| Took liquidity before the move | In the middle of nowhere |
A common entry is a limit order at the edge of a fresh zone, with the stop just beyond the zone.
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