How To Trade Blog: What Are Supply and Demand Zones? The Idea Of This Strategy? (Chapter 1)

“Following the footsteps of Big Boys or big organizations in the market, you will make money.”

This is the motto of those who prefer the school of trading according to the Supply and Demand zones.

This is one of the best trading systems you need to know. Let’s start from chapter 1 to chapter 4. I believe you will have useful knowledge after reading this series.

What are Supply and Demand zones?

Supply and Demand zones are the places where the price drops or rises sharply.

+ The supply zone is where the price falls sharply.

+ On the contrary, the demand zone is where the price increases strongly.

According to the above concept, what you need to focus on is “the price rises or falls sharply”.

Detailed explanation:

Often individual (retail) investors in the market will not be able to make prices rise or fall sharply. Only the Big Boys in the market such as Word Banks, investment funds, and other large organizations in the market can do such a thing like that.

So when the big money flow is activated, it is time for us – retail traders to join the market.

An example of the Supply zone

I will give an example about the Supply zone of the gold price to make it easier for you to understand.

(1) On November 9, 2020, gold was sold off by big funds such as SPDR, ETF… The price dropped by more than $100 (from $1955 to $1,855 in a single trading day). In theory, this is the Supply Zone.

(2) On January 5, 2021, gold price returned to the $1955 zone, entered the previous Supply zone and dropped dramatically again.

When the price returns to the supply zone, it will drop again

Detailed explanation:

You can understand it like this. Suppose a trading fund executes an order to sell gold for about 1 thousand lots from the range of $1960 to $1940. This trading order will be split and matched on the market. When the price drops sharply below the 1940$ zone, the fund’s remaining sell orders will be hung in the market as pending ones which are called “Unfilled Orders”.

When the gold price rebounds above the 1940$ zone, these unfilled orders will be triggered and push the gold price down again.

Summary

To trade with the Supply and Demand zones, you have to identify these zones first. Then wait for the price to retest them and open orders. SELL in the Supply zone and BUY in the Demand zone.