Supply and Demand Zones
A zone is not a line — it is the area a big move started from, where orders were left unfilled. Price keeps coming back to those areas.
When a large buyer cannot fill an entire order at one price, the market runs away before they are done. What is left behind is an area with unfilled buying interest — and when price returns there, the rest of that order is waiting. That is a demand zone. A supply zone is the same story on the sell side.
This is why support and resistance work better as areas than as lines. The order was not at one price; it was in a range.
Marking a zone
- 1
Find the move, then look back
Locate a sharp move away from a level — a big candle or a run of them. - 2
Mark the base
The small consolidation the move exploded out of is the zone. Draw the box from the open of the last candle before the move to the extreme of the base. - 3
Prefer fresh zones
A zone that has not been retested yet has the most orders left. Each retest consumes some of them. - 4
Note the reaction
If price returns and stalls, the zone is alive. If it slices through without pausing, treat it as gone.
Fresh, used, broken
Fresh — untouched since it formed; the strongest. Used — one clean reaction already taken from it; weaker. Broken — price closed through and held; it now works in the opposite direction, an old demand zone becoming supply.
When it fails
Zones are a quiet-market tool. A rate decision, a CPI print or a war headline goes straight through the best-drawn zone on your chart, because the orders that were sitting there get pulled the moment the news lands.
The other failure is human: if you can draw six zones on one screen, you are not reading the market — you are decorating it. Two or three that you can justify out loud is the whole point.