What a zone actually is
A demand zone is an area where buying was strong enough to push price away quickly; a supply zone is the same for selling. The idea is that unfilled orders may remain there, so price can react when it returns.
How to draw a demand zone
Find a sharp move up made of large-bodied candles. Go back to the last small-bodied candle or tight cluster before that move — the 'base'. Mark the zone from the lowest wick of the base to the top of its bodies. Supply zones are the mirror image above a sharp drop.
Grading zone strength
Not every zone is worth trading. Score it before you trade:
- Departure: the faster and larger the move away, the stronger the zone.
- Freshness: zones that have never been revisited are usually stronger than ones already tested.
- Time in base: a short base (1–3 candles) is cleaner than a long, choppy one.
- Context: demand zones in an uptrend on the higher timeframe have the wind behind them.
Planning the trade
Set a limit order at the near edge of the zone, a stop just beyond the far edge, and a target at the opposite zone or the last swing high/low. Because the stop is defined by the zone, position size follows from it — see our position sizing guide.
Common mistakes
Drawing zones on every candle, trading zones against a strong higher-timeframe trend, and moving the stop when price enters the zone. If a zone breaks cleanly, treat it as information, not a personal failure.