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Drawing supply and demand zones is a skill many people fail to master correctly.
Ever since supply and demand trading first came to prominence 4 -5 years ago there have been many different interpretations of how to draw the zones properly. This is to be expected since everyone has their own method of trading supply and demand zones.
Supply and demand trading explained - FOREX
Today I want to give you the definitive guide on how to draw the zones correctly as well as a quick overview on how to locate supply and demand zones in the forex market.
Locating Supply And Demand Zones
Before we get to how to draw the zones I think its best if I show you how to locate actual supply and demand zones in the market just in case anybody is new to the supply and demand trading method.
Firstly I recommend you go and read my other article on supply and demand trading titled “Supply And Demand Trading The Essential Guide” to understand how I trade the forex market using supply and demand zones.
The method I use differs greatly to how the majority of traders trade supply and demand and the rules I use to determine whether a zone has a high probability of working out successfully are also unlike the rules implemented by the vast majority of supply and demand traders.
My strategy is based on the most well-known rules given by Sam Seiden which are found in typical supply and demand trading methods, but with some small tweaks which bring them more in-line with the reality of how the forex market really works.
Locating Supply Zones
Supply zones can be located by looking for a swift drop away from either a single candle or small consolidation structure commonly known as a base.
The base consists of a few candlesticks in a tight sideways range (consolidation)
This is an example of a supply zone formed with a base.
Below is an example of a supply zone formed from a single candle.