Supply and demand zones are the areas from which a strong, impulsive move began. A demand zone is the base where aggressive buying launched price upward; a supply zone is the base where aggressive selling drove price down. They mark where a large imbalance of orders existed.
How zones differ from lines
A support or resistance line is a single price; a supply or demand zone is a rectangle covering the small consolidation just before an explosive candle. The logic is that unfilled orders may remain in that area, so price often reacts when it returns for the first time.
Spotting a valid zone
Look for a tight base followed by a strong departure — one or more large candles that leave the base quickly. The sharper and faster the exit, the more meaningful the imbalance. A fresh zone that has not yet been retested tends to react more cleanly than one price has already visited several times.
- Find the origin of a strong move, not the middle of it.
- Draw the box around the base candles before the impulse.
- Fresh, untested zones are generally higher quality.
- A zone that fails to hold on the first test loses its edge.
Zones mark the origin of strong moves — the footprints of the orders that pushed price hard in one direction.