What are supply and demand zones?

Understanding supply and demand zones is essential when it comes to two things: 1) Finding the best risk:reward trading opportunities. These zones are very highly concentrated places of buying and selling activity. In this article, firstly I walked you through the three steps of spotting the good from the bad supply and demand zones.

Why is it important to identify supply and demand zones?

Identifying supply and demand zones is important because they can indicate potential areas of support or resistance. When the price reaches a supply zone, it may struggle to move higher and could potentially reverse. Similarly, when the price reaches a demand zone, it may struggle to move lower and could potentially reverse.

What are supply and demand zones and support and resistance levels?

Supply and Demand zones and Support and Resistance levels are foundational elements in technical analysis, often utilized by traders to identify potential reversals in the market. Though they might appear similar at first glance, there are key differences between the two.