• The supply zone is determined when the price falls sharply in a candle or has a previous sideways candlestick area (small consolidation). The area with sideways candles was previously called The Base.
  • The base area consists of a series of sideways candles that form a consolidation zone. Here is an example that illustrates the supply zone that has a base area.
  • Another example of a supply zone is when there is no base, only one strong bearish candle.

  • The demand zone is defined when the market has a strong advance in a candle or has a pre-existing base (the base).
  • Below is an example of a demand area created in a candle.
  • Here is an example of the demand zone with the base zone.
  • All the pictures above show you that there are two types of supply-demand zones that exist in the trading market, one that forms in a strong candle, the other having a prior base.

  • Now that you know how to define the supply-demand areas on the chart, the next thing you need to do is learn how to plot the supply-demand areas for the standard.
  • Both supply-demand areas with or without a base (formed in a candle) are drawn in the same way.

  • We start by drawing the supply area first.
  • To be able to draw this area you need to select the rectangle tool of mt4 software.
  • We will draw the supply zone from the opening price of the last bullish candlestick before the price plummets to form the supply zone.
  • Note: you must always draw the supply zone from the last bullish candlestick before the market falls sharply if this candle is a bearish candle, you need to identify another bullish candle before and start drawing the area supply since then.

  • The opening price from the bullish candle in the picture with the arrow mark is where you start to draw the supply zone.
  • Once you are done, you need to drag the square area above the nearest highest high before the price falls in the picture. The top of the supply area is a nearby pin bar candle (you can use the swing high or fractals finder ... to find).

  • In contrast to the supply zone, we draw the demand zone when we find a bearish candle before the price forms a strong bullish candle.

  • In the picture above, you see the demand area formed from the bearish candlestick opening price found before the market formed a strong bullish candle.
  • From here you will need to find a swing low that formed in the nearby candlestick zone. You drag the square until the bottom edge reaches this lowest price area, you will finish drawing the demand area on the chart.
  • To understand how to draw the supply-demand zone as above, we need to understand the nature of the price and the trader behavior in the market (re-read the full series of instructions on the supply-demand zone) ...
  • If you see a strong bullish candlestick it means that most of the orders entering the market are buy command. On the contrary, the bearish candlestick was formed because most of the command entering the market were sell command. A supply-demand zone forms when big boys trap the majority of traders in the market, so you need to see a price action "trapped" before the price falls or goes up sharply. This leads to the fact that the market price needs to increase before decreasing to form a supply zone, whereas the market price needs to decrease before increasing to form a demand zone.