Determine the supply area

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 sideway 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 candlestick.

Defines the demand area

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 images above show you that there are 2 types of supply-demand zones that exist in the market, one that forms in a strong candle, the other must have a prior base.

How to draw the supply-demand area

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.

How to draw the supply area

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 candle 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 drawing the supply zone.

Once you are done, you need to drag the square area above the nearest high before the price falls in the picture. The top of the supply zone is a nearby pinbar candle (you can use the swing high or fractals finder ... to find).

How to draw the demand area

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 image 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 behavior of the trader 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 orders. On the contrary, a bearish candlestick formed because most of the orders entering the market were sell orders. A supply-demand zone forms when big boys trap the majority of traders in the market, so it is necessary to see a price action "trapped" before the price falls or rises sharply. This leads to the fact that the market price needs to rise before falling to form a supply zone, whereas the market price needs to decrease before increasing to form a demand zone.