Supply and demand zones

Foundations · Beginner · 6 min read

You will learn to

Spot the base before a strong move
Tell fresh zones from used ones
Use zones for context, not as a signal

The idea

A supply or demand zone is the small cluster of quiet candles — the base — right before a strong, fast move away. The theory: large orders were filled there, some were left unfilled, and price may react when it returns to fill the rest.

What makes a zone interesting

Strength of the move away: big bodies, fast, ideally breaking a level.
A short base: 1–3 candles. A long base is just a range.
Freshness: price has not come back yet. Each return fills some of the remaining orders.
Higher-timeframe agreement: a 1H demand zone inside a 1D uptrend.

Supply/demand vs support/resistance

They overlap. S/R comes from repeated reactions; supply and demand from one decisive departure. Both are areas to watch. Neither is a reason to enter by itself.

What our backtest found

Limit entries at fresh zones (stop beyond the zone, 2R target) across 15M, 1H and 4H: no better than a random zone of the same size. Use zones for context and stop placement.

Check yourself

1. What makes a demand zone "fresh"?

It formed today
Price has not returned to it yet ✓
It has 3 touches

Fresh = untested.

2. Which base is more meaningful?

Two quiet candles then a 5-ATR rally ✓
Thirty candles of chop then a small move
Any red candle

A short base followed by a strong departure shows urgency.

Terms in this lesson

Fresh zone: A zone price has not returned to yet.
Supply / demand zone: The base of quiet candles before a strong move away.

Practise it on real charts. In the app, this lesson comes with real examples (reveal what happened next), a graded drill and the track test. Open the Academy in NexusCore — free →