Contents: Supply & Demand Zones
*What are supply & demand zones?
*Types of Supply and Demand patterns
*What are supply and demand zones?
Supply and demand zones are a popular analysis technique used in day trading.
The zones are the periods of sideways price action that come before explosive price moves, and are typically marked out using a rectangle tool in the stocks, forex or CFD trading platform.
A supply zone forms before a downtrend*
A demand zone forms before an uptrend*
*Types of supply and demand patterns
First, it’s important to understand (Language of Supply and Demand) that there can be several periods of accumulation during an uptrend and several periods of distribution during downtrends. This means that, just like in classic technical analysis price patterns, there are supply and demand reversal patterns and supply and demand continuation patterns.
S&D Reversal Patterns
The Drop-Base-Rally is a bullish reversal pattern
The Rally-Base-Drop is a bearish reversal pattern
supply demand reversal patterns
S&D Continuation patterns
The Rally-Base-Rally is a bullish continuation pattern
The Drop-Base-Rally is a bearish continuation pattern
supply demand continuation patterns
This is important because understanding which phase the market is in i.e. what is the underlying trend and how long has it been in place determines which are the best demand and supply zones to look for.
In an old trend, you will want to look for reversals. In a new trend you will want to look for continuations.
*What are supply & demand zones?
*Types of Supply and Demand patterns
*What are supply and demand zones?
Supply and demand zones are a popular analysis technique used in day trading.
The zones are the periods of sideways price action that come before explosive price moves, and are typically marked out using a rectangle tool in the stocks, forex or CFD trading platform.
A supply zone forms before a downtrend*
A demand zone forms before an uptrend*
*Types of supply and demand patterns
First, it’s important to understand (Language of Supply and Demand) that there can be several periods of accumulation during an uptrend and several periods of distribution during downtrends. This means that, just like in classic technical analysis price patterns, there are supply and demand reversal patterns and supply and demand continuation patterns.
S&D Reversal Patterns
The Drop-Base-Rally is a bullish reversal pattern
The Rally-Base-Drop is a bearish reversal pattern
supply demand reversal patterns
S&D Continuation patterns
The Rally-Base-Rally is a bullish continuation pattern
The Drop-Base-Rally is a bearish continuation pattern
supply demand continuation patterns
This is important because understanding which phase the market is in i.e. what is the underlying trend and how long has it been in place determines which are the best demand and supply zones to look for.
In an old trend, you will want to look for reversals. In a new trend you will want to look for continuations.