Supply Zone vs Demand Zone

Every price reversal starts with an imbalance. Supply zones mark where sellers overwhelmed buyers. Demand zones mark where buyers overwhelmed sellers. Both are identified the same way — a sharp move in one direction, a pivot, and an impulsive move in the opposite direction.

Demand Zone

Buyers overwhelmed sellers at this level
Found after sharp down move + impulsive up move
Drawn from last sell candle before the impulse up
Expectation: price returns here and bounces up again

Supply Zone

Sellers overwhelmed buyers at this level
Found after sharp up move + impulsive down move
Drawn from last buy candle before the impulse down
Expectation: price returns here and drops again

The Core Pattern

Both supply and demand zones share the same DNA: a sharp move in one direction, a pivot candle, and an impulsive move in the opposite direction.

Demand Zone Formation

Sharp down → Last sell candle (pivot) → Impulsive up

Supply Zone Formation

Sharp up → Last buy candle (pivot) → Impulsive down

3 Ways to Draw the Zone

1. Full Candle Body (Default)

Use the high and low (including wicks) of the pivot candle. This gives the broadest zone and is the most reliable method.

Best for: All scenarios. Start here.

2. Wick Refinement

When the pivot candle has a large wick, refine the zone to just the wick area. This gives a tighter entry. On a lower timeframe, you'd see the same sharp-move-then-impulse pattern within that wick.

Best for: Large-wick pivot candles where the full candle zone is too wide.

3. Pivot Wicks (Between Candles)

The gap between one candle's wick and the next candle's open creates a mini-zone. This often appears in continuation moves where two impulsive candles have a brief pause between them.

Best for: Continuation setups and lower-timeframe refined entries.

Side-by-Side Comparison

Feature	Demand Zone	Supply Zone
Represents	Buying pressure (institutional demand)	Selling pressure (institutional supply)
Location in trend	At lows (swing lows, higher lows)	At highs (swing highs, lower highs)
Preceding move	Sharp move down	Sharp move up
Pivot candle	Last sell (bearish) candle	Last buy (bullish) candle
Following move	Impulsive move up	Impulsive move down
Zone drawn from	High to low of pivot candle	High to low of pivot candle
When it holds	Higher low forms, bullish trend continues	Lower high forms, bearish trend continues
When it fails	Lower low forms, bearish shift	Higher high forms, bullish shift
In control when	Demand holds + supply fails = bullish	Supply holds + demand fails = bearish

Why Institutions Create These Zones

Large funds can't fill their positions in one go — there's not enough liquidity. They execute a portion, price moves away, and when price returns to their entry level, they execute the remainder.

We're not trading like institutions. We're tracking the footprints of large order flow and positioning ourselves to benefit when those orders re-enter at the same price levels.

We don't know why institutions are buying or selling at a particular level. We only know that a volume imbalance occurred there, and historical patterns suggest it may happen again.

Frequently Asked Questions

Is supply and demand the same as support and resistance?

Related but not identical. Support/resistance are horizontal levels where price has reacted before. Supply/demand zones are specific areas derived from volume imbalances — they're based on the mechanics of how the zone formed (sharp pivot + impulsive move), not just where price bounced.

How do I know if a zone is still valid?

A zone is valid until it's been tested and broken. If price returns to the zone and gets a reaction (bounce), the zone held. If price pushes through the zone with an impulsive move, the zone has failed and is no longer valid.

Should I use the wick or the body to draw the zone?

Default: use the full candle (high to low, including wicks). Refine to just the wick when the pivot candle is very large and you want a tighter zone. Both are valid approaches.

What makes one zone stronger than another?

The strength of the impulsive move away from the zone. A zone followed by massive momentum candles is stronger than one followed by a gradual drift. Also, zones at the extreme of a structural range are stronger than decisional zones in the middle.

Deep Dive Articles

Why Your Demand Zone Melted: Understanding Zone Failure in Bearish Legs

You see a break of structure to the upside. You mark the demand. Price comes back and the demand melts like it never existed. The reason: you marked demand within a bearish internal structure leg.

7 min read

Supply and Demand Breaks: Why They Matter More Than Structure Breaks

Instead of asking 'did price break structure?', ask 'did price break supply or demand?' This single filter eliminates the majority of false signals and reveals which breaks have genuine institutional conviction.

8 min read

How to Map Supply and Demand Zones: 3 Methods Every Trader Needs

Learn three proven methods to map supply and demand zones: candle bodies, wick refinement, and pivot wicks. Find the institutional footprints on any chart.