Module 4: True Supply & Demand Zones

 A true zone begins where price pauses briefly—a base—and then leaves with power. That departure, if sharp and impulsive, signals that large orders overwhelmed the opposing side. When price eventually returns to that area, the traders who missed the move the first time often re-enter, while opposing positions either exit or defend weakly. That’s where opportunity lives.

There are three core types of zones:

• Drop-Base-Rally (Demand): A price decline stalls, forms a base, and then explodes upward.

• Rally-Base-Drop (Supply): A price rally pauses, then collapses with strength.

• Continuation Zones (Rally-Base-Rally / Drop-Base-Drop): Momentum pauses and resumes, often signaling trend reinforcement.

To qualify a valid zone, we look for:

1. A clean, narrow base (1–3 candles, tight wicks).

2. A strong departure (impulse move away—long-bodied candles).

3. A clear engulfing of nearby structure (ideally breaking a previous high or low).

Fresh zones—those that have never been revisited by price—carry the highest probability. The logic is simple: if a large order was placed there and price hasn’t returned, it’s likely those orders remain unfilled or unchallenged. A return to a fresh zone is where the trap is set, and the reward is richest.

To draw the zone:

1. Identify the base candle(s) before the strong move.

2. Box the open and close (or high/low) of the base.

3. Extend that box forward in time.

4. Wait for price to return and react.

Higher timeframes produce more reliable zones. A 4H or Daily demand zone carries more weight than one on the 5-minute. That’s why multi-timeframe analysis is critical. Use larger charts for directional bias and smaller ones for entry timing.

Support and resistance levels are based on reaction history. Supply and demand zones are based on reaction cause. This distinction is key. Support is where price stopped. Demand is where price launched. One is passive. The other, powerful.

Not every zone is tradable. Discipline means filtering out zones that lack structure, confluence, or context. The first touch of a zone often provides the cleanest opportunity. After multiple retests, the zone becomes diluted and loses strength.

In this lesson, you’ll draw zones, backtest their behavior, and refine your eye. You’ll begin to develop an intuition for imbalance—and more importantly, for patience. Because the best traders don’t chase. They wait. They prepare. And then they strike when the odds are overwhelmingly in their favor.

Prepare thy work without. Mark your field. Identify the zones where price is likely to respond. When the harvest comes—when price returns—you’ll be ready. That’s the difference between reacting to the market and commanding it.