How Supply and Demand Zone Trading Boosts Your Profits?
Supply and Demand Zone trading is the new concept that is followed by traders. It provides us with a complete and detailed understanding of market behavior. In this article, we will try to discuss how to improve results with supply and demand zone trading.
What Supply and Demand Zone look like?
Supply and demand zones are the key areas on our chart where prices can find strong reversals. We can expect a high buying and selling pressure on these important levels. When we refer to the supply zone then it tells us that sellers can have a full control in the market.
On the other hand, demand zones are those key levels where prices can go up and we can expect a bullish pressure in the market. If we understand these zones properly, they will provide an edge to our trading strategy.
Why a Trader Shoulr trade Supply and Demand Zones?
Supply and demand zones are very important for traders to know because these are the levels where we can expect huge reversals in the trading market. If we use these zones very carefully then we can enter and exit from our trades more effectively. These zones help us to understand the market behavior and future price movements. We can avoid so many potential losses by using these zones and we can give boost to our trading profits.
How To Find These Supply and Demand Zones?
To find these zones on our charts where the price has moved up and down very fast.
- You should expect sharp price action movement in these areas.
- We can also expect consolidation in these zones.
- Price can retest these areas multiple times.
- If we mark these areas on our charts we can gain a lot of trading opportunities.
Key Role of Price Action In Supply and Demand Zones?
Price action is the road to success in trading. If we combine price action trading with these zones it can lead to much better trades. A trader should look for three types of patterns in these zones.
- Doji Candlestick Pattern
- Engulfing Candlestick Pattern
- Pin Bar
If we find the above three patterns in supply and demand zones then we can catch high-quality reversals.
How Supply and Demand Zone Are Different From Each Other?
Many trades believe that supply and demand zones and support and resistance levels have the same concept. This is wrong. Yes, they look like the same but they have different concepts. Traders mark support and resistance levels on their charts in the form of lines. On the other hand, we mark supply and demand zones in the form of areas (not lines).
Supply and demand zone trading covers a wide range of price movements in the same area.
How We Can Use Supply and Demand Zone in Our Trading?
We need to focus on the following points.
- First of all, we need to find these zones before executing our trades. We can use these zones in order to target take profit and stop loss.
- We can get help from other indicators when prices reach these zones.
This approach can help traders to reduce their risk and make more efficient trades.
Which Time Frame is Better In Supply and Demand Zone Trading?
There is a different impact of Supply and Demand Trading in various time frames. For our guidance, we should know that the higher time frames show accurate and strong zones. The smaller time frames are more noisy and the zones on smaller time frames can lead to false signals.
What Tools are Best For Trading With Supply and Demand Zones?
The following methods can be very helpful in that case Such as:
- If we add the Fibonacci Retracement Indicator with these zones can help us to take good trades.
- If we use the trend lines we can take our positions on the break of trend line.
- We can also take a second confirmation from the moving average indicator in these zones.
The Role of Volume In Supply and Demand Zones Trading
Volume plays very important role in trading. The best way is to add any volume indicator on your chart and trade accordingly. For example: If we notice an increase of volume in supply and demand areas then it can be considered as a very good confirmation. There are a lot of good volume indicators available on trading view.
Conclusion
With no doubt supply and demand zone trading is very helpful for traders. These are such levels on our chart where we can expect sharp momentum in the market. If we use these zones on higher time frames then they can be more reliable. Moreover, these zones should not be traded alone. We should use other good indicators for our second confirmation. The third piece of advice is to do a lot of practice with these zones because practice makes the trader perfect.
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