Supply And Demand Zone: All You Need To Know About Trading In The Zones2 min read
Trading crypto in the bear market is one of the toughest times for most traders, including advanced traders, but as the saying usually goes, the bear market produces the best of traders, and millionaires are born. Trading with the right skills and implementing your strategy to the very least is like exposing yourself to risk that could cost your life but, in this case, your trading portfolio.
Having the right psychology, patience, and trading with the right strategies gives you an edge over huge investors and institutions. Most traders and investors look for strategies with the best profitability and result, thereby increasing their earning potential. Most technical analysis strategies, when combined appropriately, yield huge success. Let us discuss how the supply and demand zone as a strategy is used by institutions to enable them to trade with the best possible outcome. We will also see how to combine the supply and demand zone with other trading strategies.
What Is Supply And Demand Areas
It is key to understanding that the market always moves in cycles, and getting a hang around this concept allows you as a trader to trade and best position yourself to get the best result out of the market.
There are four common market cycles or market structures that traders should know. They are the uptrend, downtrend, accumulation, and distribution phases.
The concept of demand and supply revolves around the different market structures the market forms after some time.
The supply zone is the price area or zone where sellers are more dominant and want to sell an asset at a considerable price, thereby preventing the price from going higher.
The demand zone is the price area or zone where buyers are more dominant and want to buy an asset at a considerable price, thereby preventing the price from going lower.
How To Identify Supply And Demand Zones
Supply and demand zones can be easily identified by looking at the chart, as they are not difficult to find. Here is a simple step to find either supply or demand zones.
- Examine the chart for consecutive large consecutive candles. The price must move rapidly.
- Determine the base (usually a sideways price action area) from which the quick move began.
How To Trade Supply And Demand Zones With Pin Bar Pattern
One of the most highly used patterns in trading is the pin bar pattern, used to spot potential price reversal from an uptrend or a downtrend. Let us discuss how this pattern with the supply and demand area is highly effective. From the chart above, the formation of a demand area with pin bar patterns indicates a potential price reversal to the uptrend, confirmed by the price moving upward.
Featured Image From zipmex, Charts From Tradingview