Supply and demand trading is one of the most effective price action trading methods in the Forex market. Whether you are a professional trader or new to forex trading, knowing where prices are likely to reverse provides you a significant advantage.

This blog will teach you the following:

• What are supply and demand zones?
• Key Patterns in Supply and Demand Trading
• Supply and Demand Zones Trading Strategies

What are supply and demand zones?

Demand zones are the zones where buying pressure outweighs selling pressure and causes prices to rise. Demand zones frequently arise following a quick rally or rebound from a support area.

Supply zones are the zones on the chart where selling pressure is strong enough to counter buying pressure. Supply zones are typically generated following a sharp fall from a consolidation or resistance area.

These zones indicate that institutions have placed significant buy or sell orders, and price frequently reacts when it returns to them, making them crucial for both entry and exit points in supply and demand forex strategies.

Key Patterns in Supply and Demand Trading

While there are many ways to determine supply and demand zones, but one of the most dependable is using candlestick patterns, particularly:

✅ Bearish Engulfing 

✅ Bullish Engulfing 

But we will go a step further, we will  trade when the engulfing pattern fails, indicating a higher degree of confirmation that the market is moving.

Indicators

✅ Bearish Engulfing 

✅ Bullish Engulfing 

Supply and Demand Zones Trading Strategies : Demand Zones

This supply and demand zones trading strategy is applicable on any timeframe, making it suitable for scalpers, day traders, and swing traders.

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Step by Step Buying Guide: 

✅ Find a bearish engulfing candlestick pattern. You can use the Engulfing Bearish indicator to identify and locate the candlestick pattern.

✅ Wait for the failure of Bearish Engulfing

Price first breaks the Low price of the Bearish Engulfing, then instantly reverses and closes above the High price.

✅ Mark Red candle as the demand zone.

✅ Buy Entry 

When the price returns to the demand zone.

✅ Stop Loss

Below the low price of the Bearish Engulfing candle.

✅ Target

Most recent Swing High.

Supply and Demand Zones Trading Strategies : Supply Zones

Step by Step Buying Guide: 

✅ Find a bullish engulfing candlestick pattern. You can use the Engulfing Bullish indicator to identify and locate the candlestick pattern.

✅ Wait for the failure of Bullish Engulfing

Price first breaks the High price of the Bullish Engulfing, then instantly reverses and closes below the Low price.

✅ Mark Green candle as the supply zone.

✅ Sell Entry 

When the price returns to the supply zone.

✅ Stop Loss

Above the high price of the Bullish Engulfing candle.

✅ Target

Most recent Swing Low.

Pro Trading Tips to Increase Accuracy

To maximize the effectiveness of this method, you must :-

✅ Perform multi-timeframe analysis for improved confirmation.

✅ Plan trades around market sessions (e.g., London open).

✅ Avoid trading during low volume hours.

✅ Use sound risk management with set stop loss and targets.

Just start Trading using Supply and Demand Zones - Open Your Account Now !

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