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Chart Patterns

Supply and Demand Zones

Price areas where imbalances between buyers and sellers caused sharp moves: stronger than traditional support/resistance.

What are Supply and Demand Zones?

Supply and demand zones are specific price areas where institutional buying (demand) or selling (supply) caused a strong, impulsive move. Unlike support and resistance lines, these are zones: ranges where orders cluster.

Identifying zones

  • Demand zone: a base or consolidation area just before a sharp rally
  • Supply zone: a base or consolidation area just before a sharp drop
  • Fresh zones: zones that haven't been tested yet are strongest

Quality indicators

The best zones have: a strong departure (big move away), little time spent in the zone (quick base), and haven't been retested yet.

Related Terms

Fair Value Gap (FVG)

A three-candle pattern where the wicks of candles 1 and 3 don't overlap, leaving an imbalance zone price often returns to fill.

Liquidity Sweep

When price briefly breaks above a high or below a low to trigger stop losses before reversing sharply.

Market Structure

The pattern of higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend) on a chart.

Order Block

The last opposing candle before a strong move: an area where institutional orders were placed.

Support and Resistance

Price levels where buying (support) or selling (resistance) pressure historically prevents further movement.

Volume Profile

A chart study showing volume traded at each price level, revealing where the most activity occurred.