Supply and Demand Zone Strategy

Supply and demand will always have an implication in all market prices. Supply & demand zones put the economic theory into a trading strategy using price charts.

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What are supply and demand zones?

Supply and demand zones are a popular analysis technique used in trading. The zones are the periods of sideways price action that come before explosive price moves, and are typically marked out using a rectangle tool in the stocks, forex or CFD trading platform.

The Pin Bar Pattern (Reversal)

A pin bar pattern consists of one price bar, typically a candlestick price bar, which represents a sharp reversal and rejection of price.

The Supply and demand zones in combination with a pinbar is a strong trading pattern.

Trading setups

When a bullish pinbar touches the demand zone there is a setup for a long position. When a bearish pinbar touches the supply zone there is a setup for a short position. Risk reward can be 1:1 or 1:1.5 depending on risk tolerance. Simple as that!

What are the Pin Bar Pattern (Reversal)

A pin bar pattern consists of one price bar, typically a candlestick price bar, which represents a sharp reversal and rejection of price. The pin bar reversal as it is sometimes called, is defined by a long tail, the tail is also referred to as a “shadow” or “wick”. The area between the open and close of the pin bar is called its “real body”, and pin bars generally have small real bodies in comparison to their long tails.

The tail of the pin bar shows the area of price that was rejected, and the implication is that price will continue to move opposite to the direction the tail points. Thus, a bearish pin bar signal is one that has a long upper tail, showing rejection of higher prices with the implication that price will fall in the near-term. A bullish pin bar signal has a long lower tail, showing rejection of lower prices with the implication that price will rise in the near-term.