Identifying demand zones

Where the buying began

A demand zone is the mirror of a supply zone. Instead of marking where selling began, you are marking where buying began. The mechanics are identical, just flipped. Find a strong rally, scroll back to the cluster of candles just before the rally launched, and draw your rectangle on that cluster. That is your demand zone.

Step by step. First, identify a strong bullish move on the chart. Big bodies, mostly green, the kind of move that covers ground quickly. Second, scroll your eyes left to the cluster of candles that came just before the rally began. There will usually be two or three small candles, sometimes a sideways base. That is the origin cluster. Third, draw a rectangle from the highest close in that cluster down to the lowest wick. You now have a demand zone.

Same three quality filters apply. Impulsive move out of the zone. Tight cluster before it. And freshness, meaning price has not come back to test the zone yet. If the move out of the zone was sluggish or sideways before turning up, it is a weak demand zone. If the cluster was wide and messy, the zone boundaries become fuzzy. If price has already revisited the zone several times, the unfilled orders have likely been consumed and the next reaction will be weaker.

On a small account like 500 dollars, the practical value of identifying clean demand zones is that they give you defined places to look for entries with tight, well-located stops. Instead of buying because a green candle looked nice, you wait for price to return to a marked zone. Your stop goes just below the zone. Your idea is invalidated if price closes through the zone with conviction. Everything else is just sitting on your hands until the chart comes to you.

Recap: demand zones live at the origin of strong rallies. Find the rally, then draw the rectangle on the cluster of candles immediately before it. Impulsive move, tight cluster, fresh status, all the same quality filters as supply zones, flipped direction.