Mastering Supply and Demand in Trading: Three Insane Tricks to Improve Accuracy

Supply and demand are fundamental concepts in trading that even kids are talking about these days. If you haven’t heard of it yet, you’re missing out on a powerful strategy that can significantly improve your trading performance. In this comprehensive guide, I will show you how to draw zones correctly, what to look for, How to Enter and Exit Trades, and some secret tricks to make your supply and demand zones three times more accurate.

What is Supply and Demand?

Supply is an area where the price had aggressive selling, and demand is an area where the price had aggressive buying. In simple terms, supply pushes the price down, and demand pushes it up. The key factor here is that the move has to be aggressive. For example, a single green candle wouldn’t be enough to qualify as a demand zone. You need aggressive buying, like moms on Black Friday.

How to Draw Supply and Demand Zones Correctly

There are multiple ways to draw supply and demand zones, but I’ll show you the method that has given me the best results.

Step 1: Identify Aggressive Buying or Selling

For instance, here we have a chart with aggressive buying. To draw a demand zone, find the red candle right before the aggressive buying. Draw your area from the low to the high of that candle, and that’s your demand zone.

Step 2: Validate the Zone

Not all zones are valid. A valid zone will have a break of structure. If the price breaks the structure after your zone is formed, it is a valid zone. If it doesn’t, the zone is invalid, and you should not trade based on it.

Using Indicators for Validation

My private indicator automatically displays all break of structures for you. All you have to do is go to the settings, scroll down to Smart Money Concepts, and enable BOS. This will save you a lot of time and ensure you don’t mark the wrong structures. You can check out the indicator at tradinglab.ai.

How to Enter and Exit Trades

Once you have identified a valid zone, you can proceed to enter and exit trades based on it.

For a demand zone, you enter as soon as the price comes back down to the zone, set your stop loss right below the zone, and set your take profit at the high of the upward move. For a supply zone, you do the opposite: enter when the price comes back up to the zone, set your stop loss right above the zone, and set your take profit at the low of the move.

Secret Tricks to Improve Your Zones

These tricks will significantly improve the accuracy of your supply and demand zones.

Trick 1: Slow Approach

You want the price to slowly approach your supply or demand zone. If the price returns to your zone aggressively, it’s not a good sign. A slow and steady approach increases the chances of a successful trade.

Trick 2: Fair Value Gap

You want a fair value gap at the beginning of the move. When you mark your zone, look for a gap connected to the candle you used to mark the zone. This gap indicates an imbalance and improves the chances of your zones working. My private indicator also displays fair value gaps for you. Just enable it in the settings under Smart Money Concepts.

Recap of the Perfect Trade

First, identify a strong aggressive move. Ensure there is a break of structure during this move. Look for a fair value gap connected to the first candle of the zone. Finally, wait for the price to slowly return to the zone, enter the trade, set your stop loss below the zone, and set your take profit at the high of the move.

Conclusion

This guide has covered the essentials of supply and demand in trading, from identifying and drawing zones to validating them and entering trades. By using these techniques and secret tricks, you can significantly improve the accuracy of your trades. For more trading tips and strategies, join my Discord community. It’s a great place to connect with other like-minded traders.

Thanks for reading, and happy trading!

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