ForgeXStrategy
The Supply & Demand Core Squeeze
A supply and demand zone is simply a price area where the market clearly showed its hand once before. When price sits quietly in a small range and then rockets away in one direction, it leaves behind the spot it launched from. If it shot upward, that launch area is a demand zone, a place where buyers were waiting. If it dropped hard, that area is a supply zone, a place where sellers took control. The idea is that when price drifts back to one of these zones later, the same buyers or sellers often show up again.
The thinking behind it is that the big players, the banks and institutions, cannot buy or sell everything they want at one price without moving the market against themselves, so they leave orders resting at these levels. Trading the zones is a way of lining up with them instead of against them, which is the opposite of what a lot of struggling traders do. Zones also work best with the wider trend. A demand zone is more reliable while the market is trending up, and a supply zone is more reliable while it is trending down.
A zone is an area of interest and not a promise, so you do not drop a blind order at it and hope. You wait for price to actually reach the zone and then show you a reaction, like a strong rejection candle or a break of the short term structure, before you commit. Your stop goes just beyond the far edge of the zone, which keeps the risk small and clearly defined, and a sensible target is the next zone or swing in your direction. Win rate and risk management still carry the result over many trades, so the honest step before risking money is to backtest the exact rules on real history.
Watch it traded live
Here is Carmine Rosato planning and executing a trade around exactly this kind of level. Notice how the idea comes first, then the entry, then the management.
What to take from it
- Carmine shows the draw, find and trade steps in order, so you learn to mark a zone before you ever think about an entry.
- He starts on a higher timeframe to find the strong zones, then drops to a lower one to time the entry, which keeps you out of the weak and noisy levels.
- He hammers the same point that a zone needs confirmation. Wait for price to react inside the zone rather than assuming it will hold.