TermTechnical analysisAdvanced

Supply and demand zones

Supply and demand zones are price areas where a sharp rally (demand) or drop (supply) started before. The idea is that unfilled orders may still be sitting there.

How it works

A demand zone is an area where price paused briefly (a base of a few candles) and then shot up. A supply zone is the same before a sharp drop. The logic: the move was so fast that not all big orders got filled, so when price returns, the rest of them may kick in again.

Unlike a support or resistance line, a zone is a range: from the start of the base to its extreme. The sharper the move away and the less time price spent in the base, the stronger the zone. A fresh zone that price has not returned to yet is rated higher than one already tested.

Zones are used to enter with a limit order and a clear stop beyond the zone's edge. They are close relatives of SMC order blocks, but marked from the whole base rather than a single candle.

Example with numbers

ETH ranged at $2,900–$2,940 for three hours, then rallied to $3,100 within an hour. The demand zone is $2,900–$2,940. When price returns to $2,940 a day later, the trader buys with a stop at $2,885 ($55 risk) and a target at $3,090 ($150 potential, about 1:2.7).

Common mistake

The mistake is drawing zones too wide or on every wiggle. Then the stop becomes huge and there are so many zones that price is always in one. Mark only zones with a strong departure, keep them tight and check that they agree with the higher-timeframe trend.

Questions and answers

What are supply and demand zones in simple terms?

They are places on the chart where price previously took off sharply up or down. The assumption is that buyers or sellers will show up there again when price returns.

What is the difference between a demand zone and support?

Support is usually a line price has touched several times. A demand zone is a range one strong move started from, and it matters most on the first return.

How many times can a zone work?

The first return usually works best. With each touch fewer orders are left, and the zone gets weaker.

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Updated: 2026-10-19