SUPPLY AND DEMAND
Supply and Demand Trading:
Beginner to Pro Guide
INTRODUCTION :
Welcome back, traders! I hope you are doing well in your
trading journey.
This guide is all about Supply and Demand Trading, one of the
most reliable concepts in price action trading.
I have already explained supply and demand zones in previous
videos, but in this document, we’ll go deeper. This guide is
designed to clear all your doubts and give you a step-by-step
path from beginner to pro level.
1. WHAT IS SUPPLY AND DEMAND IN TRADING?
In the simplest terms:
Demand = Aggressive Buying
Supply = Aggressive Selling
When we look at price charts, we don’t need to overcomplicate things. The presence of large
momentum candles (either bullish or bearish) shows us aggressive activity by big players.
Big green candles Aggressive buying Demand Zone
Big red candles Aggressive selling Supply Zone
What we don’t want to see: small, indecisive candles with no real movement. We want clean
momentum, where price moves strongly in one direction within a short period of time.
2. WHY TRADE SUPPLY AND DEMAND?
Why do professional traders focus on supply and demand?
The logic is simple:
Big players (institutions, funds, HNIs) have enough capital to move the market.
When we see strong momentum, it usually indicates their participation.
As retail traders, we don’t have the power to create big moves, but we can follow the footprints of
big money.
Example:
If a famous investor like Rakesh Jhunjhunwala buys at a particular price level, would you want to
buy there too? Of course! That is the core idea behind trading supply and demand — trade with
the big players, not against them.
3. HOW TO IDENTIFY SUPPLY AND DEMAND ZONES
Step 1: Look for Momentum Candles
We need a minimum of three consecutive big candles showing strong movement.
If the candles are green, we have aggressive buying Demand Zone.
If the candles are red, we have aggressive selling Supply Zone.
> Note: You may see more than three candles — that’s ne as long as there’s strong movement.
STEP 2: DRAW THE ZONE
After identifying momentum, we mark the base of the move. There are three main ways to draw
supply and demand zones:
a) Using the Last Opposite Candle (Last Pivot)
Look at the candle before the move began.
Mark a rectangle covering that candle’s body (or wick, if using wicks).
This becomes your supply or demand zone.
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b) Using Tight Consolidation
Sometimes before a strong move, price goes sideways brie y.
Mark the entire consolidation range as your zone.
When price revisits this range, it’s likely to react strongly again.
c) Using Wicks (Advanced)
When a single long wick appears before a strong move, you can mark only the wick area as the
zone.
This is more advanced and not recommended for beginners — focus on the rst two methods
rst.
4. HOW FAR BACK SHOULD YOU LOOK FOR ZONES?
You can go 3 to 6 months back, or even a year if necessary.
The age of the zone doesn’t matter as long as it’s clear and untouched by price.
Price action is timeless: if a strong supply or demand zone exists, price can respect it even after
months.
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5. TRADING BETWEEN MAJOR ZONES
Most traders only wait for major swing highs and lows, which is ne for swing trading.
But if you are a day trader, you might not want to wait weeks or months for price to return to
those big levels.
Solution:
Look for smaller supply and demand zones inside the major waves of price.
The market moves in waves.
Trade the intermediate waves by marking fresh zones between major levels.
6. HOW MANY TIMES SHOULD YOU USE A ZONE?
For beginners: Use a zone only once.
Why? The rst retest is the most reliable.
Zones can work multiple times, but after each test, they weaken.
Keep it simple: mark the zone, take one trade, move on.
7. SHOULD YOU WAIT FOR CONFIRMATION?
Yes — always con rm before entering.
Don’t blindly place orders just because price enters a zone.
Wait for con rmation patterns such as:
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Bullish engul ng (in a demand zone)
Bearish engul ng (in a supply zone)
Pin bars or rejection candles
Indicator con uence (e.g., Moving Average support or resistance)
This reduces false signals and improves accuracy.
8. PRACTICAL STEPS TO TRADE SUPPLY AND DEMAND
1. Open your chart (any timeframe — daily, hourly, 15-min depending on style).
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2. Scan for strong momentum candles.
3. Mark supply and demand zones using any of the three methods.
4. Wait patiently for price to return to these zones.
5. Look for con rmation before entering.
6. Place stop-loss outside the zone for safety.
7. Target nearby opposite zones or logical support/resistance.
9. KEY RULES FOR BEGINNERS
Always trade with con rmation.
Focus on fresh zones, not tested ones.
Start with higher timeframes (1H, 4H, Daily) — they’re cleaner.
Don’t overtrade.
Be patient — price will return to your levels eventually.
Keep risk small per trade (1–2% of your account).
10. COMMON MISTAKES TO AVOID
1. Drawing zones on small candles — no momentum = no zone.
2. Trading zones too many times — reduces reliability.
3. Ignoring con rmation — leads to unnecessary losses.
4. Forcing trades when price isn’t at your level.
5. Using very small timeframes without understanding bigger trends.
11. FINAL THOUGHTS
Supply and Demand trading is a powerful price action method that works in any market — stocks,
forex, crypto, commodities — because it’s based on human behavior and institutional activity.
Stay disciplined, practice regularly, and don’t expect overnight success. Like any skill, it takes
time to master. Focus on building a strong foundation with these principles, and gradually, your
consistency and pro ts will grow.
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