What makes an area a zone
Look for the base: a small cluster of quiet candles, then a sudden violent move away. Those quiet candles are where the orders were sitting. If price drifted away gently instead of leaving fast, there was nothing there worth calling a zone — a slow departure means supply and demand were roughly balanced, which describes most of the chart.
How to draw it
From the body extreme of the base to the wick extreme, covering the small candles before the move and nothing more. The commonest error is drawing zones enormous, and an enormous zone is not a zone — it is a region so wide that price touching it tells you nothing and there is no sensible place for a stop. If you cannot put a stop just beyond your zone without risking more than the trade is worth, the zone is drawn wrong.
Fresh zones and used ones
A zone that price has not returned to still has whatever orders were left unfilled. A zone price has already bounced from once has had some of those orders consumed, and a zone it has bounced from twice has had more. This is why the first return to an untouched zone is the version worth taking, and each subsequent touch is a weaker version of the same idea. Eventually a zone breaks, and the third touch is often the one that does.
A broken zone flips
Once price closes decisively through a demand zone, that area becomes supply: the buyers who were defending it are now trapped and want out at their entry. This is the same flip as breakout and retest, and it is the reason a zone that fails is not simply deleted from the chart — it changes sides.
Trading one
The entry is on the return to the zone, the stop goes just beyond the far side of it, and the target is the next opposing zone or structure. What makes the method work is not the zone being right — it will often be wrong — but that a tightly drawn zone puts your stop very close to the point at which the idea is dead, which is what lets a modest number of wins pay for a larger number of losses.
In short
| Supply zone | Base of quiet candles, then a fast drop |
|---|---|
| Demand zone | Base of quiet candles, then a fast rise |
| Evidence | How fast price left, not the shape |
| Strongest touch | The first return to an untouched zone |
| Broken zone | Flips to the other side |
Common questions
How wide should a zone be?
Narrow enough that a stop just beyond it is affordable. If it is not, either the zone is drawn too generously or the trade is too big — and the fix is nearly always the first one.
How many times can a zone be used?
Fewer times than you would like. Each touch consumes some of what was there, so the first return is the good one and the third is often the break.
Is this the same as support and resistance?
Closely related. Support and resistance is a line where price turned; a zone is an area price left quickly. The zone version is fussier about the evidence and gives a tighter stop, which is its whole advantage.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.