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S/R Methods

Supply & Demand Zones

Master supply and demand zone trading. Learn to identify institutional order blocks, imbalance zones, and high-probability reversal areas.

What are Supply & Demand Zones?

Supply and Demand zones are areas on a chart where institutional traders (banks, hedge funds) have placed large orders. These zones often cause price reversals because unfilled orders remain at these levels.

Unlike traditional support/resistance (which are lines), S/D zones are areas based on consolidation before an impulsive move.

Demand Zone

  • Area where buyers overwhelmed sellers
  • Price rallied strongly from this zone
  • Unfilled buy orders may remain
  • Expect support when price returns

Supply Zone

  • Area where sellers overwhelmed buyers
  • Price dropped strongly from this zone
  • Unfilled sell orders may remain
  • Expect resistance when price returns

How to Identify S/D Zones

The Pattern: Rally-Base-Drop / Drop-Base-Rally

  1. Impulsive Move: Strong move in one direction (the rally or drop)
  2. Base (Consolidation): Small candles, sideways action before the move
  3. The Zone: Draw from the top to bottom of the base candles

Zone Patterns

  • Drop-Base-Rally (DBR): Creates demand zone - look to buy
  • Rally-Base-Drop (RBD): Creates supply zone - look to sell
  • Drop-Base-Drop (DBD): Supply zone continuation
  • Rally-Base-Rally (RBR): Demand zone continuation

Zone Quality Factors

Not all zones are equal. Higher quality zones have higher probability of holding:

Strong Departure

Faster, stronger move away = more unfilled orders

Time at Zone

Less time in base = more urgency from institutions

Fresh Zone

First return to zone is strongest

Nested Zones

Zones aligned on multiple timeframes

How GarudaAlgo Uses S/D Zones

GarudaAlgo Enhancement

GarudaAlgo automatically identifies supply and demand zones using consolidation analysis and impulsive move detection. We score zone quality based on move strength, time at level, and freshness to prioritize high-probability zones.

S/D in Signal System

Supply/Demand analysis is part of the 9% Support/Resistance weight in GarudaAlgo's signal system.

What GarudaAlgo Analyzes

  • Zone Identification: Automatic detection of consolidation + impulse
  • Zone Quality Scoring: Based on departure strength and freshness
  • Price Approaching Zone: Alerts when price nears high-quality zones
  • Multi-timeframe Zones: Confluence across different timeframes

Trading Strategies

Strategy 1: Zone Entry with Limit Order

  1. Identify fresh, high-quality zone on higher timeframe (H4/Daily)
  2. Set limit order at the edge of the zone
  3. Stop loss below/above the zone
  4. Target: Previous swing or next opposing zone

Strategy 2: Zone Entry with Confirmation

  1. Identify zone on higher timeframe
  2. Wait for price to enter zone
  3. Drop to lower timeframe for entry confirmation (engulfing, pin bar)
  4. Enter with tight stop just beyond the zone

Strategy 3: Zone-to-Zone Trading

  1. Identify both demand zone below and supply zone above
  2. Buy at demand, target supply
  3. Sell at supply, target demand
  4. Works best in ranging markets

Best Practices

  • Fresh zones are best — First touch has highest probability
  • Quality over quantity — Only trade the cleanest zones
  • Strong departure = strong zone — Big moves leave unfilled orders
  • Use higher timeframe zones — H4/Daily zones are more reliable
  • Combine with other factors — Zone + Fibonacci confluence = high probability
  • Zones can break — Always use stop losses