These zones are where buyers and sellers may be in an unbalanced situation. These zones form when the price consolidates within a range or base, and then quickly breaks free from that range. These zones are automatically identified by the TOS indicator and drawn on your chart.
The indicator can be modified in a number of ways. This indicator is highly customizable. You can alter the strength and number zones displayed, the width of the areas, and hide any zones that have been broken. You can also filter zones by whether they are formed in a reversal of continuation of the trend. It will only show reversal areas if you select to. It will also show rally-base demand zones and drop-base supply zones if you only show continuation areas. It is possible to show all types simultaneously.
The multi-time frame (MTF), which allows you to see supply and demand zones in a higher timeframe on a lower chart, is a feature of this indicator.
The scanner searches for symbols within a specific zone. A watchlist column tells you whether the price is in a demand or supply zone. The scan results can then be sorted according to the type of zone. Audio alerts can be sent when price enters one or more of these zones.
What are the Supply and Demand Zones?
You need to be able to fully understand the concepts before we can learn how to identify the supply/demand zone on a price graph. Let’s take a look at each zone before we move on.
The price zone at which traders typically sell is called a supply zone. This is the area where there is the greatest selling interest or potential.
The price reaches this level when the unfulfilled orders are completed, which brings down the price. The chart below will help you understand the concept of the supply zone.
The chart above shows that the price reaches a certain zone, waits for a while, then goes back down. This cycle will continue until all orders are fulfilled.
A demand zone refers to the price range at which traders typically buy. This is an area below the current price where there is high buying interest. Due to the high number of buying orders at this level, the demand zone is flooded with buyers.
This chart will help you to understand the concept of demand zones better.
The chart shows an immediate move to the upside. This is because as price rises to the demand zone, some orders are filled and others are absorbed.
The Best Supply and Demand Zones Trading Strategies
Here are some suggestions for supply and demand forex strategies:
Range Trading Strategy
You can choose a range trading strategy if your supply and demand zones have been well-identified. Stochastic indicators are used by most traders to spot overbought or oversold market trends. Rang trading is non-directional (trend-wise) and allows you to easily identify short and long entries in the forex markets.
After you have viewed all conditions on a longer-term graph, you can zoom in to a shorter-term frame to find the perfect entry.
Forex market prices are always changing so traders try to find ways to get in on the market when conditions are favorable. This could be in the direction or breakout. It could signal the beginning of any trend.
The USD/JPY chart is an example. It’s the forex ticker that represents the US Dollar’s value against the Japanese Yuen. Although the chart shows a breakout of the trading range, it unfortunately returns to the demand zone. In this instance, traders who choose to trade short at the breakout are more likely be stopped out.