The Guide to Supply and Demand Forex Trading

Telegram Forex Signals via Telegram – Most traders prefer to trade using technical indicators like RSI and MACD. Others love using a bare chart to make their decisions. No doubt, support and resistance lines are a vital part of a trader’s routine. We want to broaden your trading potential, and thus we introduce you to the guide to supply and demand zones in forex trading. From the manual, you’ll learn how to identify and use the zones in your favor.

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Meaning of Demand and Supply Trading
The supply and demand concept came from the economic theory. Supply means the number of goods available to users, while demand is the need for the goods. The more supply we have on the market, the easier it’s for the asset price to fall. On the contrary, high demand usually boosts prices due to customers’ urge to buy an item.

The Guide to Supply and Demand Forex Trading

The same goes for demand zones. A demand zone is a price area with strong buying interest below the current price action. Many investors don’t want to buy the asset until it goes lower and reaches the demand zone because a person may get greater returns on the portfolio. Looking at the chart below, we can see a lot of buying interest in the demand zone, most likely caused by a large volume of buy orders resting at this level.

The Guide to Supply and Demand Forex Trading

In trading, people use supply and demand as a resistance and support areas where the price of an asset may slow down or reverse. They’re similar to resistance and support lines at first glance. However, there are fundamental reasons for supply and demand zones to occur.

Supply and demand trading is about placing your orders according to zones where the price tends to reverse due to various factors. Summed up with other trading techniques, supply and demand trading provides a comprehensive and powerful tool that can take your results to a new level.

Trading Demand and Supply Zones
A supply zone is where traders and investors try to sell an asset for fundamental and technical reasons. Some market participants are selling because the asset reached their target. Others do the same due to changing economic environment or news that has altered an asset’s outlook. Usually, the price reacts sharply to the supply zone, meaning that there is a lot of selling interest.

Then, we should define an entry point for the trade. We’ll talk more about various trading strategies later in this guide but for now, let’s say we are trading the most common supply and demand trading strategy, which is range trading. Thus, we will look for long entries somewhere in the demand zone. For the asset above (GBPUSD), the entry should be between 1.1408 and 1.2000.

It’s crucial for supply and demand trading to understand that when the asset goes lower, the chances for it to reverse are higher becauseris more investors and traders find the instrument valuable and oversold.

Supply and Demand Trading Strategies

Range Trading Strategy
The most typical supply and demand trading strategy is range trading. The rules are simple: you find an asset with a strong supply or demand zone and enter on the bounce. Recent moves in the EURUSD pair can act as an example.