An area where buying pressure previously overwhelmed selling pressure, causing price to rise sharply.
Deep Dive
A demand zone is the opposite of a supply zone - a price area where significant buying previously occurred, causing a sharp rally. When price returns to this zone, unfilled buy orders and traders looking to buy at the same level often create buying pressure again. This makes demand zones act as support.
Demand zones form when price consolidates and then breaks sharply upward. The consolidation area represents where institutional buyers accumulated positions before marking up price. When price returns, there may be remaining orders to fill or new buyers expecting the same outcome.
Identifying strong demand zones requires looking for bases that led to powerful rallies. The more explosive the rally from the zone, the more institutional involvement likely occurred there. Fresh zones that haven't been retested carry the highest probability of holding.
Why It Matters
Demand zones act as support and potential reversal areas for long entries.
Related Terms
- Order Block — Order Block is a trading concept. Order Block: A specific candlestick or series of candlesticks on a chart that represents a key institutional order flow point
- Accumulation — A phase where institutional investors gradually buy an asset before a significant price increase
- Support — A price level where buying pressure is strong enough to prevent the price from declining further. It acts as a floor for the price.
- Supply Zone — An area where selling pressure previously overwhelmed buying pressure, causing price to decline sharply.