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Trading Strategy with Supply and Demand for Pro Traders

If you're looking to enhance your ability to utilize Supply and Demand to achieve higher profits, this article will discuss advanced trading strategies using the Supply and Demand concept for experienced traders. If you haven't read the previous article, it's recommended to go through the "Basic Guide to Trading Using Supply and Demand" before proceeding with the advanced discussions in this article. In the previous article, you learned about the basic concepts, entry methods, drawing balance zones, and trading systems using Supply and Demand. Now, let's delve into advanced trading methods with Supply and Demand.

Supply and Demand Balance Zones

Let's briefly review the balance zones to avoid forgetting. Balance zones are conditions where the number of buyers and sellers is equal, with no shortage or surplus that can cause significant price changes. Simply put, a balance zone is a sideways market condition, where there's no dominance from buyers or sellers. When the market is in a sideways condition, it's the same as a balance zone where supply and demand are balanced. However, are there imbalance zones in the market? And how does it relate to trading strategies using Supply and Demand? This article will explain that.

Supply and Demand Imbalance Zones

Imbalance zones are extreme zones where prices can move significantly. In these extreme zones, there's a significant difference between the supply and demand. Imbalance zones are often utilized to identify crucial points in market reversals or retracements. Why is that? Remember that balance zones occur due to negotiation between sellers and buyers, but imbalance zones are formed due to tendencies and biases regarding price movements. These zones are often used by retail traders and banks to place their large orders and are often referred to as high liquidity areas. High liquidity zones offer execution with low risk and high opportunities. Although these zones can be benchmarks for determining reversal or continuation points in the market, no one really knows where prices will move.

Here's an example of the basic structure of an imbalance zone in a candlestick:

  • Supply Zone: A zone where there are many sellers ready to sell their goods.
  • Demand Zone: A zone where there are many buyers ready to buy goods.

For example, consider a Pin Bar candlestick with a long upper shadow. According to Steve Nison, such a Pin Bar indicates selling pressure in the market. You may consider entering a sell position when you see such a Pin Bar formed. The longer the upper shadow of the candle, the greater the selling pressure. From the perspective of Supply and Demand, the anatomy of the candle illustrates the comparison between supply and demand. The longer the upper shadow (Supply) compared to the lower shadow (Demand), the greater the likelihood of a sharp price decline, and vice versa.

Types of Imbalance Zones

Generally, there are two types of imbalance zones: Supply and Demand zones. Both zones can also be divided into Continuation (price continuation) and Reversal (price reversal) zones.

Continuation Zones:

  • Drop Base Drop Supply (DBD Supply): A zone marking a significant price decline after a pullback from the balance zone.
  • Rally Base Rally Demand (RBR Demand): A zone marking a significant price increase after a pullback from the balance zone.

Reversal Zones:

  • Rally Base Drop Supply (RBD Supply): A zone marking a price reversal from an increase to a decrease.
  • Drop Base Rally Demand (DBR Demand): A zone marking a price reversal from a decrease to an increase.

Drawing Imbalance Zones

Drawing imbalance zones is much easier than drawing balance zones because you can use well-known candlestick patterns. Some candlestick patterns commonly used as references for drawing imbalance zones are Engulfing, Harami, Piercing, and Doji.

Trading System with Supply and Demand Imbalance Zones

Before starting trading using imbalance zones, it's important to always remember four important rules learned earlier:

  1. Sell only at Supply.
  2. Buy only at Demand.
  3. Always look left.
  4. Always consider risks in detail.

This trading system mainly focuses on Entry Pullback, Retest, and Retracement. However, you can also use Counter Trend or Follow Trend trading styles.

Market Filter

The first step is to filter the market by marking the imbalance zones on the daily or weekly time frame. This helps you see the current price position from a larger-scale perspective. For example, if the current price is in a Demand zone, you can focus on finding buy entry opportunities on smaller time frames.

Trading Setup

Trading setups involve not only looking at the overall trend but also considering the current price position on larger time frames. Therefore, you need to mark imbalance zones based on the daily or weekly time frame. Adjust the time frame to your trading style, such as swing trading or day trading, then use the H4 and H1 time frames.


Entry in this strategy can be done through Pullback, Retracement, or Retest at Supply and Demand imbalance zones. The entry criteria are not difficult, the more often the zone is


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