Supply and Demand is one of the core strategies used in trading. It focusses on the ancient laws of supply and demand and how price moves in a free-flowing market. The foundation of this strategy is that the amount of an instrument that is available and the desire of buyers for it, drive the price. It identifies zones on the chart where demand overwhelms supply (the demand zone), driving the price up or where supply overwhelms demand (the supply zone), driving the price down. Most supply and demand traders wait for the price to enter these zones, where major activities of buying or selling have taken place, before entering a long or short position themselves.
It makes sense to buy at a demand zone and to sell at a supply zone, but keep in mind that fresh zones are more effective than retested ones. They can be used as entry zones for a continuing trend or as reversal zones for a changing trend. Trades can be made aggressively or conservatively, each with their own rules of entry and exit. TradingView has a
smart drawing tool that allows users to visually identify these levels on a chart.
