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S&D Zone Creation: Time Doesn't Know Price and Price Doesn't Know Time

The document discusses the creation and identification of supply and demand (S&D) zones on candlestick charts. S&D zones are caused by imbalances between supply and demand, and can be identified by price breaks out of consolidation ranges. These zones can act as support/resistance areas. The direction price was traveling before the zone forms determines if it is a continuation or reversal zone. S&D zones can be refined by focusing on specific areas like pivots or wicks. Strong S&D zones are those that cause significant breaks of structure or cause other zones to fail.

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saul
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240 views1 page

S&D Zone Creation: Time Doesn't Know Price and Price Doesn't Know Time

The document discusses the creation and identification of supply and demand (S&D) zones on candlestick charts. S&D zones are caused by imbalances between supply and demand, and can be identified by price breaks out of consolidation ranges. These zones can act as support/resistance areas. The direction price was traveling before the zone forms determines if it is a continuation or reversal zone. S&D zones can be refined by focusing on specific areas like pivots or wicks. Strong S&D zones are those that cause significant breaks of structure or cause other zones to fail.

Uploaded by

saul
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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S&D Zone Creation

Supply & Demand

Time doesn't know price and price doesn't know time.

The majority of institutional market activity is just commercial orders and transactions being put through the market, often with sophisticated algorithms.

But we make sense of all of that complicated interplay of those orders by using candlestick charts across multiple timeframes.

Range -> sideways correction/consolidation 

Ranges generally indicate either:

1. High volume -> many orders are exchanging hands & likely larger players are stacking orders at a fair value of price (accumulation/distribution)
2. Low volume -> minimal market activity

We wait to see what happens after the range has been created:

High volume = rapid & sustained breakout away from the range

Low volume = price trickles out slowly

We're interested in high volume breakouts of a range, as this indicates a clear imbalance between supply and demand, which signals institutional interest at that price level. 

S&D ZONE CREATION

S&D zones are caused by overwhelming imbalances between supply and demand.

We can identify and draw these on our charts by seeing where price broke out of a range. 

This can be in the form of range or pivot-created supply or demand. 

We don’t trade the initial breakout, we instead wait for price to show its hand and see which direction it wants to go first.

Wait for price to return to that zone and then look for your potential entry models.

Buying from demand or selling from supply. 

What determines if those zones are continuation or reversal zones, is which direction price was traveling in before the zone was created. 

S&D Continuations:

Demand continuation -> price is bullish before


Supply continuation -> price is bearish before 

S&D Reversals:

Demand reversal -> price is bearish before


Supply reversal -> price is bullish before 

S&D ZONE REFINEMENTS 


A range-created supply can be refined to just the pivot, the pivot candle, or even the fractal wick.  

We look to enter any on or within the zone and our stop loss will always go behind the zone. 

More refinement of a zone leads to increased accuracy, giving you higher R:R, but potentially more missed trades if price does not pull back that far. 

A range created zone, or even a pivot zone with multiple candles will be a pivot on a higher timeframe 

3 main types of fractal refinements:

Inside bars -> represents a range created zone on a lower timeframe 

It's where the candle does not break the high or low of the prior candle, and it is then engulfed by the next candle

We don’t care if the inside bar is bullish or bearish, it's irrelevant in terms of supply and demand, we just look for which way price moves after the inside bar forms.

Demand = upside break. Supply = downside break. 

STB & BTS wicks -> represent a pullback on a lower timeframe 

Within those wicks there will be a pivot or range created zone on the LTF which is visible as those wicks on the HTF 

Large wicks -> this will be a range or pivot created zone within that wick on the lower timeframe 

STRONG S&D ZONES

S&D zones are everywhere, almost all will give some form of a reaction, but not all are necessarily one in which we want to risk our capital on and take a trade from.

We want to find zones that achieved something significant

There are 2 main methods we use to validate a strong S&D zone:

1. Zones that cause a BOS -> the more significant the structure, the more significant the zone (BOS > mBOS > sBOS) 
2. Zones that cause other zones to fail (flips)

Combining both methods together gives extremely high probability zones to build trade ideas around, especially when used in conjunction with other analytical concepts we use (market structure / liquidity etc).

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