All around the financial world, markets are driven by supply and demand. According to the law of demand, the relationship between demand and price is inverse. Demand declines when the price increases because consumers do not want to spend an excessive amount of money on a single purchase. Yet, demand increases as a result of eager purchasers when the price drops. According to the law of supply, the relationship between supply and price is direct. Because the sellers do not want to sell at such a low price, the supply is low when the price is low. Yet, when the price is high, the supply also increases since the sellers want to get the most money they can for their goods.
These basic rules of supply and demand apply. Let’s now examine how to trade at Quotex by utilizing the supply and demand zones in the marketplaces.
Recognizing the supply and demand zones at Quotex
The large region between the support and resistance levels can be used to identify the supply and demand zones. But their underlying concept is distinct. Support and resistance levels are effective because they are tied to previously observed peaks and bottoms that are readily apparent to traders. For supply and demand, cheap or expensive is more important. The supply and demand are established at the support and resistance levels, respectively.
You should look for the long candles that follow to locate the supply and demand zones. The next step is to determine the cause of the price’s rapid change, which is often sideways fluctuation.
Trading with the supply and demand zones on the Quotex platform
Normally, when a price enters the demand zone, it is a hint that the price will rise. So, you ought to initiate a purchase position. Use currency pairs (CFDs) rather than fixed-time trades on the Quotex platform. Do not forget to place a stop loss immediately below the demand zone (or above supply zone for sell positions).
Typically, the price will drop quickly as it reaches the supply zone. You should therefore enter briefly.
Sometimes the supply zone turns into the demand zone, or vice versa. It resembles the change of roles between support and opposition.
There are numerous ways that supply and demand are formed. Let’s focus on a handful of the more typical ones.
Trend continuation patterns
Trend reversal patterns
When the price was falling, it first moved briefly within the base before changing direction, giving us a demand zone and maybe a demand reversal pattern. As soon as the price touches the demand level once more, you should begin a buy position.
As the price falls downward following the uptrend and while fluctuating inside the base, a supply reversal pattern forms. You ought to start a sell trade here for that reason. Insert when the price is returning to a supply zone that has previously been established.
As demand turns into supply, the scenario is referred to as a flip zone. Zones of supply and demand will eventually run out. When the price crosses the zone and advances, it occurs. By doing so, the price may occasionally provide a fresh base for a brand-new supply/demand pattern. The zone’s function can then be said to have altered.
How strong demand and supply are
The types of candles that develop following the breakout from these levels can be used to gauge the strength of supply and demand. A very strong demand or supply is indicated when the price goes sharply up or down and the candles are long and the same color. When the candles are medium length with sporadic retracements, the zones are still regarded as being powerful. Following the weak supply or demand, the price is moving slowly.
The amount of time spent in the zone is another indicator of how strong the level is. In this instance, the strength of the area is inversely connected to the amount of time spent in the supply or demand. Such a brief duration in the zone is indicative of more unbalanced supply or demand.
A further indicator of the strength of the levels is the time it takes for the price to move away from the supply or demand and then back. When the price travels far before coming back, the level is considered powerful.
Every time the price approaches the level, it becomes weaker. The zone is strongest when the price first reaches the supply or demand. The following time, it is still comparatively powerful, but with each price return after that, it becomes weaker.
Using the demand and supply areas to enter a trading position at Quotex
The zones for supply and demand must first be determined. Look for them during longer time periods.
Checking how the levels are accepted on the period frame you wish to trade is the next step.
Wait for a signal from the price activity and then enter the trade as necessary.
An illustration of an hourly time period for the GBPUSD currency pair is provided below.
You should enter a trading position when you spot a strong demand or supply area.
All financial markets are built on a foundation of supply and demand. You may utilize this information to determine the optimal entry opportunities for your trades because there are some universal laws that apply to them. The best you can expect for with any strategy is that it will minimize risk and increase your chances of success, which is not a 100% guarantee of a profitable transaction.
In the demo account, practice determining the supply and demand levels. It is provided with virtual money by Quotex and is made available to users at no cost.
Tell us about your experience trading on the Quotex platform using the supply and demand zones in the comments section below.
Q: What are supply and demand zones in trading?
A: Supply and demand zones are areas on a price chart where the supply and demand of a particular asset or security is imbalanced, resulting in a potential reversal of the current trend.
Q: How can I use supply and demand zones at Quotex?
A: By identifying supply and demand zones on a Quotex chart, you can potentially anticipate market turning points and make more informed trading decisions. You can use tools such as horizontal lines or support and resistance levels to mark these zones on the chart.
Q: How do I identify supply and demand zones at Quotex?
A: To identify supply and demand zones, you can look for areas where price has previously reversed direction. Look for areas where price has shown support or resistance, or where price has formed a pattern such as a double top or double bottom.
Q: Are supply and demand zones reliable indicators?
A: Supply and demand zones can be useful indicators, but they are not always reliable. It’s important to combine supply and demand analysis with other technical analysis tools and market indicators to get a more complete picture of the market.
Q: Can I use supply and demand zones for any asset or security on Quotex?
A: Yes, supply and demand zones can be used for any asset or security on Quotex, including forex, stocks, and cryptocurrencies. However, it’s important to keep in mind that different assets may have different supply and demand dynamics, so it’s important to adapt your analysis accordingly.