Have you ever placed a trade on a supply or demand zone, only to see price spike past the zone without reversing? Or worse, lose money on two trades because price breaks through stacked zones?

It’s frustrating, but there’s a solution:

Combine Close Zones into One Larger Zone.

By merging closely formed zones into a single unified zone, you eliminate the common issues traders face with stacked zones, such as price reversing in-between the zones or doubling your losses when both zones fail.

Sound good? Let’s jump in.

Why Combine Nearby Supply/Demand Zones?

Take a look at this AUD/CHF chart:

Here, we see three RBR demand zones stacked almost ontop one another — a common occurrence in supply and demand trading. Most traders will mark and trade these zones individually:

1. Trade 1: Enter when price touches the first (higher) zone.
2. Trade 2: Enter again if price breaks the first zone and touches the second (lower) zone.
3. Trade 3: Enter the lowest RBR zone if price breaches the upper two demand zones.

This seems logical, but there are two key problems with this approach:

Price Reverses Between the Zones: Sometimes, price spikes past the first zone without reaching the second, instead reversing inside the small gap found in-between the zone.

You lose the first trade and completely miss the reversal because you failed to enter the second zone before price broke through it on the downside.

Not ideal!

Double Losses When Both Zones Fail: If price breaks both zones, you lose on two trades. Instead of managing one controlled loss, you’re stuck with double the damage.

The Solution: Combine the Zones

Rather than trading each zone individually, and taking on double the risk plus the spread, merge them into one larger supply or demand zone

Here’s what happens when you combine zones:

Eliminates Missed Reversals: By consolidating two smaller zones, you naturally fill the gap between them, creating a unified area where price is more likely to reverse. You effectively capture price movements that would otherwise slip through the cracks.

You’ll never miss a trade simply because price reversed between two separate zones.

Reduces Overall Risk: While the combined zone is larger in size, your overall risk remains nearly unchanged. Merging zones also helps you avoid doubling up on potential losses, allowing you to maintain similar risk management and position size while boosting the chances of price reversing from your zones.

How to Combine Zones: A Quick Guide

Step 1: Identify Close Zones

Look for zones that are stacked on top of each other, with little to no gap between them.

Example:

These two DBD supply zones, almost touching but not quite, are perfect candidates for merging into a singular supply zone.

Step 2: Draw the Combined Zone

Mark the upper boundary of the top zone. Now, extend the zone down to the lower boundary of the bottom zone stacked underneath (edge of the base).

This creates a single, larger zone that encompasses both smaller zones.

What to Avoid:

• Wide Gaps Between Zones: If the zones are far apart, combining them increases risk unnecessarily. Example: Two zones with a 500-point gap would result in a massive combined zone.
• Rule of Thumb: If the gap between zones makes the total risk significantly higher than trading the zones individually, don’t combine them.

Example: Combining Zones

Stacked Zones Example

Here’s a set of stacked demand zones on Usd/Jpy:

Bingo! We’ve identified two potential demand zones, and they’re very close in proximity.

• Middle Demand Zone: 449 points (49 Pips)
• Lower Demand Zone: 343 points (34 Pips)

Because the two zones are so close together, we can effectively re-draw them as one combined zone. Merging these two demand zones strengthens the likelihood of price reacting in this range, as both areas share similar characteristics and price history.

By combining them, we create a single demand zone with a total size of ~830 points, (83 pips) keeping the risk much smaller and manageable than trading each individual zone.

Wide Gap Example

Now, let’s look at two zones that are too far apart:

• Upper Demand Zone: 709 points
• Lower Demand Zone: 449 points
• Gap Between Zones: 830 points

In this scenario, merging the zones would create a massive zone over 1,500 points wide! The risk skyrockets, making it more sensible to trade these zones individually rather than combining them.

Pro Tips for Combining Zones

1) Focus on Close Zones: The closer the zones are to each other, the better the result. Ideally, you want them stacked with as little space between them as possible to make the most reliable and efficient setup, reducing the chances of price reversing between them.

2) Use Risk as a Guide: Calculate the total risk when combining zones. If the combined risk exceeds the individual risk by a significant margin, it’s better to trade the zones separately. Risk management should always be your top priority, so don’t hesitate to adjust your position size if the combined zones introduces too much risk.

3) Refine Your Entries: Once the zones are combined, fine-tune your entries by looking for your standard signals—whether it’s pin bars, engulfing patterns, or LRCs (Last Reliable Candles)—within the newly formed larger zone.

Combining supply and demand zones is a straightforward technique that can improve your consistency when trading S&D zones. I’ve used this approach extensively across multiple timeframes, and its been one of the primary factors behind both cutting risk and boosting profitability by simplifying the zone identification process.

Now, let’s move on to the next video…