Step 1: Start on a Higher Timeframe

Finding supply and demand zones starts with locating the origin points of significant upswings and downswings—areas where banks and institutions entered large positions to create the zone.

The easiest way to identify the strongest of these points is to move up a timeframe or two above your trade timeframe (the timeframe you analyze price with and execute trades). Higher timeframes reduce market noise, making the swing start/end points easier to spot, along with the strongest supply and demand zones.

It also helps visuallize where price sits within the current range.

For example:

Which Higher Timeframe Should You Use?

Here’s a quick guide based on your trade timeframe:

Trade Timeframe	Higher Timeframe
5-Minute (M5)	15-Minute (M15)
15-Minute (M15)	1-Hour (H1)
1-Hour (H1)	Daily (D1)
4-Hour (H4)	Daily (D1)

Key Note: Weekly and monthly timeframes are not included due to the timescale difference.

Got it?

Great, let’s move on.

Finding SD Zones on the Higher Timeframe

For this example, we’ll assume the 1-hour timeframe is our trade timeframe. So, we’ll switch to the daily timeframe to find the key zones.

Marking the Zone

Supply and demand zones form at the origin points of steep rises and declines. These are the areas where price stopped, reversed, and initiated the upswing or downswing.

Start in the Middle: Locate an upswing or downswing.

Now, identify the inital point where the movement began.

• If price reversed upward, mark the base as a demand zone.
• If price reversed downward, mark the base as a supply zone.

Don’t worry too much about marking zones perfectly right now. The goal at this stage is to identify where supply and demand zones have formed and understand the process behind their creation.

Marked Zones Example:

Step 2: Switch Back to Your Trade Timeframe

With the major zones identified on the higher timeframe, it’s time to move back to your trade timeframe (e.g., the 1-hour chart) to refine and locate any smaller zones that aren’t easily visible on the higher timeframe.

Once you’re back on your trade timeframe, you’ll notice:

1) More Swings Appear: On lower timeframes, additional upswings and downswings become visible, unveiling more potential supply and demand zones. These smaller swings represent finer details of price movement that are not as apparent on higher timeframes, offering more opportunities for analysis and potential trade setups.

2) Not All Zones Are Equal: While more zones are visible, many will be weaker and unlikely to generate major reversals. Weak zones might not cause the biggest price reversals, but they often lead to retracements, consolidations, or pauses into more significant zones.

Marking these alongside the stronger zones helps you map the market’s likely movements, allowing you to anticipate where and when reactions may occur.

Marking Trade Timeframe Zones

1. Identify Swings: Look for smaller swings within the larger swings visible on the higher timeframe.
2. Mark the Zones: Focus on the origin points of these moves to identify supply or demand zones.

Classify zones by the timeframe they appear on, their type (e.g., RBR, DBR, RBD, DBD), and also by the significance of the psychological level found within or nearby:

Rally-Base-Drop/Drop-Base-Rally Zones:

Always form at the start of new swings when banks have ample opposing orders available to execute trades against. These zones are stronger and more likely to cause longer lasting reversals. Daily supply is the only RBD zone in the image, with the 1H supply zones being weaker DBD supply zones.

Rally-Base-Rally/Drop-Base-Drop Zones:

Only form when price is already moving in the direction of the zone. This means institutions can only buy or sell small amounts due to limited opposing orders, making these zones weaker and more likely to cause minor reactions or retracements than their RBD/DBR counterparts.