MASTERING SUPPLY AND DEMAND ZONES AT QUOTEX: A COMPREHENSIVE GUIDE

Supply and demand zones are crucial in technical analysis, offering valuable perspectives on market trends and price fluctuations. Understanding the interplay between supply and demand empowers you to spot potential trading opportunities and enhances your decision-making process.

This piece will delve into the fundamentals of supply and demand zones in trading. We’ll cover their definition, identification methods, and application in your trading strategy. Whether a novice or an experienced trader, comprehending supply and demand zones is vital to your trading toolkit.

WHAT ARE SUPPLY AND DEMAND ZONES?

Supply and demand zones are specific regions depicted on a price chart where the price of an asset frequently encounters a pause or a reversal. These zones signify areas with a notable concentration of buying or selling pressure, exerting influence over the asset’s price direction.

An abundance of sellers exists in a supply zone, leading to a price decline. This situation arises when the supply surpasses demand, and traders are willing to sell the asset at a lower price. Conversely, in a demand zone, an excess of buyers causes the price to surge. This surge occurs when demand outstrips supply, prompting traders to buy the asset at a higher price.

WHAT IS QUOTEX?

Quotex is an online brokerage firm that allows you to trade various asset classes, including currency pairs, stock indices, cryptocurrency, and commodities. Quotex offers demo accounts that are risk-free market environments where you can practice your trading strategies. 

Once confident enough to trade, you can open an account with various deposit options. Depositing is free, and you can deposit as low as 10 USD. The company also awards bonuses of up to 35%. Furthermore, Quotex provides sleek, user-friendly platforms with active customer support that will respond to you anytime.

THE BENEFITS OF USING SUPPLY AND DEMAND ZONES AT QUOTEX

Supply and demand zones have greatly benefited me through my trading career on Quotex. Below, I have illustrated a few of these benefits.

• Analysis of supply and demand zones has helped me better understand market sentiment and potential price movements. These zones reveal the concentrated areas of buying and selling pressure, providing valuable insights into the psychology of market participants.
• These zones have allowed me to enter or exit trades strategically. On price charts, they can act as potential reversal points. You can use them to identify when a prevailing trend may weaken or change direction.
• You can effectively set your stop-loss and take-profit levels by recognizing supply and demand zones. These zones can act as support or resistance, preventing the price from moving in specific directions.
• Additional weight to the validity of trading signals. Technical indicators or trading signals aligning with supply or demand zones confirm possible trade opportunities. This confirmation increases confidence in your trades.
• You can effectively manage your risk by utilizing supply and demand zones to determine logical entry and exit points for their trades. You can avoid unfavorable levels and clearly understand potential turning points.
• You can use these zones to identify areas where trends will likely continue. Pullbacks to demand zones in an uptrend and rallies to supply zones in a downtrend create favorable entry opportunities. Moreover, you can use these patterns to identify reversals.

TECHNICAL ANALYSIS FOR SUPPLY AND DEMAND ZONES

I identify supply and demand zones through the application of technical analysis. It is reasonably accurate and has been crucial in applying these zones into trading on Quotex. Below, I will show you how to use technical analysis for supply and demand zones.

IDENTIFYING THE ZONES

There are several ways you can identify support and resistance levels. Here are a few examples.

First, you can search for regions on the price chart where the price has encountered a halt or reversal: Supply and demand zones manifest when there is a notable accumulation of buying or selling pressure, leading to a pause or reversal in price movement. Observe sections on the chart where the price has faced difficulties moving higher or lower, which may indicate potential supply or demand zones.

Furthermore, you can spot high-volume areas: Supply and demand zones frequently emerge in regions with significant trading volume, signifying an intensified buying or selling pressure. Look for places on the chart with a surge in trading volume, hinting at potential supply or demand zones.

Lastly, utilize technical indicators: Employ specific technical indicators, like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), to assist in identifying potential supply and demand zones. For example, if the RSI indicates overbought conditions, it could point to a potential supply zone, whereas oversold readings may indicate a potential demand zone.

MARKING ZONES ON A CHART

After identifying supply and demand zones, I employ various marking methods on Quotex charts. Here are some of the techniques I use.

• Use horizontal lines to mark the zone: The easiest way to mark supply and demand zones is to use horizontal lines. Identify the price level where the area occurs, and draw a horizontal line across the chart at that level. Make sure the line extends across the chart so that it’s clear where the zone begins and ends.

• Use color to distinguish the zone: To make it easier to determine the zone from other lines and indicators on the chart, use color to fill in the area between the horizontal lines. This color will help the zone stand out and make it easier to see when analyzing the chart.

• Label the zone: To make it easier to remember what the zone represents, label it with a brief description. For example, you might mark a demand zone as “DZ” and a supply zone as “SZ.”

• Review and adjust as necessary: Once you’ve marked the zone on the chart, check it to make sure it makes sense in the price action context. Adjust the zone as necessary to accurately reflect the support or resistance area.

READING THE PRICE ACTION WITHIN THE ZONE

Let me show you how to read the price action within supply and demand zones.

Bullish candlestick patterns, such as engulfing or hammers in a demand zone, can indicate potential upward reversals. Pay careful attention to candlestick patterns that form within the zones. Conversely, bearish patterns like shooting stars or bearish engulfing patterns in a supply zone may suggest potential downward reversals.

Analyzing the volume within the supply and demand zones also provides insight into market participation and the strength of buying or selling pressure. Higher-than-average volume during price movements in these zones may indicate increased market activity and more robust buying or selling pressure.

Lastly, when the price arrives at the zones of supply and demand, please take note of its reaction. A rapid reversal will indicate more robust zones, pointing towards substantial buying or selling interest. Conversely, weaker supply or demand areas may display a gradual reaction or a period of consolidation within the zone.

TRADING STRATEGIES FOR SUPPLY AND DEMAND ZONES

There exist numerous trading strategies that apply supply and demand zones. I have had the privilege of employing some of the techniques illustrated below.

TRADING BREAKOUTS FROM SUPPORT/RESISTANCE LINES WITHIN THE ZONE

The first step in trading breakouts from support/resistance lines within these zones is to mark support /resistance lines. Support and resistance lines are barriers to where the price will break out.

You will then watch how the price acts when it reaches the support or the resistance level. Look for clear price action signals before making an entry. You can monitor the market volume. Increased trading volume signifies a potential breakout.

Once you have confirmed the breakout, set your entry-level slightly above the breakout point if the breakout is bullish. Set your entry point slightly below the breakout if it is bearish. Place your stop loss order depending on the amount you are willing to risk for that trade.

You can monitor the price action as the trade goes on. Consider trailing the stop loss to lock in profits. You should also set clear profit targets depending on your risk-reward ratio.

Manage Position and Set Targets:

1. Monitor the price action and manage your position as the trade progresses.
2. Consider trailing your stop-loss to protect profits as the price moves in your favor.
3. Set clear profit targets based on your risk-reward ratio and market conditions.

SPECIALIZED TECHNIQUES TO TRADE WITHIN THE ZONE

Here are some other specialized techniques to trade within supply and demand zones.

• Reversal trading: A prevalent approach involves seeking out supply and demand zones that have previously caused price reversals and utilizing them to pinpoint potential reversal opportunities in the future. For instance, when the price reaches a past demand zone, you may search for reversal indications, like a bullish candlestick pattern or an oversold state on a technical indicator.

• Engaging in trend-based trading: You can also utilize supply and demand zones to detect support or resistance regions within a prevailing trend. For instance, during an uptrend, you may seek out demand zones that have previously triggered price reversals and consider these zones as potential opportunities for buying.

AUTOMATED TRADING WITH SUPPLY AND DEMAND ZONES AT QUOTEX

Automated trading enables you to create precise rules for entering and exiting trades, which you can program into a computer for automatic execution.

By transforming precise trade entry, exit, and money management rules into automated systems, you can let computers handle the execution and monitoring of trades. One of the primary advantages of automating strategies is the reduction of emotional involvement since automation automatically executes trades once they meet specific criteria. Here is how I apply automated trading when dealing with supply and demand zones.

SETTING UP A TRADING ROBOT FOR QUOTEX PLATFORMS

Setting up a robot for Quotex is easy if you follow these steps

First, design your trading strategy. It would help if you defined the specific rules for your strategy. Have the entry and exit criteria, risk management rules, and other relevant parameters.

After putting your strategy in order, you can use a programming language you are conversant with to write it in code. Implement the logic for trade entries, exits, stop-loss, take-profit levels, and other necessary functions.

Lastly, save the code and install it on Quotex.

UTILIZING PRE-PROGRAMMED INDICATORS FOR PROFITABLE TRADES

Pre-programmed indicators are mathematical calculations based on historical price and volume data designed to identify trends, momentum, volatility, and potential entry and exit points for trades. Below, I have demonstrated how to use these indicators for profitable trades on Quotex.

First, you need to have a good understanding of how they work. Familiarize yourself with popular indicators such as Relative Strength Index and Moving Average Convergence Divergence.

You should avoid using only one indicator. Indicators are not 100% accurate, and combining them should increase your chances of getting accurate signals.

Test the indicators on historical data to see how they would have performed in the past. This process can help you evaluate the effectiveness of the indicators in different market conditions.

OTHER CONSIDERATIONS WHEN USING SUPPLY AND DEMAND ZONES AT QUOTEX

When using supply and demand zones, you should consider the following.

• Recognize the most critical demands: the most critical areas of demand and supply. These areas previously responded to price changes quite strongly, and we can expect future price changes to be affected by them.
• Multiple timeframe analysis: We asses demand and supply zones in various timeframes to provide a more comprehensive market picture. Higher time frames have a greater capacity to give larger zones that significantly impact the price.
• Other indicator confluence: Look for other technical indicators or price patterns that will help to strengthen the importance of a supply or demand area. For instance, if a region is in line with a key Fibonacci number, it may significantly impact your trading decisions.

FAQs

What is the supply and demand zone in Forex?

These are regions on a chart where the price movement of a currency pair is likely to shift its course because of an uneven equilibrium between buyers and sellers.

How do you identify a supply and demand zone on a chart?

Search for regions on the price chart where the price has encountered difficulties in advancing or declining, suggesting possible areas of supply or demand zones.

What are the supply zone and demand zone?

Supply and demand zones are specific regions depicted on a price chart where the price of an asset frequently encounters a pause or a reversal.

How does creating increased competition, such as the free trade zone, impact supply and demand?

Creating a free trade zone encourages people to participate in trading. This free trade zone, in turn, increases the supply in the market.

Does demand and supply zone matter in day trading?

In every market exchange involving a seller and a buyer, the interplay of supply and demand establishes the price of the product or service.

BOTTOM LINE

Supply and demand areas are a crucial part of online trading on Quotex. Therefore, you must learn to locate, mark and incorporate them into your trading strategy.