Okay, let’s cut the crap.
Drawing supply and demand zones shouldn’t feel like you’re deciphering ancient hieroglyphics.
It’s literally just drawing boxes on a chart!
But a shocking number of traders – from newbies to even many “SD experts” – screw this up. And if your zones are off, your whole supply and demand trading strategy goes down the drain.
That’s where I come in!
In this post… I’ll explain the right way to draw supply and demand zones, from the base down to the most recent swing low (demand zones) or up to the most recent swing high (supply zones).
I’ll also explain how to draw the zone from the inital breakout point (BO), to help you cover the right area when drawing the zones.
Sound good?
Why Traders Draw Supply & Demand Zones Wrong (Hint: It’s Not You!)
FACT: Many so-called supply and demand “experts” incorrectly draw supply and demand zones.
It’s a bummer, but it’s true.
Just consider the following demand zone example, where the zone is drawn from the candlestick bodies (which is incorrect!).
Ever drawn zones like this? (I hope not!)
At first glance, the demand above seems pretty decent, right? Clear base, steep rise… all signs of a solid zone.
But hold on a second…
Why has this trader drawn a zone from the candle bodies? That’s not how demand zones actually form.
Remember: Smart money buying always comes in at the lows of bullish/bearish candlesticks. This is when selling pressure (supply) is highest; with thousands of willing sellers, SM can sneakily buy without upsetting price.
Ooops – there goes your stop loss!
See the problem now?
So, drawing zones from candle bodies misses the whole point. It fails to include where the smart money entered (the bullish and bearish candle lows!).
Candle bodies simply show where price opened and closed that day; nothing to do with smart money buying, which only happens during peak market sessions – not just after the market opens or closes.
The Foolproof Guide to Drawing Supply and Demand Zones
Now I’ve covered the basics, here’s a quick walkthrough on drawing supply and demand zones correctly, starting from the base.
Step 1: Identify The Zone Base
What is the zone base?
The small pause or consolidation found right before price reverses. The zone base covers where smart money potentially entered positions to initiate the reversal.
You must include the zone base to draw supply or demand zones!
To find the base…
Locate the small consolidation or pause at the source of the steep rise or decline.
See that little cluster of price action right before price shot higher?
That’s your zone base.
Now, sometimes the base is just a few candles.
Other times, it might be a longer, sideways movement that looks more like a consolidation.
But here’s the key: Size doesn’t matter.
A base is a base, regardless of how many candles it’s made of.
Important Note: The Single Candle Base
Most of the time, your zone base will be formed by a few small candlesticks. But supply and demand zones sometimes develop from a single candle base. This leads to a slightly different zone structure.
Let’s take a look at an example below…
Seen these zones before?
Single candle zones usually form at a major swing high or low, and the base is just one candlestick the opposite color of the candles that make up the move away.
For these zones, the single candlestick marks the base.
That’s the point to include when drawing the zone.
Step 2: Draw The Supply Or Demand Zone
With the base found, the hardest part is over.
But wait, don’t relax just yet…
You still need to draw the zone.
You’ll hear all sorts of “expert” advice on how to draw supply and demand zones. Some say you should draw them from candle bodies, others have their own fancy methods.
But here’s the truth: there’s only one way to draw zones that truly captures where supply or demand comes into the market.
From the most recent MAJOR swing low/high to the breakaway point.
Breakaway point? What’s that?
The point where price takes off, and large bullish or bearish candles start forming the steep move away.
Cover the area between the BP and the most recent major swing high or low – the last H/L that sticks out from the surrounding price action.
That’ll cover any points the banks entered buy positions to initated.
Let’s go through some examples…
It’s clear: a steep rise created this upswing and caused price to jump higher. So, a demand zone must exist at the source (the base).
But which points should you include when drawing the zone?
Well, it’s simple…
First: Find the most recent swing low near the base.
Next: Locate the last SMALL candle before price took off.
Finally: Place the rectangle on the low and drag upto the small candle.
See, told you it wasn’t hard!
The zone covers the entire base, from the most recent major swing low up to the small candlestick that formed at the breakaway point.
If price returns here, watch for long entries.
To draw demand zones, follow the same process in reverse:
First: Find the most recent high near the base.
Next: Locate the last small candle before price took off.
Finally: Place the rectangle on the high and drag to the small candle.
The zone encompasses the high down to the last small candle.
“What about zones with a single candle base?”
Easy – the small candle indicates the breakaway point.
Mark the zone from the candle open, up to the most recent major swing high (for demand zones) or down to the most recent major swing low (for supply zones).
Aside from that, everything else remains the same.
Step 3: Extend The Zone And Make Adjustments
The final step: extend the zone and make any minor adjustments to cover the correct area.
To extend the zone…
Click the right hand side and extend out.
And there you have it!
The zone just sits horizontally, right next to the current price action. You’ll be able to spot when price jumps in and if any entry signals show up.
Easy, right?
Key Point: Some zones may require minor adjustments…
Many traders draw miss the low or high by a few pips.
Or the zone will sit on the wrong small candle at the breakaway point.
These may seem like minor errors, but they can negatively affect trade entry, not to mention overall profitability.
Mark the wrong small candle, price may miss the zone.
Miss a few pips from the low/high; the stop may get messed up.
Don’t sweat it if this happens, just make sure you’re drawing and tweaking those zones the right way. I goofed up big time when I began, thinking it was no biggie. But after losing and missing a bunch of trades, I got my stuff together and started drawing zones properly.
Drawing SD Zones: Your Questions Answered (With Examples!)
Struggling to drawing supply and demand zones? This FAQ tackles the most common questions from our readers, providing multiple examples and practical tips to improve your understanding of how to draw zones correctly.
Just wanted to say I went through the course yesterday – it’s fantastic and I really enjoyed it. It was very clear and hugely beneficial. It’s also a real eye opener and completely different to the regular stuff.
As I went through it so quickly, vid after vid, I will probably go through it in full again.
I have a few questions regarding the content that I was hoping you could clarify but will leave that to another day.
My question now is (apologies if you did cover it) but I don’t think you touch upon where you take profits or any strategy based round that. Is this something you would consider doing a video or article on? I have my own system of profit taking in place – I generally take 1/3 of profit at the first resistance / support where my trade could run into trouble.
This level is usually equal to a 1-1 on risk (minimum), then generally move stop to break even and target a bigger profit for the remaining part and try to stay in unless price action dictates otherwise.
I seem to struggle though with my take profits mentally, always questioning if I am doing the correct thing.
Anyway, your thoughts would be much appreciated.
I would appreciate if when you have the time, you could let me have your thoughts on the email below.
In the meanwhile, I just wanted to share with you my chart and see if it seems along the right line as per your course.
I appreciate you have provided a supply / demand indicator, but I would like to draw out the zones myself.
Please see as an example the Usd/cad chart. I tend to plot what I think are the S/D zones based on aggressive price movement. I do this in the higher time frame such as the 4hr and then go down to the 1hr to look for trade opportunities via price action such as engulfing candles / large pin bars.
Does this all look correct as per your course?
My Response:
Alrighty, here are some answers for you…
Chart Zones:
Your zones look mostly on point, but I’ve noticed a couple of things we need to tweak.
First up, make sure your zones are hitting the candle highs and lows. Don’t leave any of the low or high sticking out; the zone should cover it all.
Look at my pic… it’ll give you a better idea.
Believe it or not, price often hits the low or high before bouncing… so even a teensy gap can mess up your entry or mislead you about where the zone ends.
Second issue: your zones aren’t lining up with the most recent major swing highs or lows.
Check out the 4h image… See the far-left zone?
You’ve drawn it down to the swing low, but it should actually be hitting the most recent major swing low—or high for demand zones.
By ‘major,’ I’m talking about swings which set off big price shifts.
In my zone, you can see it’s drawn from the previous swing low.
That’s because that low set off a major reversal.
This is where the banks went in, especially considering how bearish the market was before the turnaround.
The more bearish the market, the more traders were selling, the more the banks could buy.
By the time the next low forms around, the market has swung up, and the banks can’t buy as much; there’s a lot more buyers due to the rise and fewer sellers around.
This makes it a weaker spot for a reversal, ’cause the banks just don’t have as many positions executed here.
So, always draw your zones to the nearest major swing low—that’s where the banks main positions are and where price is most likely to reverse.
Profit Taking:
When it comes to taking profits, I usually cash out once price hits a higher timeframe supply or demand zone or if price shows signs of wanting to reverse. I take small profits as price moves in my favor, and then take a chunk out once price hits a sticky spot.
It’s not rocket science, but it does the trick.
Taking profits can be a real head-scratcher—you never really know when the perfect time to take them is.
Just do your best and don’t beat yourself up if you jump the gun or make a mistake.
PAN.
Hi.
Thanks for tips provided in your articles.
I have also been reading your others articles esp on Supply/Demand Zone, and I would like to seek the following clarifications on the article “How to easily draw supply and remands zones”:
Supply zone (formed with Base) is drawn fr the Open of the last bullish candle to the most recent high before the drop.
In the first EURUSD chart (under the section “Locating Supply Zones”), the zone does not seem to be consistent with the definition. Should it be drawn as indicated in blue dotted line of the following image: 
In the e.g. provided for drawing Supply zone (under the section “How to draw Supply and Demand Zones”), should the most recent high be the candle indicated by the blue arrow in the following image (hence the zone should be narrower):
3. For zone formed by single candle, is it correct that they should be from opening of the last bullish candle to its high (for Supply zone) and from opening of the last bearish candle to its low (for Demand zone)?
Kindly advise.
Thanks.
My Response:
About your first question, you’ve got it spot on…
The supply zone you’ve drawn uses the proper technique. The differences with my article’s images are likely because I updated the article a while back… and may have missed updating a few images.
So, yes… it can get a bit confusing.
For your second query, the supply zone should actually originate from the high point I’ve marked on the image.
When I referred to ‘the most recent high,’ I meant ‘the most recent SWING high,’ not just any random high preceding the drop. This applies to demand zones, too, where you’d draw the zones from the most recent swing low instead of the swing high.
Your understanding of single candle zones seems quite accurate…
So, you’re all good to go there—no changes needed.
Keep those questions coming!
PAN.
Hello,
Thanks for all your help in the past. I have another question however and hopefully you can clarify. I have included a picture illustrating my query.
Thank you.
Response:
Let’s revisit the supply in the image you’ve sent.
Ideally, it should be drawn from the bearish candle which follows the large bullish candle, not from the bullish candle itself.
Yep, I know… that one’s on me.
I missed mentioning these kinds of zones which often crop up in the market.
I’ll go back and touch on this in the article.
Here’s a quick tip: Always draw your zones from the candle with the smaller body. All Supply and Demand (SD) zones are made up of two candlesticks.
You want to sketch your zone from the candlestick with the smallest body.
In the image you’ve shared, this was the bearish candle which caused the market to fall out of the zone.
So, this would be your go-to candle for drawing the supply zone.
Need some more help?
Don’t hesitate to ping me.
PAN.
Hi,
I have attached USDCAD 1H chart. i made comments on the chart itself for my analysis. 
I basically marked demand zone on the bullish candle before the move up, does the size on the most recent candle matter because i see on this chart this candle is so small.
Best regards.
My Response:
Your analysis looks sound to me…
The price rise is likely due to either profit-taking or banks executing trades, thereby creating a demand zone. Upon seeing this, you marked the region as a demand zone, patiently waiting for the price to revisit.
The idea being, there’s a high chance of banks wanting to reap more profits from their trades or place additional ones.
The drop into the demand zone was a deep pullback, which the banks employ to prompt a mass of traders to enter counter to the direction the banks want the price to move.
When sufficient traders have entered, banks step in and execute more buy trades.
This is primarily responsible for the ongoing upward price movement.
Your trade execution was excellent…
Keep up the good work!
Have a great week!
PAN.
Q: Are RBR/DBD Zones Drawn Differently To DBR/RBD Zones?
A: No, draw all zones using the same points.
The only difference between RBR/DBD zones and DBR/RBD zones is location. Drawing and trading both types of zone follows the same rules/guidelines. RBR/DBD zones may sometimes form with a less clear base, but you still draw the zone in the same way.
Q: What Time Frame Should You Use To Draw Supply And Demand Zones.
A: Draw supply and demand zones on whatever timeframe you used to find and enter trading opportunities. Zones form on any and all timeframes, so get out there and find those zones!
The Bottom Line
Getting the hang of drawing supply and demand zones might take some time, but you know what they say—practice makes perfect.
Just keep at it, and don’t be afraid to go back and fix those wonky zones you drew before.
Give ’em a makeover with the tips I shared, and you’ll be a pro in no time!
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Hi there, I have 2 questions:
1) when the base consists of multiple small / medium sized candles – which candle should be taken as the small base candle from which we draw to the swing high / low? The last one before the price breakout? the second last one? The smallest one in the consolidation area? The resolution of pictures above is pretty low so it’s not that clear.
2) Let’s say I’m trading of 5-15 min timeframe chart. I have found that in this case the zone should be drawn using 1D candles chart. But how many days should I take into consideration? Only the last day or two? Or a week?
What should the settings on the chart be to draw the supply and demand zones?
Thank you