How To Trade Supply And Demand On The Daily: What You Need To Know

The normal way to trade supply and demand is on the lower time-frames, like the 5min, 15 min or 1-hour.

That’s how I trade it, as I’m sure many of you do too.

But what about the higher time-frames? Does supply and demand work as a long term strategy as well as it does a short term strategy?

The answer…

Is a definite YES.

Supply and demand is a fantastic long term strategy that can get you into some of the biggest reversals and trends in the market.

Today I’m going to show you how to trade S & D on the daily time-frame.

First, I detail some of the differences that come with trading the daily, as it’s a bit different compared to the lower time-frames. Then I’ll walk you through how to find the right zones, what you should look for to enter, and where to place your stop and when to move it to break even.

Trading Supply And Demand On The Daily: What You Need To Know

Here’s the deal:

Trading supply and demand on the daily timeframe is not much different to trading it on any other time-frame.

In fact, besides a couple of small differences in entry and stop position (more on this later), there’s zero difference between how you trade the zones on each timeframe.

So why not just end the guide here then?

Well, the daily time frame can be a different beast compared to the lower time-frames…

For one, price takes much longer to move (due to the time difference). That means the daily requires a lot more patience to trade. Additionally, the time difference has a significant effect on the size and location of your stop loss, not to mention how many trading opportunities appear.

There are other differences too, but those are the 2 biggest you need to be aware of.

Here’s a closer look at each one…

  1. Your Stop Loss Is Bigger… Much Bigger.

Because the daily time-frame contains more data than the time-frames below (a day instead of 1-hour, 5 min, etc), price must cover a greater distance when it moves.

One of the side effects of this is it makes you stop bigger… much bigger.

When you trade S & D on the 1-hour as I do (I trade on the daily too, but not as often), your stop usually come in around 30 – 40 pips per trade. Not bad, right? However, because the daily contains more data, your stop can be upward of 100 pips per trade – almost double the 1-hour!

Holy crap!

This sounds like a negative and it kind of is.

But here’s the point to remember: The daily provides nowhere near the same number of supply and demand trades as the 1 hour.

On the 1-hour (or lower), you expect to have trades every day, sometimes multiple times. But on the daily, you only get a few opportunities per month.

This means that even though you’ll have bigger losses on the daily, overall, you won’t lose as much because you don’t have the same amount of trades.

  1. Less Trades, But More Profit (Potentially)

You would think trading the daily is less profitable than the lower time-frames, given that you only receive a few signals per month (depending on how many pairs you trade).

But that’s not really true…

Sure, you don’t get as many signals on the daily. That’s obvious. But the signals you do get tend to have a higher probability of working out. And they usually make more money because of how much bigger the move are on the daily.

Take a good S & D on the 1 hour for example…

Most traders consider a 100 pip win on the 1-hour a good trade – well, I do at least.

On the daily, however, that’s the minimum you can expect to make on a normal trade. The good trades tend to be upwards of 300 pips, if not more, depending on how long you hold onto them.

So while you don’t get as many trades on the daily, they do tend to make a lot more money, which means you can (potentially) be more profitable.

How To Trade On The Daily In 3 Easy Steps

What’s great about trading supply and demand on the daily is that, for the most part, it’s the same as how you trade it on any other time-frame.

  1. Wait for price to reach a zone
  2. Enter upon seeing a candle pattern
  3. Place a stop and wait for price to reverse

Simple, right?

Of course, a couple of minor differences exist, mainly in how you enter the zones (which I’ll get to in a minute). But if you already know how to trade and draw supply and demand on the lower time-frames, switching to the daily will be an easy transtion.

Here’s a quick walk-through on how to trade the zones.

Step 1: Locate The Strong/Weak Zones

Have you my supply and demand rules post?

If you have, you’ll know the key to finding strong zones is to look at the move that precedes the zone.

The strongest zones always form after a long decline (for demand zones) or a long rise (for supply zones).

The longer the preceeding rise or decline, the stronger than zone – there’s a bit more to it than that, but you’ll need to read my book for more info.

image showing supply and demand zones forming after sharp rises and declines on 1 hour chart of eur/usd

Notice how all the strong zones above formed after either a long down-move or long up-move?

These zones are strong because whatever the banks did to cause them to form (either place trades or take profits) took a lot of orders.

How do I know?

Well, it’s simple: The further price moves in one direction, the more traders who believe a trend exists and begin entering in the same direction.

For example….

image showing strong demand zone forming after sharp decline

I know the demand zone above is very strong because before it formed after price had been falling for a long time.

If it’s fallen for a long time, that means most traders are selling.

That, in turn, means the banks have a lot of sell orders to either place buy trades with – which is what they ended up doing – or take profits off sell trades placed earlier in the move down.

So, how do you gauge how strong a S/D zone may be?

The easiest way: Move your chart so the right side sits right at the point just before the zone formed, then look at the market and ask yourself…

How bearish or bullish was the market here?

If the market seemed extremely bearish before a demand zone was established or bullish before a supply zone appeared, like when a zone is created after a significant rise or fall, it indicates a strong zone. This is because the banks had to counter the prevailing sentiment to reverse the price and create that zone.

On the flipside…

if the market was really bullish before a demand zone formed or bearish before a supply zone was created, like you see with Rally-Base Rally/Drop-Base-Drop zones, that zone isn’t very strong, as the banks didn’t have many orders to use to place trades or take profits with.

image of strong downtrend on 1 hour chart of eur/usd

Here’s how the market looked just before the blue zone in the previous image formed.

Looks super bearish, right?

The sharp decline coupled with the extended downmove makes the downtrend look certain to continue. Upon seeing this, most retail traders (the sheep) assume the same. Hence, they sell en mass to capture what they believe will be a continuation.

The result?

A massive number of sell orders enter the market.

The banks then use these orders to enter buy positions.

What happens when they buy?

image showing strong demand zone forming after long downtrend on eur/usd 1 hour chart

Price surges higher, creating a powerful demand zone!

We know this zone is strong because lots of people were selling before it formed, due to how bearish the market looked.

When price returns…

image of price reversing from strong demand zone on 1 hour chart of eur/usd

The market reverses, and sets off a large new upswing.

I know this method isn’t easy to get your head around, but if you take some time looking at old zones that worked, you should get an idea of how the market should look before a zone forms for it be strong.

Step 2: Wait For A Sharp Rise/Decline Or Bullish/Bearish Engulf To Form

Entering a trade at a supply and demand zones on the lower timeframes means waiting for a bullish/bearish pin bar or engulfing candle to form somewhere inside the zone.

On the daily timeframe, it’s the same.


  • Wait for price to tap or enter the zone.
  • See if a pin bar or engulfing pattern forms.
  • Enter a trade upon the pattern completing

Simple, eh?

Important: Pin bars can also make great entry signals, but I tend to leave them out, as they don’t work as well as engulfs – price often breaks the pin before reversing, causing a stop out.

image showing bearish engulfing causing reversal from daily supply zone on gbp/usd

I know a lot people like to go down in time-frame to tighten up the entry, but on the daily, that isn’t a good idea. The time difference is too large for 1 hour or lower candles (or 4 hour for that matter) to confirm reversals on the daily.

If you’re free during the day you can enter by watching for sharp rises and declines on the 1-hour.

This is my preferred way to enter the zones.

Watching for an engulf on the daily works well, but it typically means you have to risk more. With this method, you can cut the risk down significantly and increase the risk/reward ratio, as you’ll be entering closer to the source of reversal.

Here’s a sharp rise that took place just after price entered a daily demand zone.

See how this rise is made up of multiple big bear candles?

These are the types of move you want to look for once price enters the zone. They indicate the banks have placed trades, so are a good sign price is about to reverse out.

image showing entry into daily demand zone trade using 1hour chart signal

The entry should come after two or three big candlesticks form (or one if it’s around the size of two or three). In our case, two formed, so you would enter after the second closed and then place your stop loss.

Speaking of stops…

Step 3: Place A Stop And Move It To Breakeven

Regardless of whether you enter after seeing a daily engulf or sharp rise/decline, the location of your stop loss is always the same:

Below the zone for demand zones…

image showing where to place a stop loss on demand zone trade

And above the zone for supply zones…

image showing where to place a stop loss during supply zone trade

Knowing when to move to break even really depends what happens after you enter.

If price shoots out of the zone soon after you enter with a large candlestick, it’s okay to move it halfway to breakeven, as chances are it’s not going to come back in.

On the other hand, if it fails to move away quickly or the move out is only a small candle, keep it where it is because it’s more likely price will come back in before reversing.

What About Taking Profits?

You should always take profits when you see price reach a zone that has a high probability of causing a reversal or large reaction.

I tend to take a tiny amount off if I see price enter a zone with a low chance of causing a move in the opposite direction, like a Rally-Base-Rally/Drop-Base-Drop zone. If I see it enter a zone created by the banks buying or selling a large amount, I’ll take most off and leave a little to run.

The Bottom Line

Supply and demand is a great long term strategy for those who haven’t got the time to trade during the day or are fed with the stress and fast paced nature of the lower time-frames.

Be sure to get check out my other S & D posts for more help on trading supply and demand as a long term strategy.

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