Demand Zone

A Demand Zone is the bullish counterpart to a Supply Zone: a horizontal price region where buyers previously absorbed sellers aggressively enough to reverse price upward. The zone spans from the lowest wick of the decline that preceded the reversal to the body close of the reversal candle. On retest, traders expect leftover institutional buy orders to defend the zone and produce another bounce.

The two canonical formations are Rally-Base-Rally (continuation in an uptrend) and Drop-Base-Rally (reversal from a downtrend). Like supply zones, demand zones are strongest on first test and degrade with each subsequent revisit. Higher-timeframe demand zones (4H, Daily) are considered more reliable than intraday zones. Trading a demand zone means entering on a bullish candle reaction within the zone, with a stop below the zone's lower boundary and targets at the next supply zone or prior swing high.