How to Trade Supply and Demand Zones With a 1:2 Target

Support forms where price looks cheap enough that buyers rush in, and resistance forms where price looks expensive enough that buyers hold back and sellers press. My petrol example in the video makes it concrete: Rs 80 feels cheap next to Rs 120, while a jump to Rs 160 makes people step out less.

Imagine petrol was Rs 80 ten years ago and Rs 120 today. Rs 80 now looks absurdly cheap, so even someone riding a cycle would go and fill a litre, because it feels so cheap that everyone wants it. That rush of buyers is support.

Flip it: petrol jumps from Rs 120 to Rs 160 overnight, you wonder how it got so expensive so fast, and you step out less. That is resistance. Flight tickets behave the same way, with Rs 5,000 climbing to Rs 10,000 and fewer people booking.

On the chart, start on the one-day timeframe no matter what you are looking at, which in the video was Bitcoin. Remove the default volume bars, then mark the most extreme highs and lows with horizontal lines. The weekly Bitcoin support and resistance levels post shows the same exercise on a higher timeframe.

Close is close enough, because a level does not need to be marked to the exact tick and a small wick through it is fine. Levels sitting near each other merge into one zone. The first level I drew on the daily chart came back later as a reference line.

A supply zone is a box where sellers are expected to step in, drawn from the high of the move down to the low of the previous green candle. A demand zone is the full range of the red candle price fell from, watched for buys. Both boxes get right-extended so they stay visible.

On the one-hour chart I stopped using lines and drew rectangles. This is the step most beginners skip, and it is where the method starts.

How the two hourly zones are drawn

Supply in plain words: there is a pile of goods here and few buyers, and the seller, whose goods are not moving at this price, will knock the market down to offload. If you want a second take on how these boxes are defined, read TrendSpider's supply and demand zones explainer.

Use the right-extend option so the box carries forward as new candles print.

The supply zone is the last green candle before the impulsive down move, anchored to the swing high. In the Bitcoin example, the hourly swing low sat at 76,486, so the green candle just before that fall became the box. A second reference at 78,420 was rejected because it produced no significant move.

Picking a zone by feel gives you a different box every day, while a written rule gives you the same box every time.

• The hourly swing low of the down move was 76,486, and the green candle right before it became the supply zone.
• I considered 78,420 as another reference and dropped it, because it did not produce a significant move.
• The swing check is simple: does price keep breaking the previous high and closing above it?
• The ideal rule is four consecutive greens with at least two breaking the high, though I simplified it for beginners in the video.

Codifying a rule means writing down something specific and repeatable, the way an algorithm would. That is where the whole secret of swing identification sits.

If your rule needs a judgement call every time, it is not a rule yet.

A trade only starts after price returns to the marked zone and a 15-minute reversal pattern breaks structure, such as the low of a pin bar. Touching the zone only means be alert, not trade. Reversal patterns include pin bar, evening star, double top, head and shoulders and bearish engulfing, while an inside candle is a continuation.

The zone touch is the moment trading begins, and before that there is no trade, whatever price is doing. Once the zone is marked, drop to the 15-minute chart and wait for price to enter the range. When it arrives you get an alert, not permission to trade.

Below is hourly Bitcoin from the days before the video went out.

I named the pin bar, evening star, double top and head and shoulders as reversal patterns. In the short example a bearish engulfing formed, and I called it a very strong reversal pattern. Entry came only after the pattern broke structure, such as the low, with the stop just above the zone high.

An inside candle is different: it is a continuation pattern, not a reversal, so it does not qualify. My pin bar entry rules for crypto cover the pin bar in more depth.

The second example was a long from a demand zone, and I admitted the 15-minute pattern was not a clean reversal. It was tradable because it formed inside the zone, so I showed it anyway.

Exit half the position at 1:1 reward and the full position at 1:2, with the stop just above the supply zone high for shorts. In the video, the Bitcoin short reversed exactly at the 1:2 target. Beginners should start small and stick to major, liquid markets rather than small coins or random stocks.

The exit plan on the supply zone short

In the video I said, 'Look at it, it reversed exactly at 1:2.' Trailing came up too, but I did not explain it, so look up half booking and trailing if the terms are new.

Sizes mentioned were 0.2 BTC and 0.5 BTC, with the advice to start small. The 1:2 rule in price action pullbacks goes deeper on the ratio, and trading exit strategies covers the rest.

It needs liquidity: the method may not work on small coins, stocks or random foreign markets, and I teased a separate liquidity video for that.

Crypto products are unregulated and highly risky, and the video closes with the warning that there may be no regulatory recourse for any loss. Choose platforms that are legal in India, and which exchange you use is your own choice.