Supply Zone

A supply zone is a specific price range where there is a significant concentration of sell orders. It is a region where the market has previously seen a strong downward reaction, suggesting that sellers are waiting to defend this level.

When the price returns to a supply zone, it often faces resistance, making it a key area for potential short entries or profit-taking. In the context of supply and demand trading, these zones are more significant than simple lines because they account for the imbalance of orders in that area.

Identifying these zones helps traders define their risk and reward parameters effectively.