Supply and demand zones in gold trading
Supply and demand zones are price areas where gold left a base and moved away fast, suggesting unfilled orders; traders expect a reaction when price returns.
Also called Supply zone, Demand zone, Base, Rally-base-rally, Drop-base-drop
Supply and demand zones are areas on a chart where price consolidated briefly (a base) and then moved away sharply. A demand zone forms where a base is followed by a strong rally; a supply zone where a base is followed by a sharp drop. The idea is that unfilled orders remain in the zone, so price may react when it returns.
How it applies to gold trading
Gold’s impulsive moves after news and session opens leave clear bases. The classic patterns are rally-base-rally and drop-base-rally for demand, and drop-base-drop and rally-base-drop for supply. Fresh zones, not yet revisited, are considered strongest; each return uses up some of the orders.
The concept overlaps heavily with SMC order blocks: an order block is often the last candle of a supply or demand base. Zone traders tend to use the whole base; order block traders often narrow to one candle.
Worked example
Example (hypothetical numbers): gold bases between 3,992 and 3,998 for three 15-minute candles, then rallies to 4,030. That base is a demand zone. When gold returns to 3,999 the next day, a trader places a buy limit at 3,998 with a stop at 3,989 ($9) and targets 4,025.
A common mistake
Marking every small pause as a zone. The move away from the base must be strong and clear.
See also: Order block, Support and resistance, Displacement, Imbalance.
Frequently asked questions
What is the difference between supply and demand zones and support and resistance?
Support and resistance come from repeated turning points. Supply and demand zones come from bases that launched strong moves, even if price touched them only once.
How many times can a demand zone hold?
Fresh zones are considered strongest. Each retest is thought to absorb remaining orders, so later tests are weaker.
Are supply and demand zones the same as order blocks?
They overlap. An order block is usually the last opposing candle of a base; a zone usually covers the whole base.