Many students email me wanting to know how to tell if a supply or demand zone is likely to hold or break. Understanding this is critical for trading, for if we buy or sell at the wrong time we give up the opportunity to make greater profits or worse, we lose money.
In the Online Trading Academy’s Professional Trader Course as well as the Extended Learning Track, we stress the importance of our Odds Enhancers as a way to filter out weak opportunities and find the best trades that we should take. Although the strategy of using Supply and Demand is relatively simple, traders and investors must know that not every turning point in the market is a high quality trading opportunity. There are many Odds Enhancers, but with knowledge and practice using them becomes second nature and your consistency in the markets generally improves.
An Odds Enhancer that we look at when determining the strength of a zone is how price left that zone. Think of a glass of water sitting on a table. If you were to grab the glass only to find it filled with scalding hot water, you are likely to release your grip very quickly. But if the glass was filled with room temperature water you could hold the glass as long as you would like or even take a sip.
Price works the same way. Traders need to focus on the strength at which price left the origin of the supply or demand zone. If price leaves quickly, it shows a large imbalance of supply and demand and, therefore, a stronger zone.
Looking at the following chart we can see that we left the demand zone with large green candles when demand was formed. This means that this is an area where buyers are much stronger than the sellers. The glass is hot! When price returns to that level we would have a high probability buying opportunity since the sellers are weak there and price is likely to rise again.
What happens if we leave the area slowly? We would likely see smaller candles and/or a mix or red and green candles. The battle between buyers and sellers is pretty even and no one side has the major advantage. Without clear direction in this zone, prices are less likely to bounce fast.
The same can be said for supply zones. For the zone to offer us a higher probability selling opportunity we would want to see a fast drop from that level. On the charts this would be characterized by large red candles, gaps down and/or topping tails on the candles.
If you do not see that occurring you would have a lower probability of success in selling at those levels.
So, now you are aware of one of the Odds Enhancers we can use to increase our chances for success in trading any market and any time frame. To learn the others join us at one of our worldwide education centers and increase your knowledge.
Editors’ Picks
![EUR/USD stays below 1.1100, looks to post weekly losses](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/european-euro-coin-on-top-of-american-dollar-bill-11292130_XtraSmall.jpg)
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
![GBP/USD struggles to find a foothold, trades near 1.3150](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-157771037_XtraSmall.jpg)
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
![Gold retreats toward $2,500 ahead of the weekend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
![Week ahead – Investors brace for NFP amid Fed rate cut speculation](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/america-back-to-work-gm178972493-25143312_XtraSmall.jpg)
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
![Easing Eurozone inflation to back an ECB rate cut in September](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/Eurozone/eu-flags-flying-at-the-european-commission-building-brussels-belgium-24759579_XtraSmall.jpg)
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
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