Price only moves because of two different reasons.
Balanced
market participants AGREE on price
equilibrium between buyers and sellers which creates massive liquidity (sideways consolidation)
Imbalance
market participants DISAGREEING on price
Demand > Supply or Supply > Demand
creates an illiquid area of price since all orders were in favor of the sellers or buyers
What time frame?
The higher the time frame, the more significant the zone
Daily will have a much bigger zone than a 15 min zone
Determine the time frame you plan to trade
When there is a DEMAND ZONE, there is a higher number of buyers than sellers
Indicate that institutional buyers are stepping in (most major market moves are done by hedge funds)
The higher demand serves as a support zone (where price action will bounce)
In order for price to invalidate (drop below) the zone, there needs to be a higher amount of sellers as more people will see the zone as support and BUY INTO DIPS at that price level (Buy Dips, Not Rips)
When there is a SUPPLY ZONE, there is a higher number of sellers than buyers
Indicate that institutions are stepping in and selling/shorting (most major market moves are done by hedge funds)
The higher supply serves as a resistance zone (where price action will reverse)
In order for price to invalidate (pass above) the zone, there needs to be a higher amount of buyers as more people will see the zone as resistance and a SELL OFF occurs at that price level
SUPPLY and DEMAND ZONES
Zones should be created without EXTENDED HOURS (after market or premarket trading)
Daily, 4HR, 3HR, 2HR, 1HR, 30MIN (You may also do Weekly)
The higher the time frame the larger the zone; the greater number of buyers/sellers that are needed to invalidate the zone
Start with your highest timeframe and work down through smaller time frames