GM all........after watching a slew of youtube vids on how to locate area of supply/demand zones and where to place the zone boundaries and after having spent over the last few days a fair amount of time placing those zones on different fx pairs and watching how price moves back to those zones, I've discovered a few things. These are my observations and you may argue with me or not but for now my minds made up. LOL
1) there's no absolutes with this method of trading anymore than any other method of trading in that the price may reverse within a pip or two of the zone line or many pips within the zone or at the outside zone boundary line or there may not be a zone where you think you see one (at least not yet).
2) so, the zones have pippy wiggle room beyond the brokers spread
3) typically a zone can be located and drawn off the entirety of a smaller candle (wick and all) which immediately preceeds a bullish or bearish engulfing candle following the consolidation of a couple to several consolidating candles.
4) if the zone isn't located, determined and defined by a bullish or bearish engulfing candle then it's equally likely to be located and drawn from the entirety of a strong reversal candle such as a shooting star, or long doji, or a hammer or abandoned baby or whatever. Note that the entirety of the strong reversal candle itself is the top/bottom boundary of the SD zone.
5) There are times when a very strong supply/demand zone line can be observed only historically where upon in it's origination there was neither a strong reversal candle or a bullish/bearish engulfing candle but rather a bit of a long candle, with or without wick, followed by two smaller reversal candles that erase the value of the long candle, and ta da.....the reversal has occurred with like a fart under the bed covers where noone hears it but man was it deadly! Note that the entirety of the long candle itself is the SD zone itself.
6) a previous supply or demand zone will more likely than not present a future line of support/resistance during a consolidation area on a larger time frame. One of the SD zone lines will become a SR line. So an area of consolidation on a weekly chart, i.e., a wave 4 for example, may be an area where the daily chart shows multiple revisits to and through, and back to and away from, and yet another return to and through that historical prior supply/demand zone. Support and resistance lines can be a supply/demand zone boundary line or not be, but support resistance lines can be strong price reversal locations and ought to be considered.
7) as with elliot waves, the larger time frames take precedence over the smaller time frame, so while you may be in a supply zone on a 15 minute chart, watch out because you might be priced right at a demand zone boundary reversal line spot on a 4 hour chart.
8) the price may either reverse at the zone, or inside the zone or at the outside boundary line of the zone, or even a few pips BEFORE the immediate zone boundary is reached SO there's not only the brokers spread to consider but the occasional wide spread of the supply/demand zone itself.
9) these zones are simply one more way to look at a chart and attempt to guess what where the price is headed. Stay light on your initial position entry and be prepared to maybe have to add to your initial position. Plan on maybe having to wait a while before the trade goes your way depending on the time frame you are trading off of as the larger the time frame the greater number of pips and the longer it take for the reversal. And always use a few pips beyond the outside supply/demand zone boundary line as an absolute stop. If it's not a supply/demand zone, or if it hasn't become one yet, then the price can go a long way against you before that zone line is revisited again (the larger the time frame the greater number of pips).
10) Still learning.
