Most traders draw supply and demand zones too wide. Use the basing candle method instead: mark only the candle's open as the upper boundary and its low as the lower boundary. Large traders split orders during consolidation, so price returns to these exact levels.
Most traders draw zones wrong, and it's not their fault. Nobody explains exactly where the box starts and where does it end. Here's my exact process. So what I look for is a basing candle. I look for a small body, a tight range, and the market barely moving. This is where the zone begins. The top of the box starts at the open of the basing candle, and the lower portion of the zone starts at the low of the zone. That's it. This is how I mark my whole zone. It's not the entire consolidation range. It's not the whole turning point. It's just the basing candle itself. And here's why. In this basing range, large buyers or large sellers begin to leverage into the market with larger size. Instead of buying 5,000 contracts at once, maybe they could split it up in the order of 500 contracts over 10 times. This is when the market is in equilibrium, where buyers and sellers are agreeing on price. We then mark the consolidation, we then mark the balanced range as a zone, and when price returns to this box, it's returning to exactly where those price levels of these large buyers or the large sellers are waiting. It's a tight box, a specific candle, a precise level. That's what makes the zone actually work.
